Opinion: Canada’s Banks Could Show The World How To Thrive

How is the Canadian banking industry being affected by the United State’s economical turmoil? In reality not as badly as one would suspect considering the closeness of the two nations. Canada is holding its own and doing a decent job of it.
Even though Canada is often considered the little cousin in the corner by the United States the bankers have learned how to do ‘it’ right compared to the United States. Last year the banking industry in Canada was ranked the healthiest in the world. The United States was far below at a mere 40th and the United Kingdom even farther at 44th. How did the ‘new kid on the block’ rise up in the ranks during a time of world wide financial crisis?

Regulation is the main reason Canada’s banks aren’t falling into the recession crevices.

Canoe Money reports:

“We’ve had a couple of financial institutions in Canada that ran the risk of falling outside the capitalization requirements,” he said during a news conference on Wednesday.

“We required them… to maintain the appropriate capital requirements and raise capital as necessary, which was done months ago.”

While other world banks are collapsing Canadian banks are growing. In just one year the Toronto Dominion Bank has gone from the 15th largest bank in North America to fifth.

The underlining growth of Canadian banks can be accounted to one basic principle; common sense. Instead of allowing lenders with nothing to show free rein on the housing market Canadian banks aren’t afraid to just say come back when you can show us your money. Banks require at least a 5 percent down payment before the loan officers will start talking to you.

As Canoe quotes Brad Smith of Blackmont Capital:

“Some Canadian banks have experienced far more stress than others, but collectively the strong banks are carrying the less strong banks through.”

But, he said, for “domestic financial institutions to continue to outperform, you have to assume the economic environment here will continue to outperform – because if it doesn’t you’re going to get deterioration here as well.”

That doesn’t mean fewer Canadians own a home, the fact is in both countries home owners number roughly at 68 percent of the population. Canadians just don’t hit the foreclosure trail as often.

Some of the guidelines put into place by Jean Chretien nearly a decade ago are holding true to their promises. Canadian banks remain in a safe zone in part because of the refusal to approve any Canadian bank mergers.

The government in Canada has been in budget surplus for the past decade. The national pension plan has a solid footing. The citizens don’t fear losing everything because of a health crisis. Each of these issues are positives for the banker.

The most positive news though about the state of the Canadian banks came when on
Tuesday the International Monetary Fund report announced that Canada will lead the G-7 economics in 2009 with growth of 1.2 percent as the rest of overall global growth is slowing down.


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