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Business, Consumer Bankruptcies Remain Low in Canada, Says Scotiabank

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Scotiabank asks if Canadian insolvencies are as bad as some are depicting.

The total number of business and consumer bankruptcies remains low in Canada, noted the bank. The number of consumer bankruptcies remains very low along a flat trend, as the number of proposals to work out terms has continued to rise and which is driving higher total insolvencies -- the sum of bankruptcies and proposals.

On a per capita basis and per employed person basis, consumer bankruptcies, proposals and insolvencies are very low, stated Scotiabank. Canada has a more collaborative borrower-lender set of arrangements than, say, the United States, where strategic defaults and jingle mail are more prevalent at times of stress.

This is a strength of the Canadian system, according to the bank.

Shifting to business insolvencies, the picture is a little different, pointed out Scotiabank. Bankruptcies are off the peak but higher than proposals and higher than the pre-pandemic experience, but still relatively low.

Some businesses are indeed struggling.

In other cases, creative destruction is driving change and coverage needs to be careful. You wouldn't want to quash all bankruptcies with support in a way that would interfere with the reallocation of resources away from nonviable businesses toward others that can use the workers and resources more productively, added the bank.

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