Discounted bank stocks, CRA clawbacks and interest rate tightening: Must-read business and investing stories

Open this photo in gallery:

Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

CRA restarts child benefit clawbacks

The Canada Revenue Agency has resumed collecting debts tied to overpayments of the Canada Child Benefit, a move that some parents say resulted in drastic reductions of their benefit payments for March. As Erica Alini reports, the CRA usually reduces or withholds tax refunds and benefit payments to offset a taxpayer’s debt but temporarily stopped doing so in 2020 as relief during the pandemic. While the tax agency says it sent taxpayers notices to inform them of their debt, some parents said on social media the reduction came as a surprise and left them scrambling to pay for bills and groceries. Under the Canada Child Benefit, parents can receive a maximum of $583.08 a month for children under 6 and up to $491.91 a month for children between 6 and 17, with the amount of the benefit tied to family income.

The difference between the U.S. and Canada’s banking systems

Last week, the Office of the Superintendent of Financial Institutions, which is responsible for ensuring Canada’s banking system functions smoothly today, made headlines when it took control of Silicon Valley Bank’s Canadian operations. According to Tim Shufelt, what has unfolded is uncannily familiar to the collapse of the Home Bank of Canada 100 years ago, which triggered a homegrown banking crisis. Tens of thousands of depositors faced the loss of their savings, sparking a debate over how much bank deposits should be guaranteed at the federal level. Home Bank’s demise inspired key features of Canada’s modern banking system, including deposit insurance, federal regulatory oversight and a more concentrated sector built around a handful of big banks. It has proven to be a durable structure. Home Bank’s failure was the last of any major chartered bank in Canada – unlike what we’ve seen unfold in the U.S.

Real interest rates set to tighten even more

The Bank of Canada may have hit pause on further rate hikes, but real interest rates – a measure of the policy rate minus inflation – are set to become even more restrictive over the next year, even if the bank leaves its policy rate unchanged. Despite last year’s hikes, real monetary policy was historically lax. That’s changed as inflation cools, to the point that real rates are back to where they were prior to the pandemic and rising fast. Jason Kirby takes a closer look in this week’s Decoder.

RBC tells employees to return to office as country deals with empty downtowns

Royal Bank of Canada has asked employees to return to their offices three to four days a week, as companies across the country struggle to convince workers to leave their work-from-home setups behind. An internal memo says that without frequent in-person engagement the bank’s long-term competitiveness is at risk, writes Stefanie Marotta. The new requirement will go into effect on May 1. RBC is the first of Canada’s big banks to mandate more rigorous return-to-office requirements, and as Canada’s largest lender and one of the country’s biggest employers – with 97,000 staff – RBC sets the tone for other Canadian companies. According to Rachelle Younglai, the percentage of employees in Toronto’s financial hub averaged 43 per cent of prepandemic occupancy levels in early March. That is the highest level of occupancy since the pandemic started – a sign of the slow return to the office.

Porter Airlines struggles to attract passengers on cross-country flights

Porter Airlines’ aggressive expansion with new routes and larger passenger jets is off to a bumpy start, as the Toronto-based airline made extensive cuts to its March schedule. As Eric Atkins reports, Porter cancelled 22 per cent of its flights departing Toronto Pearson International Airport, almost 20 per cent of its schedule at Vancouver International Airport, and 17 per cent at Calgary International Airport, according to Cirium, an aviation data company. Porter launched a major expansion in February, taking aim at Canada’s largest airlines with a full slate of flights to several of the country’s major centres. Porter has eight Embraer jets with firm orders for another 42, and 29 78-seat De Havilland Dash 8 propeller planes.

It’s time to buy beaten-up bank stocks

Investors are growing fearful as the banking sector lurches from one crisis to the next, but there’s an upside to this upheaval: it may be good news for anyone looking to take advantage of beaten-up stocks. According to David Berman, the Canadian banking sector has been hit by a gloomy outlook as central banks raised interest rates in a battle against inflation. These stocks have taken an additional hit since the failure of Silicon Valley Bank this month rattled confidence in the financial system and are now trading near five-month lows. Additional turbulence in the sector has left investors wondering if others are at risk.

Ready to get your finances in shape?

MoneySmart Bootcamp is a 5-part newsletter course to improve your personal finance skills, including budgeting, borrowing and investing. Taking the course? Tag us on Twitter (@globeandmail) using the hashtag #MoneySmartBootcamp.

Sign up for MoneySmart Bootcamp: If you want to improve your financial fitness, The Globe’s MoneySmart Bootcamp newsletter course is for you. This new five-part course written by personal finance reporter Erica Alini will improve your personal finance skills, including budgeting, borrowing and investing. Subscribe to the MoneySmart Bootcamp and you’ll receive an e-mail a week to work a different financial muscle. Lessons will land in your inbox Wednesday afternoons.

Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.