NEWS RELEASE for September 26, 2007
Global economic growth is currently strong with relatively mild inflation. The largest risk to growth, particularly with the U.S. economy, is the significant increase in subprime loan problems and tightness in the commercial paper market. A noticeable slowdown in 2008 can be expected, but a North American recession is not a likely scenario. It is anticipated that market interest rates will start to decline in the near future.
Periodically, unexpected events occur in the financial markets, and the subprime loan situation is one of those events. Certain financial institutions, mainly in the U.S., did not employ prudent credit risk management practices in the past and now have higher exposures on their balance sheets. As a result, central bankers are now very conscious of and responsive to these risk issues. However, the subprime issue will subside, and the financial and stock markets should settle within the next few months.
Compared to the U.S., the Canadian banking system has relatively minimal risk exposure in terms of subprime lending due to highly diversified loan portfolios. Although the recent circumstances in the U.S. may slow down global and provincial growth, it is projected that the Alberta economy will remain strong over the next 12-month period.
As an Alberta-based financial institution, Community Savings can be impacted by general macro-economic events, such as market interest rates and swings in business cycles. Fortunately, our loan and investment portfolios are very conservative, and we do not have any exposure to risk in the commercial paper market. As well, our balance sheet is extremely solid with an unusually high equity position, thanks to support from our members and the prudent business practices of our management team. Business is continuing as usual at Community Savings, and we look forward to paying out another large profit sharing amount in January 2008.
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