Consenheim: Only time will tell if banks acted in best interests of consumers

Les Consenheim Financial Adviser / Kamloops Daily News
December 5, 2012 01:00 AM

We all know the bank on the corner - it's the place you deposit cheques and withdraw cash. You probably also have the joyous experience of paying your mortgage and credit card bills there as well. That is what we consider a local bank, one that deals with people and businesses.

Some people will be familiar with what is called a central bank. This is the bank that runs a state's banking and banking policy. In Canada, our central bank is the Bank of
Canada (in the U.S. it's the Federal Reserve).

Central banks set basic interest rates, play around with the money supply and support the banking sector when needed.

Central banks have been very busy of late, especially in the U.S. and Europe, trying to help the economy recover from the housing bubble that burst in 2008-2009. There will be opinions for a long time, I would think, as to whether these banks have acted in the best interest of the state, and in effect us, the citizens of that state.

We call it printing money when central banks increase the money supply as they have lately. The idea is that more money out there will keep interest rates down, create more capital for expansion and cause job creation. We will see if this works or, as you have also most likely heard, push the U.S. toward the so-called fiscal cliff.

Now, if you don't like what you are seeing in the banking world there could be another bank out there to put your mind at ease, or at least make you feel a little better. The Bank for International

Settlements (BIS) is the central banker's bank and the entity designed to help central banks pursue monetary and financial stability. They also look to encourage all of the members (international) to
co-operate with one another or, as we like to say, play well in the sandbox.

BIS is set to put into effect its third Basel Accord on Jan. 1, 2013. The name originates from the location of the BIS as it is in Basel, Switzerland.

This will be the third accord and its directive is to really focus on bank capital reserves, their ability to manage financial stress, the amount of leverage and overall liquidity. I won't go in to great detail here, but if you would like to learn more, go to

Basel III is put together by the Basel Committee on Banking Supervision and the committee is made up of central banking governors from 27 countries, one of which is Canada. Our governor Mark Carney (until June 2013) will have his chance to represent us as these new rules come into effect and ensure we don't get too much sand in our face.

Les Consenheim is a financial adviser with Raymond James - Consenheim and can be reached at 250-372-8117 or Raymond James Ltd. is a Member - Canadian Investor Protection Fund. This article is for general information purposes only. The views of the author do not necessarily reflect those of Raymond James. Individuals should seek professional advice prior to acting on any information referred to herein.

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