No_hite_pls
Joined: 05 Mar 2007
Location: Don't hate me because I'm right
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 Posted: Wed Feb 18, 2009 6:46 pm Post subject: Obama compliments Canadian regulation |
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Obama compliments Canadian regulation
The Associated Press
Wednesday, February 18, 2009
OTTAWA: President Barack Obama said the United States should take note of Canada's banks, which have avoided government bailouts and are now among the strongest in the world.
In advance of his first foreign trip, Obama said in an interview with the Canadian Broadcasting Corp. on Tuesday that Canada has shown it is a good manager of its financial system.
Obama heads to Canada on Thursday as the financial crisis threatens the solvency of U.S. banks.
"One of the things that I think has been striking about Canada is that in the midst of this enormous economic crisis, I think Canada has shown itself to be a pretty good manager of the financial system in the economy in ways that we haven't always been here in the United States," Obama said.
"And I think that's important for us to take note of, that it's possible for us to have a vibrant banking sector, for example, without taking some of the wild risks that have resulted in so much trouble on Wall Street."
Canada has avoided the mortgage meltdown and banking crisis that are hitting the United States and Europe hard.
The country has not experienced the failure of any major financial institution and Canada's banks now have the largest market capitalization's in the world. Royal Bank of Canada has a $30 billion market cap compared to Citigroup's $16 billion market cap.
The stock prices of Canada's banks are down but not nearly as much as U.S. or European bank stocks. Canada's financial system is dominated by five banks, unlike in the U.S. where there are scores of banks.
The World Economic Forum said recently Canada had the soundest financial system in the world, with a rating of 6.8 out of 7.
Toronto-Dominion Bank economist Craig Alexander said regulation force the banks to have a Tier 1 capital ratio of 7 percent, but that in practice the median in mid-2008 was 9.8 percent.
"This is a higher capital ratio that in many other countries," Alexander said in a recent report.
Alexander also noted that investment banks in Canada were folded into a larger diversified institutions late 1980s when the government allowed for it.
"There appears to be a more risk adverse culture in Canada running through government, the public and banks. One feeds off another. It may be instrumental that Canadian banking is relatively dominated by a fairly small number of large banks that have been in business for a very long time," Alexander wrote.
"Perhaps this long history deters actions to boost short-term profits at the expense of long-term risk."
Robert Bothwell, director of the international relations program at the University of Toronto, said government oversight has prevented the Canadians banks from behaving like U.S. banks.
"My suspicion is that the Canadian banks deeply desire to behave as badly or stupidly as the British or American banks but government wouldn't let him," Bothwell said. |
Here is a story for all the people on this board who think regulation is bad. |
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