Banking on Canada's Conservative Approach to Lending
Canadian financial institutions making major inroads
in the U.S. with a business model that is second to none in the world
Steve Berger
Are Canadian banks, five of which are among the 15 largest banks in North America, surveying the American banking landscape after the global financial crisis just as a child might survey a toy store after being given an envelope full of cash?
Not exactly, because these highly-capitalized and universally respected banks are far more patient than children and are extremely adept at being ready to clean up the mess when a shaky or failing American bank is put up for a fire sale. And they are ready with cash in hand. These banks don’t believe in credit cards and while they’re not hiding their money underneath mattresses, they are only spending what they have and not speculating on what they might have in the future.
That’s the scenario that exists for the “Big Five” Canadian banks as they cautiously have been growing their retail and investment banking business in the United States. The weakness of the Canadian dollar and high U.S. bank stock prices were commonly cited as obstacles to purchasing assets south of the border. Those obstacles no longer exist and Americans shouldn’t be surprised if a Canadian bank branch opens on Main Street, or if their investment banker has ties to a Canadian owned investment bank. While maintaining the conservative practices that allowed them to be successful in such difficult economic times, these banks have forged a high-speed train line that travels non-stop from Bay Street to Wall Street.
Total profits for the “Big Five” in both the first and second quarters of 2010 surpassed $5 billion Cdn and the Consul General of Canada in New York, Daniel Sullivan, believes that continued good times for the banks lie ahead. Sullivan attributes the success of the banks to a number of factors, including the Scottish influences on conservative Canadian banking practices.
“Canada came out well after the financial crisis because of the Canadian system,” says Sullivan, former deputy chairman of Scotia Capital and a former director of the Toronto Stock Exchange. “It’s not a particular formula, or regulation, it’s the entire system.”
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