Chapter 7: Money and the Candian Banking System

http://www.american.com/archive/2010/february/due-north-canadas-marvelous-mortgage-and-banking-system

Summary
A very recent article mentions the stability and safety of Canadian banks over any other banks. While almost 200 American banks failed during the 2008 meltdown, not even one Canadian bank closed down. One reason for Canadian banks’ safety is the responsibility of borrowers. If the borrower is unable to pay the mortgage, Canadian banks can legally take the borrower’s future wages. This action of seizing wages is unpopular in America. In addition, the Canadian bank industry is concentrated in the 5 large banks out of a total of 82 Canadian banks, as opposed to the 8,000 diversified banks in America.

Connection
The article relates to our Everyday Economics section 7.2, as Canada indeed has one of the soundest banking systems in the world. In addition to the article, the text includes several other reasons for the stability of Canadian Banks. For example, failing banks would merge with larger banks to maintain public confidence in the Canadian banks. Another reason is the deposit insurance. Because Canadians are automatically covered by insurance when they deposit money into a chartered bank, they will not panic withdraw when chartered banks have problems. Also, the reserve ratio helps stabilize the chartered Canadian banks. A percentage of assets have to be sent to the Bank of Canada, where they are kept in ‘reserve’.

Reflection
I feel very proud of our Canadian banking system. Prior to the 2008 meltdown, people have been complaining about our conservative ways of banking. Now people can see that only the best can stand out in bad times. When hundreds of banks of banks close down worldwide in 2008, not one Canadian bank closed down. All the above features of the Canadian banking system add to the public confidence of our system. It is because we have such closely monitored and stiff regulations in Canada that our banks are so safe, so next time you are rejected of a mortgage, feel proud of our Canadian banking system.