Canada's Banking System

[finknottle]

I found this interesting:

http://www.washingtontimes.com/news/2010/m...g-saved-canada/

 

The gist of it is that Canada's banking system weathered the crisis largely undamaged, largely because they practice old-school requirements: higher capital reserves. 20% down payment, proof of income, and no federal push for home ownership. As a consequence, banks generally found lending more profitable, and engaged less in the bundling and selling of dubious loans.

 

It goes on to say that the Obama administration has successfully resisted attempts in the financial regulation bill to follow the Canadian example, defeating such amendments on largely partisan votes.

 

This seems to have flown under my radar. Is it essentially accurate?

[meazza]

I found this interesting:

http://www.washingtontimes.com/news/2010/m...g-saved-canada/

 

The gist of it is that Canada's banking system weathered the crisis largely undamaged, largely because they practice old-school requirements: higher capital reserves. 20% down payment, proof of income, and no federal push for home ownership. As a consequence, banks generally found lending more profitable, and engaged less in the bundling and selling of dubious loans.

 

It goes on to say that the Obama administration has successfully resisted attempts in the financial regulation bill to follow the Canadian example, defeating such amendments on largely partisan votes.

 

This seems to have flown under my radar. Is it essentially accurate?

 

There was no subprime mess here. That is correct.

[John Adams]

I found this interesting:

http://www.washingtontimes.com/news/2010/m...g-saved-canada/

 

The gist of it is that Canada's banking system weathered the crisis largely undamaged, largely because they practice old-school requirements: higher capital reserves. 20% down payment, proof of income, and no federal push for home ownership. As a consequence, banks generally found lending more profitable, and engaged less in the bundling and selling of dubious loans.

 

It goes on to say that the Obama administration has successfully resisted attempts in the financial regulation bill to follow the Canadian example, defeating such amendments on largely partisan votes.

 

This seems to have flown under my radar. Is it essentially accurate?

 

What is surprising is that the investment bankers and AIG (and the AIG-clones) and the ratings agencies got into such a death spiral of greed that banks would drop those kind of requirements and just start giving loans to damn near anyone in the first place. The investment banks created an atmosphere of such mania over the mortgage backed securities that banks were under a huge pressure to keep making more...and the more they made, the more that could be backaged into the securities...which Moody's and others then waved a magic wand over and created AAA bonds from...which could then be traded on for jillions of dollars...creating the need and on and on.

 

Michael Lewis's The Big Short is a fantastically readable treatment of this.

[Bronc24]

Again...thanks Mom and Dad, for staying in Canada....

 

Call us socialist, but the more I learn, the more I realize America is regulated and hidden taxed to death. At least we call it what it is....

[drnykterstein]

I also learned recently that Canadian laws require offshore drill rigs to drill a relief well when the rig is first built. This way if a Gulf type spill ever happens it can be relieved with relative ease, instead of waiting 4 months for one to get drilled.

[Keukasmallies]

Damn that George Bush!

[ExiledInIllinois]

I also learned recently that Canadian laws require offshore drill rigs to drill a relief well when the rig is first built. This way if a Gulf type spill ever happens it can be relieved with relative ease, instead of waiting 4 months for one to get drilled.

 

What are you part of the 20 amp brigade now! We live in America dammit! you can't make us do sh*t!

 

[finknottle]

I also learned recently that Canadian laws require offshore drill rigs to drill a relief well when the rig is first built. This way if a Gulf type spill ever happens it can be relieved with relative ease, instead of waiting 4 months for one to get drilled.

 

And that would have made a difference how?

 

This was not a producing well. It was an exploratory well that when finished was to be plugged for later completion, when a second well would be dug. Sounds rather like your Canadian policy in action.

 

The explosion and fire occured during the first exploratory digging.

 

http://www.offshore-technology.com/projects/macondoprospect/

[/dev/null]

And that would have made a difference how?

 

This was not a producing well. It was an exploratory well that when finished was to be plugged for later completion, when a second well would be dug. Sounds rather like your Canadian policy in action.

 

The explosion and fire occured during the first exploratory digging.

 

http://www.offshore-technology.com/projects/macondoprospect/

 

Are you questioning what Conner read on the Intertubes?

 

Next thing you know, somebody might try to refute Global Warming Cooling Climate Change (You Can Believe In)® or provide an explanation of WTC7 that doesn't involve Dick Cheney

[DC Tom]

I also learned recently that Canadian laws require offshore drill rigs to drill a relief well when the rig is first built. This way if a Gulf type spill ever happens it can be relieved with relative ease, instead of waiting 4 months for one to get drilled.

 

I call bull ****. You, learn something?

[GG]

There is also the matter of Canada having a more consistent and centralized regulatory framework, blocking entry of foreign entities into the country, but more importantly - holding capital levels for their financials at high levels and being slow to adopt Basel accords. Interesting to note that Canada never had a Glass Steagall type of regulation, and their banks can conduct all sorts of banking, insurance and trading businesses under one umbrella - proprietary trading & all.

 

On the other hand, there's a lingering concern that as with anything, Canada is simply late to the game like in everything else. If its economy hits a road bump - the loony is richly priced and exports are getting hammered, and the oil economy of the Rockies goes into a downturn - their housing market will take a hit, but not to the same extent as in the US.

