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Market-Based Banking and the International Financial Crisis$
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Iain Hardie and David Howarth

Print publication date: 2013

Print ISBN-13: 9780199662289

Published to Oxford Scholarship Online: September 2013

DOI: 10.1093/acprof:oso/9780199662289.001.0001

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Cool Canada: A Case of Low Market-Based Banking in the Anglo-Saxon World

Cool Canada: A Case of Low Market-Based Banking in the Anglo-Saxon World

(p.201) 9 Cool Canada: A Case of Low Market-Based Banking in the Anglo-Saxon World
Market-Based Banking and the International Financial Crisis

Patrick Leblond

Oxford University Press

Faced with the world’s worst financial crisis since the Great Depression, Canada remained an oasis of relative financial stability while Europe and the United States succumbed to the pressures of rapidly depreciating assets, indebtedness and frozen credit markets. In the context of this volume’s argument, the explanation for this admirable performance by the Canadian banking system rests squarely on its low exposure to market-based activities, both on the asset and liability sides of the balance sheet. Why does Canada have a banking system that is less market based than one might expect given its liberal market economy? The relatively low level of market-based banking in Canada is a result of, on the one hand, a concentrated banking sector protected from competition and, on the other hand, a relatively tougher regulatory system in terms of capital and leverage requirements. In making stability in the banking system a policy priority, the Canadian government ended up, more by accident rather than by design, slowing the growth of volatile market-based banking in Canada in favour of traditional banking activities that tend to be less risky in nature.

Keywords:   banks, banking regulation, banking system, Canada, market-based banking

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