I must say, I don’t quite understand what is going on at Emerge:
The Toronto-based company, which manages about $118-million in assets, owes a total of $2.53-million across six of its Emerge ARK funds, a group of investment funds that are sub-advised by prominent U.S. investor Cathie Wood.
The total amount owed was first disclosed in 2019, the year Emerge entered the Canadian ETF industry with the launch of the ARK funds. At that time, Emerge owed $486,442 to five ETFs. By the end of 2021, the debt had grown to $1.12-million and was spread across six ETFs. Six months later, by June 30, 2022, the figure had jumped 127 per cent to $2.53-million.
The amounts owed to the funds are money that was “pre-paid” to Emerge for managing the ETFs, according to a note in the funds’ 2019 annual financial statements. Emerge said the money was used to cover operating expenses for the funds, a cost that is typically paid directly by a fund manager when first launching an ETF or mutual fund, in order to keep management fees low for investors.
It is unconventional for an investment manager to use money from inside an investment fund to prepay the fund manager. And it is even more unusual for a manager to carry a balance owing, year-over-year, with accrued interest for operating expenses, as Emerge did.
However, it always does my heart good to learn of trouble at private mortgage companies:
Romspen Investment Corp., one of Canada’s largest private mortgage lenders, is locked in a court battle with its largest borrower after multiple loan defaults allegedly totalling $333-million – unpaid debt that has hindered its ability to fund investor redemptions.
Romspen has asked the Ontario Superior Court to appoint a receiver to take control of three properties that underpin the distressed loans. If approved, the receiver could sell the properties as it sees fit and the proceeds would allow Romspen to recoup some, or all, of the money it is owed. The three affected properties are located in Toronto: Woodbine Mall and Rexdale Mall, in the city’s northwest corner, and 1500 Birchmount Rd., in the city’s northeast corner.
The borrower, Issa El-Hinn, also known as Chris Hinn, is a commercial real estate investor and businessman. He originally defaulted on multiple Romspen loans in 2018, according to court filings, but signed a forbearance agreement with the lender at the time and has since sold six properties, remitting $222-million worth of proceeds to Romspen. The alleged $333-million still owed to Romspen is over and above the $222-million already remitted.
BIS has released a working paper by Claudio Borio, Marc Farag and Fabrizio Zampolli titled Tackling the fiscal policy-financial stability nexus:
Focus
Despite the great strides made by policy reforms following the Great Financial Crisis, the link between fiscal policy and financial stability has attracted less attention. We review the channels through which fiscal and financial risks propagate and mutually reinforce each other and suggest how policy could best tackle these links.Contribution
We provide a holistic perspective on the fiscal policy-financial stability nexus, also involving monetary and prudential policies. In doing so, we highlight the importance of both protecting the financial system from the sovereign and protecting the sovereign from the financial system.Findings
We make a number of policy recommendations. First, policymakers need to consider the risks of financial instability when deciding on the size of fiscal buffers and measuring cyclically adjusted fiscal positions. Second, policymakers should continue to make progress towards reducing the favourable treatment of debt versus equity. Finally, in prudential regulation, more could be done to ensure that capital and liquidity requirements better reflect banks’ sovereign exposures. Similarly, it will be important to recognise the role of non-bank financial intermediation in the broader nexus between fiscal policy and financial stability.Abstract
Tackling the fiscal policy-financial stability nexus is essential to ensure financial and hence macroeconomic stability. In this paper, we review the literature on this topic and suggest how policy could best tackle the link. Doing so involves action on two fronts. First, incorporating financial stability considerations in the design of fiscal policy. This means, in particular, considering the risk of financial crises when assessing fiscal space, recognising the flattering effects of financial booms on fiscal positions and removing or reducing fiscal incentives to private debt accumulation. Second, acknowledging that domestic currency-denominated public debt is not fully risk-free in the design of the prudential regulation of financial institutions. This calls for carefully balanced risk-sensitive capital charges or other measures to limit banks’ sovereign exposures with due regard to the special role of government bonds in the financial system and country-specific characteristics. That said, prudent regulation cannot substitute for fiscal prudence.
…
Based on data available at the end of 2018, the approach finds that the fiscal costs linked to possible future crises estimated based on those factors are significant (Graph 4). The expected average fiscal cost is within a range of 5–30% of GDP for advanced economies, with a cross-country average of 20%. The range is similar for emerging markets and less developed economies, although the cross-country average is lower. At the tail of the distribution, the fiscal losses can be substantial. On average across advanced economies, the 95th quantile is approximately 38% of GDP and the 99th quantile exceeds 40%.Comparing estimates of these fiscal cost with typical estimates of fiscal space for OECD countries (eg Fournier and Fall (2017), Fournier and Bétin (2018)) suggests that the available space should be sufficient to absorb the cost of the crisis for most, but not all, economies in our sample.23 However, these measures of fiscal space are likely to overstate the true amount of space available as they do not consider several sources of uncertainty. In the case of EMEs, considering the calculations of, for instance, Ganiko et al (2016) which account for various sources of uncertainty, fiscal sustainability in a number of countries looks vulnerable in the case of serious financial stress.
