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Why Are Canadian Banks More Resilient?

Author/Editor: Ratnovski, Lev | Huang, Rocco
Authorized for Distribution: July 1, 2009
Electronic Access: Free Full Text (PDF file size is 654KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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.
 
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Series: Working Paper No. 09/152
Subject(s): Bank regulations | Banking crisis | Banking sector | Canada | Commercial banks | Cross country analysis | Depositories | Economic models | Financial stability | Monetary policy
Author's keyword(s): Banking Crisis | Financial Stability | Early Warning System | Canada
 
English  
    Published:   July 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009152   Pages:   19
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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