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A country that got things right
"IT IS the only time I feel like royalty," says the boss of a big Canadian bank, describing the reception he now gets in America. He is not the only one basking in acclaim. All of Canada`s main banks were profitable in the quarter ending January 31st, when market conditions were at their worst. None has needed government investment. The country`s financial system has been praised by Barack Obama.
Trouble is, some differences between the two countries are culturally ingrained. "The United States has an inherently higher risk appetite," says a banker familiar with both sides of the fence. It is hard to find pre-crisis equivalents in America of the decision by Toronto-Dominion (TD) to exit its structured products business in 2005, or the 20-30% band that RBC imposes on the share of earnings that its capital-markets business can contribute.
Structural differences matter too. The Canadian system is an oligopoly of five dominant banks. That dampens price competition: independent brokers originate less than one-third of the mortgages in Canada, compared with up to 70% in America during the bubble. It also makes it easier for Canadian banks to pull back when things are getting too risky.
Read the full article here.
"IT IS the only time I feel like royalty," says the boss of a big Canadian bank, describing the reception he now gets in America. He is not the only one basking in acclaim. All of Canada`s main banks were profitable in the quarter ending January 31st, when market conditions were at their worst. None has needed government investment. The country`s financial system has been praised by Barack Obama.
Trouble is, some differences between the two countries are culturally ingrained. "The United States has an inherently higher risk appetite," says a banker familiar with both sides of the fence. It is hard to find pre-crisis equivalents in America of the decision by Toronto-Dominion (TD) to exit its structured products business in 2005, or the 20-30% band that RBC imposes on the share of earnings that its capital-markets business can contribute.
Structural differences matter too. The Canadian system is an oligopoly of five dominant banks. That dampens price competition: independent brokers originate less than one-third of the mortgages in Canada, compared with up to 70% in America during the bubble. It also makes it easier for Canadian banks to pull back when things are getting too risky.
Read the full article here.