Canada's banking system: A blueprint for the world?

March 31, 2009

http://www.vancouversun.com/Business/Canada+banking+system+blueprint+world/1446540/story.html

This article basically praises the banking system of Canada and it also suggest that the banking system in which Canada uses should be a blueprint for other countries. The combination of Canada's macro-economic framework, regulatory oversight of our financial sector and the specific management practices of the private sector has resulted in a strong, well-capitalized and successful banking sector. With such positive approaches, Canada banking system should be highly regarded as a global solution. On the flip side, Canada has also done an explicit job keeping inflation rates low and stable vastly due to the Bank Act's mandated review, regulations separating the traditional four pillars of the financial sector -- banks, insurers, trust companies and investment dealers -- were largely eliminated. Most importantly, by 1990 Canada has already created an assimilated bank model which gives The Office of the Superintendent of Financial Institutions (OSFI) all the power. Besides having a strong framework, what makes Canada bank so stable and unique is chiefly due to their private banking sector which is trained to offer risk management practices. With practices which eliminates high risk, Canadian banks are insured to offer lower risks and deeper relationships with our customers. With such great moderation and balance, this is vastly the reason why Canadian bank should be highly regarded as a blueprint for the entire financial world.

Connections to Introduction

The connections I make with this article and Chapter 7 has to do with the Banking system which Canada offer which is referred to as branch banking. What makes branch banking so stable is vastly due to the diversified assets and liabilities which allows funds to be transferred between branches to accounts where they are needed the most. This is basically the safeguard in which Canadian branch banks offers because if bank branch was independent, then a large portion of its loans are in one area or are concentrated in certain industries. This can be risky. At times branch banking is often criticize for giving centralization of financial power to a country, but if we look at present day facts, then we can clearly see that we are one of the few countries in the world that is actually weathering this storm relatively well. This is also the reason why I think many other countries should give the branch bank system a try.

Reflection

Personally, I think many countries should use the Canadian banking system as a blueprint for the future because if we follow the Canadian banking system, then the chances of a global recession happening again would sharply decline mainly because the Canadian banking system operates with very little risk involved. As a Canadian citizen, I can easily acclaim my money to be safe because I wouldn't have to worry over banks filing for a bail out or any other risky events. Our neighbour down south on the other hand is in a way different story because many of their large financial corporations are falling down like lightning chiefly because their banks has extremely high risk, but with high rewards. But if high reward ends up in a recession, which makes unemployment high, then why not just use the Canadian banking system as a blueprint for the future.