Canadian banks prosper thanks to “strict regulation”

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I’d like to thank Vermont’s Loudest Economist (TM) Art Woolf for pointing me to a very interesting little article at Bloomberg News. The subject is Bloomberg’s list of the world’s strongest banks. And, as Woolf notes in his latest “Around the Web” piece on Vermont Tiger, the list is dominated by Canadian banks. They account for four of the world’s six strongest banks (CIBC, TD, National Bank of Canada, and Royal Bank of Canada) and placed two more in the top 22 (Scotia Bank and the Bank of Montreal).

Mr. Woolf briefly noted the amazing phenomenon and offered a congratulatory note to our northern neighbor. However, he apparently failed to read far enough into the article to discover the reasons for Canada’s banking strength. The answer is downright embarrassing to an apostle of free-market economics writing on Vermont’s leading free-market blog:

Canadian banks invoke their strong capital levels, the country’s conservative lending culture and strict regulatory oversight under a single supervisor as reasons for their showing. The supervisor requires Canadian banks to hold a higher level of capital than do international standards.

Ahh. So our banks, relatively unfettered in a post-Reagan regulatory climate, came perilously close to crashing the world economy and needed a huge bailout to survive their own stupidity and cupidity.

Meanwhile, Canada’s banks, weighed down by the heavy hand of the country’s paternalistic regulatory structure, are among the strongest financial institutions in the world.

There’s a lesson to be learned here. Somehow I doubt that our Esteemed Professor will learn it.  

4 thoughts on “Canadian banks prosper thanks to “strict regulation””

  1. be only one explanation. Bloomberg is a closet commie leftist publication. And the professor (where is the skipper and MaryAnn?) has been duped.

    Either that, or government that regulates can work to makes country stronger… but that does not compute.  

  2. or just a burden sans regulation.

    The article also notes that Canadian bank stocks, for the past four years have outperformed those in certain US indexes which include the US biggest banks.(odd,the link at the VTtigger site to the article is broken now)

    But here in the US we have happy, happy, happy bank CEO’s!

    The compensation of the CEOs of the largest U.S. banks towers above what’s paid to banking chiefs in other parts of the world, according to a Reuters analysis of pay at the 18 biggest banks by market value.

    http://www.reuters.com/article…

    And win or lose…they win.

    Despite earnings per share increasing more than 13 percent at the two dozen banks the securities firm studies, stock prices fell more than 30 percent. CEOs, however, brought in about 65 more times than the average employee salary.

    Among this year’s worst stock performers are some of the nation’s biggest banks like Bank of America which is down nearly 60% this year. Its CEO Brian Moynihan will earn $2.26 million in 2011.

    But over at JPMorgan Chase where shares are down roughly 23% this year CEO Jamie Dimon will have earned a cool $41.9 million-the most among the bank CEOs in Bove’s coverage list.

    Goldman Sachs which has lost 46% of its market cap in 2011 still managed to pay its CEO Lloyd Blankfein a $21.7 million. Mind you Goldman reported its second ever quarterly loss as a public company this year.

    http://www.forbes.com/sites/ha…

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