Any estimate of a fiscal cost is inevitably subject to a very high degree of uncertainty due to the method used, data availability and the impossibility of incorporating all relevant information. For this reason, the method proposed by Borio, Contreras and Zampolli (2020) is intended to be just one input in what is a much more complex decision. In particular, the method does not take into account the probability of a crisis; only the fiscal cost given a crisis. In addition, the estimates of fiscal cost might not capture the full benefits of the financial reforms following the GFC. These have not just raised bank capital, but also improved its quality and robustness, introduced liquidity standards, implemented macroprudential frameworks and put in place specific arrangements to ensure the orderly resolution of systemically important banks (BIS (2018), Borio, Farag and Tarashev (2020)). Finally, large estimates of the ex ante fiscal cost do not imply that the best solution is necessarily or exclusively of a fiscal nature: prudential regulation is always an essential part of the solution (see below).
The New York Fed has released the March SCE Labor Market Survey:
- The average full-time offer wage received in the past four months increased to $62,088 from $59,834 in November 2022.
- Satisfaction with wage compensation, non-wage benefits, and promotion opportunities at current jobs all declined.
- The average reservation wage—the lowest wage respondents would be willing to accept for a new job—rose to a new series high of $75,811. The increase was driven by respondents above age 45 and those with at least a college degree.
- Conditional on expecting an offer, the average expected annual salary of job offers in the next four months declined to $58,710 from a series high of $61,187 in November 2022.
- For those who are currently employed, the expected likelihood of moving to a new employer and moving to unemployment in the next four months increased to 12.5 percent and 2.5 percent, respectively. This increase was driven by men and respondents without a college degree.
RBC (US) got into some trouble over churning:
RBC Wealth Management-U.S. was censured and ordered to pay almost $1.1 million over allegations it failed to properly supervise brokers’ sales of syndicate preferred stock, according to a Financial Industry Regulatory Authority settlement finalized on Friday.
Between January 2017 and December 2018, nearly 40 RBC brokers engaged in unsuitable short-term trading of syndicate preferred shares that generated unnecessary commissions while often resulting in losses for customers, according to Finra.
RBC’s supervisory system failed to flag the preferred stock sales because it “employed no alerts specific to preferred stock” and more general trading alerts were not tailored to pick up on short-term preferred trades, Finra said. RBC thus violated the regulator’s rules requiring a “reasonably designed” supervisory system, according to the settlement.
OSFI has announced:
The Office of the Superintendent of Financial Institutions (OSFI) and the Global Risk Institute (GRI) today jointly released a report on the ethical, legal, and financial implications of artificial intelligence (AI) on financial services institutions.
The partnership between OSFI and GRI created the Financial Industry Forum on Artificial Intelligence (FIFAI) which gathered Canada’s financial services experts from industry, government and academia on the application of AI. The rapid growth in digitalization and usage of AI across the financial services industry highlighted how current AI risk management frameworks must adapt to remain relevant, forward-looking, and responsive to industry needs. As the use of AI technologies continues to evolve, the need for guiding principles became apparent. The FIFAI discussions then led to the development of the EDGE principles, Explainability, Data, Governance and Ethics:
Explainability enables customers and relevant stakeholders to understand how an AI model arrives at its conclusions.
Data leveraged by AI allows financial institutions to provide targeted and tailored products and services to their customers or stakeholders. It also improves fraud detection, enhances risk analysis and management, boosts operational efficiency, and improves decision making.Governance ensures a framework is in place that promotes a culture of responsibility and accountability around the use of AI in an organization.
Ethics encourages financial institutions to consider the broader societal impacts of their AI systems.
