Roy, Jean; Turk-Ariss, Rima; Redjah, Yenni --- "Why is the Canadian Banking System so Remarkably Stable? A Comparative Analysis with the US" [2011] ELECD 490; in LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder (eds), "Managing Risk in the Financial System" (Edward Elgar Publishing, 2011)

Book Title: Managing Risk in the Financial System

Editor(s): LaBrosse, Raymond John; Olivares-Caminal, Rodrigo; Singh, Dalvinder

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857933812

Section: Chapter 5

Section Title: Why is the Canadian Banking System so Remarkably Stable? A Comparative Analysis with the US

Author(s): Roy, Jean; Turk-Ariss, Rima; Redjah, Yenni

Number of pages: 12

Extract:

5. Why is the Canadian banking
system so remarkably stable?
A comparative analysis with the US
Jean Roy, Rima Turk-Ariss and Yenni Redjah

During 2009, the US experienced a major financial crisis that spread
to several major European countries. Government had to bail out the
banking system with unprecedented financial measures. At the same time,
Canada showed its banking system had great resilience and stability. This
remarkable performance was noted by several international organiza-
tions such as Moody's and the World Economic Forum. The contrasting
behaviour of the two banking systems is indeed quite surprising given their
common Anglo-Saxon heritage and the high level of integration of their
economies. This situation raises the question of finding the causes explain-
ing the differences in the behaviour of the two banking systems during the
crisis.
Thus, our objective is to review the possible explanations for the better
performance of the Canadian banking system relative to its American
counterpart during the latest period of financial turmoil. Hopefully, this
exercise can identify lessons that can be helpful in preventing systemic risk
and fostering financial stability.
The chapter proceeds as follows. First, it will document the striking
differences of behaviour of the two banking systems both from a public
and a private point of view. Secondly, it will explore to what extent the
higher level of market concentration in Canada can provide an explana-
tion. Finally, it will look at regulation and the financial behaviour of both
banks and borrowers as potential ...