Common Sense and Boring Canadian Banks
As a start-up, I’ve complained about how conservative the Canadian business culture is, especially banking and finance. But boring has it’s benefits, when things get shaky. From Newsweek:
In 2008, the World Economic Forum ranked Canada’s banking system the healthiest in the world. America’s ranked 40th, Britain’s 44th.
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. [more…]
Given that we lost 129,000 jobs in January alone, I don’t think it’s fair to say our economy is thriving. But certainly our banking sector appears to be in decent shape.
Speaking of which: 60:1 leverage in European banks? God help us.