Canada: Conservative Banking

Canadian Exceptionism

Excerpt:

Canada is one of the few countries without a major banking crisis. Weirdly, this was also true in 1930. I've seen this list of the success factors for Canadian banks in several places. I want to believe it, but . . .

..it doesn't seem to be as simple as "Canadian banks are more tightly-regulated".

1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn't matter if a local housing market goes bust).
   
2. We don't have Glass-Steagal. The investment banks joined the retail banks some years ago.
   
3. We don't have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.
   
4. (Except in Alberta), mortgages are fully recourse. You can't just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.
   

I wouldn't describe those differences as "Canada is more regulated". But we do have higher capital requirements. And mortgages over 80% must be insured (mostly by the government-owned CMHC).

Comment: HT: Why are Canadian banks left unscathed?

We have stock in Bank of Montreal (BMO). Other major Canadian Banks:

• Canadian Imperial Bank (CM)
  
• Royal Bank of Canada (RY)
  
• Toronto Dominion Bank (TD)