Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or ...)? / Michael D. Bordo, Angela Redish, Hugh Rockoff.

Format:

Book

Author/Creator:

Bordo, Michael D.

Contributor:

National Bureau of Economic Research.

Redish, Angela.

Rockoff, Hugh.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17312.

NBER working paper series no. w17312

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Why didn't Canada have a banking crisis in 2008

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk -- the mortgage market and investment banking -- and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2007-2008 was not contained.

Notes:

Print version record

August 2011.