The full report has been made available.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3747 % | 2,317.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3747 % | 4,444.1 |
| Floater | 9.73 % | 9.85 % | 55,639 | 9.66 | 2 | 0.3747 % | 2,561.2 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2388 % | 3,356.2 |
| SplitShare | 5.01 % | 7.22 % | 45,143 | 2.62 | 7 | 0.2388 % | 4,008.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2388 % | 3,127.2 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1592 % | 2,764.9 |
| Perpetual-Discount | 6.17 % | 6.22 % | 52,873 | 13.59 | 34 | 0.1592 % | 3,015.0 |
| FixedReset Disc | 5.74 % | 7.79 % | 88,506 | 11.95 | 63 | 0.4135 % | 2,149.8 |
| Insurance Straight | 6.06 % | 6.11 % | 73,334 | 13.73 | 19 | 0.2215 % | 2,968.7 |
| FloatingReset | 10.44 % | 10.96 % | 40,388 | 8.83 | 2 | -0.1697 % | 2,387.9 |
| FixedReset Prem | 6.92 % | 6.53 % | 318,744 | 3.92 | 1 | 0.0000 % | 2,336.6 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4135 % | 2,197.5 |
| FixedReset Ins Non | 6.04 % | 7.69 % | 67,324 | 11.81 | 11 | 0.1514 % | 2,308.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BIP.PR.B | FixedReset Disc | -3.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 21.03 Evaluated at bid price : 21.03 Bid-YTW : 8.82 % |
| TRP.PR.G | FixedReset Disc | -2.61 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 16.40 Evaluated at bid price : 16.40 Bid-YTW : 8.69 % |
| TRP.PR.B | FixedReset Disc | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 10.80 Evaluated at bid price : 10.80 Bid-YTW : 9.47 % |
| PVS.PR.H | SplitShare | 1.10 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2027-02-28 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 7.31 % |
| GWO.PR.T | Insurance Straight | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 6.12 % |
| TD.PF.K | FixedReset Disc | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 7.10 % |
| PWF.PR.P | FixedReset Disc | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 12.30 Evaluated at bid price : 12.30 Bid-YTW : 8.62 % |
| TD.PF.L | FixedReset Disc | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 22.96 Evaluated at bid price : 23.50 Bid-YTW : 6.88 % |
| TD.PF.D | FixedReset Disc | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 18.33 Evaluated at bid price : 18.33 Bid-YTW : 7.62 % |
| RY.PR.M | FixedReset Disc | 1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 17.85 Evaluated at bid price : 17.85 Bid-YTW : 7.63 % |
| TD.PF.E | FixedReset Disc | 1.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 7.56 % |
| MFC.PR.Q | FixedReset Ins Non | 1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 19.20 Evaluated at bid price : 19.20 Bid-YTW : 7.69 % |
| GWO.PR.Y | Insurance Straight | 1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 6.08 % |
| NA.PR.E | FixedReset Disc | 1.60 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 20.32 Evaluated at bid price : 20.32 Bid-YTW : 7.20 % |
| RY.PR.J | FixedReset Disc | 1.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 7.64 % |
| BN.PF.H | FixedReset Disc | 1.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 8.28 % |
| PWF.PR.T | FixedReset Disc | 2.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 17.58 Evaluated at bid price : 17.58 Bid-YTW : 7.93 % |
| MIC.PR.A | Perpetual-Discount | 2.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 6.66 % |
| BNS.PR.I | FixedReset Disc | 2.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 6.99 % |
| FTS.PR.G | FixedReset Disc | 3.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 17.81 Evaluated at bid price : 17.81 Bid-YTW : 7.69 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PF.D | FixedReset Disc | 75,660 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 18.33 Evaluated at bid price : 18.33 Bid-YTW : 7.62 % |
| MFC.PR.J | FixedReset Ins Non | 59,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 21.60 Evaluated at bid price : 21.94 Bid-YTW : 6.88 % |
| NA.PR.E | FixedReset Disc | 54,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 20.32 Evaluated at bid price : 20.32 Bid-YTW : 7.20 % |
| TD.PF.A | FixedReset Disc | 22,937 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 7.79 % |
| TD.PF.B | FixedReset Disc | 18,589 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 17.12 Evaluated at bid price : 17.12 Bid-YTW : 7.85 % |
| TRP.PR.F | FloatingReset | 16,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-04-17 Maturity Price : 14.87 Evaluated at bid price : 14.87 Bid-YTW : 10.96 % |
| There were 4 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| RY.PR.J | FixedReset Disc | Quote: 18.60 – 25.00 Spot Rate : 6.4000 Average : 3.4868 YTW SCENARIO |
| BIP.PR.B | FixedReset Disc | Quote: 21.03 – 22.25 Spot Rate : 1.2200 Average : 0.9767 YTW SCENARIO |
| FTS.PR.K | FixedReset Disc | Quote: 16.34 – 17.20 Spot Rate : 0.8600 Average : 0.6254 YTW SCENARIO |
| BN.PF.B | FixedReset Disc | Quote: 16.05 – 16.76 Spot Rate : 0.7100 Average : 0.5028 YTW SCENARIO |
| NA.PR.S | FixedReset Disc | Quote: 17.16 – 17.77 Spot Rate : 0.6100 Average : 0.4325 YTW SCENARIO |
| MFC.PR.B | Insurance Straight | Quote: 19.27 – 19.80 Spot Rate : 0.5300 Average : 0.3631 YTW SCENARIO |
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