Why Didn’t Canadian Banks Go Wild?

Fascinating story in USA Today on the banking system our neighbors to the North enjoy:

Our northern neighbor sometimes seems so similar to the United States that it’s hard to tell where the USA ends and Canada begins. Here’s one way: Canada is the place with healthy banks, taxpayers unscathed by megabillion-dollar bailouts and no need to overhaul financial regulation because it was done right the first time.

As U.S. officials scramble to prevent a crisis sequel, the ability of Canadian banks to navigate the current financial storm is earning global plaudits. The World Economic Forum in October ranked the country’s financial institutions No. 1 in the world for solvency. U.S. banks came in 40th, two rungs behind Botswana.

A few noteworthy differences:

• Superintendent of Financial Institutions: A single, powerful regulator;

• Industry Concentration: 5 banks have 85% of assets in Canada;

• More conservative executive-suite culture: Bankers are more like Accountants than Wall Streeters;

• Canada’s version of Glass Steagall repealed in the 19080s.

It is more than regulation alone: Canada has a very different corporate culture; is less driven by pursuit of option riches, and seems to be more concerned with sustainable, rather than short term, corporate profitability. Bullet points 2 and 4 would likely be abused in the US.

The entire piece is well worth reading . . .


U.S. regulators could learn from Canada’s banks (USA Today)
David J. Lynch
USA TODAY, July 2, 2009

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