The question was asked by BU family member on an earlier blog, whether the Canadian banking system is as sound as the swirling perception. The strength of the Canadian banking system is of great interest to Barbadians given the heavy concentration of Canadian banks in our market.
Statistics Canada announced this week that the debt-to-income ratio of Canadians has hit a record third quarter high. Canadians have been spending mainly on houses and cars. Statistics Canada was piercing in its analysis by citing household debt as as the biggest risk to Canada’s financial system. The proof of the pudding will come when the interest rate starts to bend upwards. How will the debt burdened Canadian respond?
The sub-prime mortgage we are told was the trigger which led to the financial meltdown in the United States. The Canadian analysts are raising concerns about the fallout of a rising interest rate interacting in a market of rising personal debt-to-income. Some may seek comfort in the number that Canada’s government debt is at a relatively low 40%; but what does the future hold?
Commonsense says that the Canadians should have learned from their neighbours to the South. This week news suggests Canadians have jumped on the bandwagon given their willingness to taken-on debt at a time when the world is experiencing a global recession. We repeat, what will happen when interest rates begin to rise; projected to be 2% in 2011?
The Barbados government should be very concerned about future developments in the Canadian economy. It is not only an important tourist market, many of our local banks are headquartered in Canada.
The blogmaster invites you to join the discussion.