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No banking crisis in Canada

Thanks to timeless principles of responsibility and accountability which we used to find in British and American banks -

Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn't grown in size; the others have all shrunk.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada's more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Meanwhile, without any government help, such as tax deductions for mortgage interest, the percentage of Canadians owning their own homes is actually slightly higher - 68.4 % - than it is in the United States.

Thanks to Gordon and Joan Leonard for the link. As they observed, there are lessons here.

Comments (1)

Brad:

While one can admire and appreciate the common sense of Canada in this instance. It should be noted that Canada has the great good fortune to be next door to the largest economy in the history of the world, and a military giant. Canada finds no need to militarize its boarder. It enjoys, until recently, a huge and low cost export market. Common sense, when paired with good fortune is as they say nice work when you can get it.

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