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The risks include insuring against damages to infrastructure caused by extreme-weather events, and the cost of shifting to a low-carbon economy. This is the first time the central bank has included climate change among its list of vulnerabilities to the financial system in its annual financial health report card. Alongside household debt and the housing market, cyber attacks were named as a significant threat. (Canadian Press)

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Talking point: This isn’t the first time the central bank has raised concerns around climate risk. In March, it joined a network of central banks that study climate change’s impact on financial systems and develop risk-management policies to deal with it. The federal government is starting to consider the issue, too. The 2019 federal budget included recommendations that companies disclose their carbon footprints and, later this spring, Ottawa’s Expert Panel on Sustainable Finance is expected to deliver its final report to the finance and environment ministers.

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The central bank held its interest rate at 1.75 per cent on Wednesday, saying the economy needs to maintain a low rate. It cited a sluggish global economy and weak domestic business activity linked to trade tensions between China and the U.S. and low investment in the oil sector as reasons for holding the rate. The bank said Canada’s economy will grow 1.2 per cent this year, down from an estimated 1.7 per cent three months ago. It expects the economy to grow by 2 per cent next year. The Canadian dollar dropped half a cent on the news to 74 cents on the U.S. dollar. (Globe and Mail)

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Talking point: The news should reduce some pressure on home-owners who were anticipating a hike on their variable rate mortgages. It also signals to homebuyers that fixed rate mortgages should stay the same at least until the central bank revists rates in six weeks, and potentially much longer. Economists, including Krishen Rangasamy and Paul-Andre Pinsonnault of the Bank of Canada, are now anticipating rate cuts if the economy doesn’t improve in the latter half of the year. The cuts could help stimulate Canada’s economy—by keeping mortgages and savings accounts rates low, and thus encouraging spending—in the face of a long-predicted slump.

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David Rozon, associate vice-president of technology banking for Ontario, is going to Scotiabank. Brent Layton, a managing director whose remit includes technology and sustainability banking, will join CIBC. (Globe and Mail)

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Talking point: National Bank’s technology division has lost a number of top employees in recent months as rivals are showing a greater interest in the tech sector. National Bank is still a key player when it comes to tech financing: the company co-led an equity raise by Shopify in 2019 and was a lead underwriter for Lightspeed’s IPO earlier this year. Competition in the space is heating up with BMO and CIBC in particular looking to sign more deals with tech companies. In August 2018, CIBC poached Eric Laflamme from National Bank to lead the Quebec region of its innovation banking division. The banks’ increasing interest in startup financing is bringing them head to head with Silicon Valley Bank, which got a license to operate in Canada in March. Earlier this month, CIBC got a US$55-million credit facility for Lightspeed, taking over a US$15-million credit facility that Silicon Valley Bank had been providing.

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The California incubator EvoNexus is opening a 6,000-square-foot space with support from “founding sponsors” RBC and New York-based investment management firm Franklin Templeton. “We want to have a better understanding of how technology like 5G and IoT (internet of things) will evolve,” Eddy Ortiz, vice-president of innovation at RBC, told The San Diego-Union Tribune. The space can hold 15 startups with two to five employees each. (The Logic, San Diego-Union Tribune)

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Talking point: RBC operates a number of innovation labs around the world in Silicon Valley, London, Luxembourg, New York, Orlando and Toronto. The incubators allow the bank to monitor best practices, hire promising software engineers and occasionally acquire startups. In March, RBC CEO Dave McKay said the FAANGs were a threat, and this new fintech incubator is the bank’s latest counter-move. In June 2018, McKay announced a plan to spend $3.2 billion on technology, and in August 2018, RBC partnered with Espresso Capital, a fintech company, to provide loans and banking services focused on the tech industry.

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The central bank will research climate-related risks to Canada’s economy and financial system. The BoC has also joined the Central Banks’ and Supervisors’ Network for Greening the Financial System, an international association of central banks that studies finance for sustainability and environmental projects and produces risk management policies for dealing with climate and environmental issues. (National Observer)

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Talking point: Investors pay attention to the BoC’s warnings about vulnerabilities in the financial system and economy, so more may start to consider climate-related risks following this change. And, while the bank operates mostly independently of the government, Ottawa is increasingly focused on accounting for such risks, including through an Expert Panel on Sustainable Finance set up to advise the environment and finance ministers. The group’s interim report, released in October 2018, said Canada needs better climate data and financial analysis based on that information, as well as regular disclosures from companies about the climate-related financial risks they face. And, the panel shares some people with the BoC—former senior deputy governor Tiff Macklem is the chair, while its creation was inspired by a taskforce established by former governor Mark Carney, now governor of the Bank of England.

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Canada’s sixth-largest bank had $552 million in profit this year compared to $550 million in 2017. Earnings at its financial markets arm declined 17 per cent.  Meanwhile, Laurentian Bank will cut 10 per cent of its staff after profits dropped 33 per cent to $40.3 million in its first quarter. (Globe and Mail)

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Talking point: While the earnings of the big banks have been boosted by their presence in international markets—BMO and Scotiabank both reported growth overseas yesterday—the smaller financial institutions have been hurt by uncertain financial and capital markets.

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RBC said it was splitting operations for its trading floors in Toronto, New York, New Jersey and London as a “precautionary measure” to backup locations. CIBC said it would move some of its traders to other locations, as did BMO. TD said it is assessing its business continuity plans, and would likely separate groups of employees, like sales and trading. (The Globe and Mail, Bloomberg)

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Talking point: Canada’s banks join companies across the country and the world in considering remote or offsite work as the new normal amid uncertainty over the impact of the outbreak, which has now impacted over 114,000 people globally, with the first Canadian death announced today in B.C. The health community has noted the phenomenon: “For COVID-19, the potential economic impact of self-isolation or mandated quarantine could be substantial,” medical journal The Lancet said in a paper released Monday. Meanwhile, many U.S. companies are going one step further by promising their employees they will take on the costs of medical testing, cancelled holidays, bank fees and lost wages, should the need arise. “How [CEOs] react to it will be remembered. There’s a short-term cost and none of us knows whether that will [last for] a quarter, six months or longer, but talent has a long memory and we are short of that talent,” said Tim Ryan, chairman of PwC in the U.S.

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The bank will advise a group that is considering building a 1,200-kilometre transmission line bringing hydroelectricity and broadband internet from Manitoba to several communities in the territory. If the project goes ahead, the bank may invest directly. (The Globe and Mail)

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Talking point: This is the bank’s ninth project and its second partnership with a pension fund. It’s also the first project in the Prairies and it comes after the Conservatives, which largely swept the region in last fall’s election, promised to close the bank. On Wednesday, CEO Pierre Lavallée said he hoped other pension funds, as well as international investors, would make more infrastructure investments in Canada. That’s the same pitch the bank has been making since it was founded in 2017. In October 2019, The Logic reported it was looking at creating a public utility to lower internet costs and provide service in areas that don’t have fast coverage. This new project could halve energy costs in parts of Nunavut and increase internet download speeds by 3,000 per cent.