Canada: Canadian Commercial Bank Emergency Liquidity Program, 1985

In March 1985, the Canadian Commercial Bank (CCB)--Canada's 10th largest bank, with CAD 2.9 billion in assets--reported to the Office of the Inspector General of Banks (OIGB) and the Bank of Canada (BoC) that CCB would not survive owing to large losses on its United States energy loans portfolio. In response, the BoC assembled an emergency CAD 255 million rescue package, secured through contributions from a consortium composed of the federal government, the provincial government of Alberta, the Canadian Deposit Insurance Corporation, and Canada's six largest banks. Despite the BoC's reassurances, including a public announcement promising virtually unlimited liquidity support, confidence in CCB continued to decline. By the time the bank failed, it depended on BoC support for approximately 65% of its total outstanding deposits, totaling CAD 1.3 billion. In the summer of 1985, as part of a full examination of CCB's loan book, authorities uncovered a significant number of additional impaired loans, confirming that the bank was deeply insolvent. This insolvency prompted the OIGB to declare the CCB nonviable on September 1, 1985, marking Canada's first bank failure in 62 years. The collapse of CCB triggered forced acquisitions of other significant regional banks and led to substantial regulatory reforms in Canada's financial sector.