Canadian bank failures of 1985
The Canadian bank failures of 1985 were the bank failures of Canadian Commercial Bank (CCB) and Northland Bank in September, 1985. As of 2021[update], they are the only Chartered Banks to fail in Canada since 1923 when the Home Bank of Canada failed.
Background
Northland Bank was founded in 1974 and was based in Calgary, Alberta. Canadian Commercial Bank was founded in 1976 and based in Edmonton. Both grew fast through the 1970s, lending to many clients who could not borrow from the Big Five Canadian banks.
In the 1980s, a recession hit Canada, particularly hitting Alberta's Oil and Gas based economy. CCB and Northland were particularly exposed to the energy and real estate sectors.
CCB was also a victim of mismanagement.
In early 1985, CCB was approaching insolvency. The Bank of Canada, Governments of Canada and Alberta, and the Big Five announced a rescue package to shore up the bank. While CCB remained viable, the event shook the market's trust in the Canadian banking sector.
Bank failures of September 1985
The CCB failed on September 1.[1]
Northland failed on September 30.[1]
Legacy
The failures of CCB and Northland immediately prompted worries at other small Canadian banks. The Mercantile Bank of Montreal faced liquidity issues and was absorbed into the National Bank of Canada in October 1985.[2] The Continental Bank of Canada invited analysts from the Bank of Canada and Big Five to assess its liquidity and it was judged to be solid and survived the crisis. The Bank of British Columbia was rescued by HSBC in 1986.[3]
Supreme Court justice Willard Estey chaired the Estey Commission, an inquiry into the collapse of the CCB and Northland, which delivered its report in August 1986. The Estey Commission concluded that... and recommended...
Regulatory changes included ... and had ... effects on the Canadian banking system.
References
- ↑ 1.0 1.1 Martin, Douglas (1985-10-04). "Troubles at Canadian Banks". New York Times. p. D1. Archived from the original on 2018-07-03. Retrieved 2020-06-13. Unknown parameter
|url-status=ignored (help) - ↑ Miller, Robert (1985-11-04). "Alarm in the Banks". Maclean's. Archived from the original on 2020-04-25. Retrieved 2020-04-26. Unknown parameter
|url-status=ignored (help) - ↑ "HSBC saved a small Canadian bank once, but it won't be coming to Home Capital's rescue". Financial Post. Bloomberg News. 2017-05-19. Archived from the original on 2018-05-15.
Further reading
- Langan, Fred (1985-09-04). "Two failed Alberta banks shake Canadians". Christian Science Monitor. Archived from the original on 2020-08-15.
- Shortell, Ann (1985-09-16). "Counting the cost of failure". Maclean's. Archived from the original on 2020-04-26. Unknown parameter
|url-status=ignored (help) - Allen, Glen (1985-10-21). "A crisis of confidence for the banks". Maclean's. Archived from the original on 2020-04-25. Unknown parameter
|url-status=ignored (help) - Langan, Fred (1985-10-21). "It's not a stampede, but bank failures trouble western Canada". Christian Science Monitor. Archived from the original on 2015-10-03.
- Janigan, Mary (1986-02-03). "The banks recharge". Maclean's. Archived from the original on 2020-11-28. Unknown parameter
|url-status=ignored (help) - Martin, Douglas (1986-05-19). "Stiff Challenges at Royal Bank". New York Times. p. D1. Archived from the original on 2020-04-26. Unknown parameter
|url-status=ignored (help) - Estey, Willard (August 1986). Report of the Inquiry into the Collapse of the CCB and Northland Bank (Report). Canada: Privy Council Office. ISBN 0-660-12171-9.
- Dean, Kelly (1988). "Crisis in Canadian Banking". Perspectives on Business and Economics. Lehigh University. 6. Archived from the original on 2020-04-25.
- Remolona, Eli (1990). "6. Canada: The Western Canadian Bank Crisis of 1985". Appendix II: Dealing with Financial Institutions in Distress: The Experience of Four Countries. Deposit Insurance Reform and Financial Modernization: Hearings Before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred First Congress, Second Session, on Reforming Federal Deposit Insurance, Modernizing the Regulation of Financial Services, and Maintaining the International Competitiveness of U.S. Financial Institutions, Volume 2. U.S. Government Printing Office. Search this book on
- Goodhart, Charles (1995). The Central Bank and the Financial System. MIT Press. pp. 376–378. ISBN 9780262071673. Search this book on
- Dingle, James F. (2003). "The Bank Failures of September 1985" (PDF). Planning an Evolution: The Story of the Canadian Payments Association, 1980–2002. Bank of Canada, Canadian Payments Association. ISBN 0-662-67377-8. Search this book on
- Koza, Harry (2007-03-16). "Canada's banking system has created a fortress of solvency". Globe and Mail. Archived from the original on 2020-04-25.
- "Our History". Government of Canada - Office of the Superintendent of Financial Institutions. Archived from the original on 2020-01-28.
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