 

Bottom line, Canadian regulatory framework was better set up to prevent a runaway train.

[Jim in Anchorage]

There is also the matter of Canada having a more consistent and centralized regulatory framework, blocking entry of foreign entities into the country, but more importantly - holding capital levels for their financials at high levels and being slow to adopt Basel accords. Interesting to note that Canada never had a Glass Steagall type of regulation, and their banks can conduct all sorts of banking, insurance and trading businesses under one umbrella - proprietary trading & all.

 

On the other hand, there's a lingering concern that as with anything, Canada is simply late to the game like in everything else. If its economy hits a road bump - the loony is richly priced and exports are getting hammered, and the oil economy of the Rockies goes into a downturn - their housing market will take a hit, but not to the same extent as in the US.

 

Bottom line, Canadian regulatory framework was better set up to prevent a runaway train.

Thats nonsensical gibberish. The bottom line is Canada never had a Nevada, California, Arizona, Florida property boom with values jumping 20-30% a year. They did not have a boom,they will not have a bust. Just like the fly over parts of the US.

[GG]

Thats nonsensical gibberish. The bottom line is Canada never had a Nevada, California, Arizona, Florida property boom with values jumping 20-30% a year. They did not have a boom,they will not have a bust. Just like the fly over parts of the US.

 

I'm sorry that you don't understand the language of banking regulation in a topic about banking regulation. Shall I write slower or in bigger font next time?

 

Maybe you should check out what happened to the housing prices in the oil lands of Alberta & Saskatchewan during the shale boom? Yeah, why do the research?

[Magox]

I'm sorry that you don't understand the language of banking regulation in a topic about banking regulation. Shall I write slower or in bigger font next time?

 

Maybe you should check out what happened to the housing prices in the oil lands of Alberta & Saskatchewan during the shale boom? Yeah, why do the research?

As simplistic as Jim's argument may have been, there is an element of truth to what he said. There is no doubt, that our entire banking system along with many other sectors, afford our economy to partake in excessive practices, much more so than Canada.

 

In short, our bubbles will be much larger than Canada's and therefore the pop will be more painful as well.

[GG]

As simplistic as Jim's argument may have been, there is an element of truth to what he said. There is no doubt, that our entire banking system along with many other sectors, afford our economy to partake in excessive practices, much more so than Canada.

 

In short, our bubbles will be much larger than Canada's and therefore the pop will be more painful as well.

 

... and 99% of the reason that US banking system can partake in excessive practices while Canadians can't, is that the Canadian banking regulatory framework would not allow Canadian banks to take on similar risks. Canadian banks can do whatever they want in foreign jurisdictions, but at the end of the day, they need to live by capital standards Ottawa sets up.

 

His simplistic argument also doesn't address why a run up in Arizona, California, Florida & Nevada housing prices blew up banks all over Europe.

[Magox]

... and 99% of the reason that US banking system can partake in excessive practices while Canadians can't, is that the Canadian banking regulatory framework would not allow Canadian banks to take on similar risks. Canadian banks can do whatever they want in foreign jurisdictions, but at the end of the day, they need to live by capital standards Ottawa sets up.

 

His simplistic argument also doesn't address why a run up in Arizona, California, Florida & Nevada housing prices blew up banks all over Europe.

I'm not quite so sure that I would agree with the 99% number, but I don't dispute the capital reserve requirements point that you brought up. I also believe that the Canadian mentality is one of prudence and savings where our culture is more about spending and profit chasing, much more so than Canada's. Which of course adds to the narrative that our economy is more susceptible to creating bubbles than in most other economies.

[Jim in Anchorage]

As simplistic as Jim's argument may have been, there is an element of truth to what he said. There is no doubt, that our entire banking system along with many other sectors, afford our economy to partake in excessive practices, much more so than Canada.

 

In short, our bubbles will be much larger than Canada's and therefore the pop will be more painful as well.

Thank you, that is the finest complement I have ever received on this forum . I have moved up to simplistic from simpleton

[GG]

I'm not quite so sure that I would agree with the 99% number, but I don't dispute the capital reserve requirements point that you brought up. I also believe that the Canadian mentality is one of prudence and savings where our culture is more about spending and profit chasing, much more so than Canada's. Which of course adds to the narrative that our economy is more susceptible to creating bubbles than in most other economies.

 

There's no debating that Canadians are more risk averse than the US, and that the US has wider economic swings and also had a higher economic growth trajectory. But the Europeans are much more risk averse than the Canadians.

 

So the question, again is, why did Europe's banks blow up and Canadians didn't?

[Jim in Anchorage]

There's no debating that Canadians are more risk averse than the US, and that the US has wider economic swings and also had a higher economic growth trajectory. But the Europeans are much more risk averse than the Canadians.

 

So the question, again is, why did Europe's banks blow up and Canadians didn't?

One of my simplistic arguments. Canada makes it's money on oil, gas and timber. Real, useful products that people need in the real world. And those assets are spread along a small population. Their banks do not need to invest in speculative ventures because the country is awash in cash.

[Bronc24]

Bottom line....it's a great place to live....