rates to people who would not normally qualify for a home loan because they are considered too risky by the chartered banks. For example, Home Capital’s mortgage-takers are self-employed, entrepreneurs, or have unstable, seasonal incomes (such as those in the agricultural sector). Such people are considered sub-prime loan applicants. Deposits at Home Capital are covered by the Canadian Deposit Insurance Corporation (CDIC), a federal Crown corporation created by parliament in 1967 to foster confidence in Canada’s banking system. If a financial institution that has CDIC coverage were to fail, the CDIC would guarantee that depositors would not lose their money – but only up to $100,000 . Anything more than that, would be at risk. The Problem: Home Capital has become embroiled in an ethics scandal: some of its mortgage brokers have falsified documents to help applicants get loans they wouldn’t otherwise have qualified for. When news of the scandal broke, Home Capital’s share price collapsed. No one knows what will happen. Will Home Capital go under? Will another bank or investor take it over? Will the government get involved? The effect on Sentinel: Sentinel must issue a press release dealing with the fallout because nothing makes investors more nervous than a bank that could fail. You have TWO choices on how to frame your release. Either you can announce that Sentinel is sticking with Home Capital as a place to invest client money. Or you may announce you are withdrawing Sentinel’s clients. Either way, you must announce the company’s decision to the media and provide reasons for it.
- Fall '19