Why Didn’t Canadian Banks Go Wild?

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• Canada’s version of Glass Steagall repealed in the 19080s.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

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Source: U.S. regulators could learn from Canada’s banks (USA Today) David J. Lynch USA TODAY, July 2, 2009 http://www.usatoday.com/money/world/2009-07-01-canada-bank-regulation_N.htm