The Canadian vs. American Banking System: What Canada is doing right!
Why is Canada ranked first as the most sound banking system? Canada has had this title for seven consecutive years; and our economy is steadily growing. What is so great about the Canadian banking system and why hasn’t Canada encountered any financial crises? Why do some people view the American banking system as dysfunctional? These are questions frequently asked by economic interpreters. Many people are concerned about what it is that Canada is doing right. They have a good and safe strategy and many countries try to establish safe financial institutions that attempt to follow Canada’s strategy, but it doesn’t seem to work. There are multiple factors that could distinguish the two banking systems. Canadian banks are more stable and efficient because of a lack of derivative trading, procedures in loaning money, structure, and banking regulations.
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It is evident that Canada has a safer banking system because of a lack of derivative trading. The major contrast is clearly highlighted by the financial crisis of 2008 in America, where Canada survived the economic blow and cushioned its citizens much smoother than its neighbor. Canada, as oppose the U.S does not allow derivative trading. The financial crisis of 2008 in America was because of derivative trading. It is noted “The greatest risk of all, however, may be one of the least visible – namely, the expanding, shadowy market for derivatives.” Investment bankers were purchasing lots of mortgages and created collateralized debt obligations and made these mortgages available to other investors who wanted minimum risk. But suddenly people were defaulting on their mortgage payments and this resulted in the financial crisis of 2008 known as the housing