Summary

This case introduces Canada Wide, a federally incorporated trust company with its branches spreading across five cities of Canada, such as Halifax, Toronto, Winnipeg, Calgary and Vancouver. Canada Wide was a subsidiary of a major insurance company, providing life, fire/auto, and casualty/liability services in the market. The trust was engaged in the Canadian market regulated by the superintendent of financial institution, both as a borrower and a lender in which the company invested in residential mortgage and investment loans. Furthermore, it also acted as a trustee for various investment products, such as RRSPs, RESPs and RTFSAs. Additionally, the company raised its funds on a day to day basis from its branchoperations, which attributed towards generating various loan applications from dealer acting upon the interest of their clients. Canada Widewas recognized in the market for offering its financial products to the investors with high yield (0.10% to 0.25%) compared to other chartered banks available anywhere.The case discusses the situation, in which, the company’s CEO Adam Smith, was faced with a tough decision, regarding a loan application worth $3 million, submitted by Chris Seymour,who was an investment advisor, acting upon the interest of his client.However, it was a policy of the company that a loan application worth greater than $2 million, must be approved by the president. Moreover, the financial institution took pride in its marketing stance, of providing quick turnaround on investor’s loan applications. Therefore, Adam knew that, a prompt and effective decision has to be made regarding the $3 million loan application from Chris. Which could potentially raise the financial institution Returns in the future or decrease them altogether, depending upon their ability to make timely payments.

Canada Wide Savings, Loan & Trust Company Harvard Case Solution & Analysis

Subject

The main subject under focus of our discussion pertains to the loan application submitted by Chris to Canada Wideand determine, whether the application would be beneficial for Canada Wideor not. If they decide to accept the loan application, what term could Adam Impose on the loan? Which could potentially increase the long-term benefit generated for the loanapplication in favor of CanadaWide.

Identification of Risks

It can be assessed that, certain risks could be faced by the financial institution, if they decide to approve the loan application from Chris inwhich the financial institution could be exposed to credit risk, raised by the ill assessment of potential applicant’s credit worthiness. Which would compromise the financial institution’s ability to generate high returns from the potential loan application. Furthermore, the borrower could default on the payment term, attributed to this inefficient investment planning which would compromise the borrower’s ability to make timely payments in favor of the financial institution which in turn could compromise Canada Wide’s ability to survive in the highly competitive and diverse market. However, it can be determined that, the most crucial risk pertains to the issue of assessing the credit worthiness of the borrower, for decision making purpose........................

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