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Why Are Canadian Banks More Resilient?

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Author Info

  • Rocco Huang
  • Lev Ratnovski

Abstract

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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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/152.

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Length: 19
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/152

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Related research

Keywords: Banking crisis; Financial stability; Banking sector; Commercial banks; Depositories; Economic models; capital injection; banking; bank performance; bank of canada; bank capital; banking corporation; capital regulation; tier 1 capital; equity ratio; capital requirement; capital ratio; bank funding; equity prices; bank stock; debt service; capital markets; cost of capital; bank size; capital market; banking market; bank liquidity; capital outflows; basel accord; bank recapitalizations; bank runs; bank distress; brokered deposits; mortgage lending; bank capital regulation; banks with assets; capital needs; recapitalization; banking sector problems; bank deposits; deposit insurance; bank losses; government bonds; banks ? asset; bank branch; banks ? balance sheet; banking services; bank regulations; government securities;

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References

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  1. John Kiff, 2009. "Canadian Residential Mortgage Markets," IMF Working Papers 09/130, International Monetary Fund.
  2. Paul Goldsmith-Pinkham & Tanju Yorulmazer, 2010. "Liquidity, Bank Runs, and Bailouts: Spillover Effects During the Northern Rock Episode," Journal of Financial Services Research, Springer, vol. 37(2), pages 83-98, June.
  3. Lev Ratnovski & Rocco Huang, 2010. "The Dark Side of Bank Wholesale Funding," IMF Working Papers 10/170, International Monetary Fund.
  4. Tamim Bayoumi & Ola Melander, 2008. "Credit Matters," IMF Working Papers 08/169, International Monetary Fund.
  5. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
  6. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
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