CUSTOMER LOYALTY AFTER FINANCIAL CRISIS IN CANADA

Customer Loyalty after Financial Crisis in Canada

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Abstract

The effects of financial crisis 2008 have significant impacts on the financial industries of the world. While the crisis initiated in the U.S, it severely combined with other countries of the world including Canada, where the effects were many. This paper will analyze the impact of the crisis on the banking industry of Canada. We will see the effects of the crunch on the liquidity and the response of customers towards banks. Based on this research, we have focused that Canada financial sector bears the strength to cope up with monetary instability followed by a crisis. However, the main focus of the research will be on the customer loyalty towards banks.

Table of Contents

Abstract2

Introduction and Background4

Aims and Objectives5

Review of Literature6

History of the Recession10

Customer loyalty12

Methodology20

Ethical Considerations21

Intended Outcomes21

References23

Customer Loyalty after Financial Crisis in Canada

Introduction and Background

The financial crisis that currently prevails in most industrialized countries has its roots in the collapse of market for subprime mortgages in the United States. The delinquency rate for such loans exploded from the summer of 2006. A severe crisis of confidence then hit the financial markets when securities backed by these mortgages have been massively devalued. Meanwhile, the market estate, the number of times jumped, causing a surplus of properties for sale and at the same time, a significant decline in property prices in the United States. Canada did not experience the crisis of subprime mortgages, lending practices have been more cautious here and through better regulation. However, the Canadian economy is impacted by the financial crisis, whether by the decrease in their exports to the United States, the substantial increase in the cost of funds faced by their financial institutions, the sharp drop in stock prices or the decline consumer confidence. All this ended up rushing the Canadian economy into recession. Still, the Quebec real estate market has remained strong so far. The number of Housing mortgages overdue, though rising, remains low. Also, prices of residential property are maintained. The lack of surplus properties for sale, the forceful interventions of governments to counter the financial crisis, lower rates of aggressive Bank of Canada, speculative activity and limited affordability of properties in Quebec lead us to conclude that the housing market in Quebec seems well positioned to withstand this period of turbulence and a soft landing is possible.

Since no price drop in real estate had been registered in U.S. since the recession of the early 1990s, lenders relied on a steady rise in property values. If a borrower could not repay the loan, the property could always sell at a price above the purchase price. In addition, the lender took advantage of securitization or sale of securities backed by mortgage receivables, which allowed it to refinance and reduce its risk. The lack of regulation of these operations includes contribution to the proliferation of subprime mortgages in the United States. Everything was going fairly well as house prices ...