Based on recent investigations by the World Economic Forum, Brittany West looks at which nations’ banks are the most secure and dependable.
There are many myths regarding our quiet Canadian friends, such as the fact that they live in igloos and inhabit snow all year long. An igloo would be quite an experience I’m sure, however boring as it may be Canadians tend to live in regular homes like that of most countries, and anyone whom has spent a year in the vibrant coastal city of Vancouver would find that the climate can be quite mild in some regions.
Canada often takes a back seat to the Southern neighbours in the USA, being viewed as not having the same technological advancements or film industry, which couldn’t be more wrong. Canadians are privy to all of the same technology as Americans and have a thriving film industry. In fact many of the syndicated U.S. TV shows, not to mention major studio motion pictures are filmed within Canada and are renowned for having some of the best production crews in the world.
This is why I was exceptionally pleased to receive a wonderful article regarding the current health of Canadian Banks. Guess which country, alone in the industrialized world has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors? If you said Canada congratulations, you are correct. In 2008 the World Economic Forum ranked Canada’s banking system the healthiest in the world. America’s ranked 40th and Britain’s 44th.
Canada has been able to do more than merely survive this financial crises, the country is undoubtedly thriving in it. Canadian banks are well capitalized, putting them in a position to take advantage of opportunities that American and European banks cannot seize. A prime example is the Toronto Dominion Bank who just one year ago was the 15th largest bank and today is the 5th. TD bank has not grown in size, the others have merely dropped of the radar.
Incidentally, in the WEF scoring, Canadian banks received 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7) – so for all of our fellow Australian’s reading this, you an rest easy. Furthermore, New Zealand scored 6.6 – clearly Australiasia is in good shape.
What is there trick? Common sense. Over the last 15 years as Europe and the United States have loosened regulations on their financial industries, the Canadians have refused to follow them down the same self detrimental path instead seeing the old rules as the golden path they are.
Canadian banks are commonly leveraged 18 to 1- compared with U.S banks at 26 to 1 and European banks at a staggering 61-1. Canadians have also been fortunate enough to be shielded from the worst of the financial crises by strong holding home prices. This is namely because of the Canadian tax code, which does not provide the massive incentive for overconsumption that the U.S. code does.
Additionally home loans in the states are non-recourse, which ultimately means that if a borrower goes belly up, it is mostly the bank’s problem. Where as in Canada if you borrow it, you are responsible to repay it, end of story.
Another feather in Canada’s cap is the fact that the Country has been running a budget surplus for the last 12 years and can now afford to fuel a recovery from a strong financial position. If the newly elected President Obama is in search of smart government ideas, there is much to learn from many other nations around the world – Canada and Australia included.
Brittany West & Simon Turner