Wednesday, July 22, 2009

Canadian Banks’ resiliency had nothing to do with Flaherty or the Harper Cons

The IMF has just published a paper entitled “Why Are Canadian Banks More Resilient?” available here.

Canadians at large have themselves to thank, rather than the bank executives or the Harper government for the resilience of the Canadian banks during the recent financial meltdown, as the IMF concluded that the single most important thing that distinguished Canadian banks from their international peer group during was the extent to which Canadian banks are funded by their depositors (i.e. Canadians at large) versus funded by wholesale sources.

The conclusion of the report reads:

The paper analyzed pre-crisis balance sheet structural fundamentals of Canadian banks and compared them with banks in other OECD countries. We found that ample retail depository finding was the key factor behind the relative resilience of Canadian banks during the turmoil. Sufficient capital and liquidity were also important but played a less distinctive role. In addition, a number of regulatory and structural factors have reduced Canadian banks’ incentives to take risks. Results allow a conjecture that strong structural fundamentals of Canadian banks will remain a source of their resilience as the financial turmoil and economic recession persist.


Dr Mike said...

It could be that some of the rest of the reason is the unwillingness of Canadian small investors to buy risky crap assets unlike their US counterparts.

The banks here were not as successful in passing these dogs down to the customers as their American cousins.

Canadian small investors are more astute financially & more (I hate to use this word) conservative in their outlook.

And that is why we loved income trusts.

Dr Mike

Anonymous said...

Yeah after reading and actually voting on all my bank shares this year, I strongly agree with the "Canadians have themselves to thank rather than bank executives or the Harper government for the resilience of the Canadian banks ..."
Going through the voting items earlier this year, this site was very handy. Anyone on a board who was named on this site as a negative for Trust Unit cause - was an automatic "against". Why should I reward those ---holes with more money, responsibility & other fantastic perks after they screwed over Trust Unit holders? Same thing with some other undesirable or stupid stuff I don't want as a customer or shareholder.
If the banks want me spending more money in fees or loan interest, they can jump on board now with efforts rescind this trust unit tax b.s. I was a much more desirable customer, with a higher risk tolerance when my trust units were doing well.

We can also add the Canadian Competition Bureau to our thank you. It is my understanding they played a key role during the late 90's when all the banks wanted to merge.

I would be very interested in some kind of Caiti posting about the Canadian Competion Bureau. Of course with some kind of link back to trust units.