Healthy Canadian Banks
The Canadian financial market is a bit like the country: low-key and a little boring. Today, it is the envy of the rest of the world. Its biggest bank, the Royal Bank of Canada, is now the 11th biggest bank in the world by market capitalization. Its market capitalization is about three times that of Citigroup and 30 percent higher than that of UBS or Credit Suisse. There are now three Canadian banks among the 30 largest in market capitalization in the world. Obviously, this is due to the fact that their American, English and Swiss counterparts' capitalization has melted away like snow in the sunshine. Of course, the Canadian banks' profits have dropped considerably, but they remain positive. Why is the Canadian financial system considered the most solid in the world at the present time?
It seems that the Canadian banking system has stuck with some classic conservative principles, including "Don't take big risks with money you can't afford to lose," "Banks should have secure sources of funding," and "Don't overdo debt." When risks are paying off, people will laugh at you for being sensible and staying out of the gambling game. But the point to risks is that eventually, they will hit hard. When that happens, suddenly everyone who is losing their shirts becomes envious of the sensible folks.
Hopefully, America will learn some lessons from the current economic collapse.