Canada's Banking System

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Why is Canada ranked first as the most sound banking system? What is so great about the Canadian banking system and why hasn’t Canada encountered any financial crises. Why do some people view the U.S banking system as dysfunctional? These are questions that are asked frequently by economic interpreters. Canadian banks are more stable banks because of their size/structure, safety/regulations and their global reach and mortgages. Although the United States and Canada are friendly neighboring countries they maintain their differences in their banking infrastructure. It is evident that Canada is a more safe banking system because of mortgages. The major contrast is clearly highlighted by the financial crisis of 2008 in the U.S., where Canada…show more content…
They relate to how large of a presence the banks have in the financial sectors of their respective countries. In Canada, the five largest banks maintain 90 percent of the country's total bank assets, while the five largest U.S. banks have less than 30 percent of the nation's total bank assets. That is a significantly large difference, it is clear that Canada holds more control in their banking infrastructure when compared to the United States. Also the amount of banks in Canada increased during the 20th century, with the allowance of foreign banks into the country's financial market. The number of U.S banks, however, decreased from 14,000 banks in the 1920s to 8,000 in 2005. Canada had a positive outgrow and expansion of their banks in their country while the United States banks witnessed a 40 percent bank decrease across their nation. The total assets of banks in Canada, approximately $1.9 trillion CAD, makes up for over 100 percent of the countries gross domestic product. The U.S. banks' total assets comprise $8.4 trillion, less than 75 percent of the U.S. gross domestic product. It is evident that Canada offers a more reliable and trustworthy banking system in their financial…show more content…
In Canada, all of the banks are federally incorporated, via the Bank Act. The Bank Act features a "sunset" clause. This typically defines that all financially-related legislation must be reviewed from time to time. The federal government constantly checks and monitors the financial market and makes sure they provide an organized, trustful, safe and sound financial environment. Changes in the Canadian financial legislation are attributed to the immersion of foreign banks into the country's financial market. Also, Canadian banks expanded into different financial services in the last quarter of the 20th century; these services include trust business and insurance underwriting. The banks in the United States follow a dual system in banking. Some banks across the nation are state monitored while the federal government monitors others. During the 1920s, the McFadden Act disallowed interstate branching; meaning state-monitored banks cannot expand into other states. However, many banks found a way around this law and avoided it by developing a BHC structure, which permitted state-monitored bank to operate in different states if they operate as separate subsidiaries of the bank company, this occurred until the 1990s where new legislation was passed. One that allowed national banks to set
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