Why are Canadian Banks More Resilient?

20 Pages Posted: 4 Aug 2009

See all articles by Lev Ratnovski

Lev Ratnovski

International Monetary Fund; European Central Bank, Financial Research Division

Rocco Huang

Michigan State University - Department of Finance; Wharton Financial Institutions Center

Date Written: July 2009

Abstract

This paper explores factors behind Canadian banks' relative resilience in the ongoing credit turmoil. We identify two main causes: a higher share of depository funding (vs. wholesale funding) in liabilities, and a number of regulatory and structural factors in the Canadian market that reduced banks' incentives to take excessive risks. The robust predictive power of the depository funding ratio is confirmed in a multivariate analysis of the performance of 72 largest commercial banks in OECD countries during the turmoil.

Keywords: Bank regulations, Banking crisis, Banking sector, Canada, Commercial banks, Cross country analysis, Depositories, Economic models, Financial stability, Monetary policy

Suggested Citation

Ratnovski, Lev and Huang, Rocco, Why are Canadian Banks More Resilient? (July 2009). IMF Working Paper No. 09/152, Available at SSRN: https://ssrn.com/abstract=1442254

Lev Ratnovski (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://ratnovski.googlepages.com

European Central Bank, Financial Research Division

Germany

Rocco Huang

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.roccohuang.com

Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

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