Don't Blame Canada for Coasting Through the Financial Crisis

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When Americans think of Canada, they generally envision a mash-up of hockey, poutine, Celine Dion, and universal health care. But now another Canadian feature is getting top billing: its uniquely sound banking system -- the soundest in the world according to the World Economic Forum.


As president of the G8 this year, Canada will host the G8 and G20 Summits in June. Speaking at Davos, Prime Minister Stephen Harper announced his intention to encourage fellow countries to follow Canada's lead in adopting strong, transparent -- but "not excessive" -- regulation.

Canada is the only G8 country that has not had to bail out its financial sector. Its mortgage default rate is 90 percent below America's, with no significant difference in the percentage of home ownership. It also has a history of strong-handed financial regulation that depends upon cooperation between banks and the government.

In a tongue-in-cheek look at "what went right in Canada," the Financial Times' Chrystia Freeland summarizes this regulatory approach as "lots of quality capital, limits on leverage and a simple and co-ordinated regulatory system that forces bank bosses to take personal responsibility for managing risk." Though this ethos was decidedly against the grain during the free-market fury of the past two decades -- "even communist China accused Canadians of being too cautious about capitalism," Freeland notes -- it is now looking uncannily prescient, if a bit boring.

Freeland quotes our own Michael Kinsley's conclusion that "Worthwhile Canadian Initiative" was the most boring possible headline in the galaxy. And Matt Winkler, editor-in-chief of Bloomberg News, adds: "Canadians are like hobbits. They are just not as rapacious as Americans."

Heeding conservative Canadian wisdom in an industry recently defined by defiant American recklessness may be a hard pill for some financial personalities to swallow, but then again, Canada isn't facing a $1.35 trillion deficit.

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Nicole Allan is a former senior editor at The Atlantic.

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