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Is the Canadian Banking System Really ¡°Stronger¡± than the U.S. One?

Author

Listed:
  • Christian Calm¨¨s

    () (D¨¦partement des sciences administratives, Universit¨¦ du Qu¨¦bec en Outaouais; Chaire d¡¯information financi¨¨re et organisationnelle (UQAM),Canada)

  • Raymond Th¨¦oret

    (D¨¦partement de finance, Universit¨¦ du Qu¨¦bec ¨¤ Montr¨¦al, ¨¦cole des sciences de la gestion; Chaire d¡¯information financi¨¨re et organisationnelle (UQAM),Canada)

Abstract

The Canadian banking system is considered one of the ¡°best¡± in the world (Bordo et al., 2011). To examine this issue, this paper compares the risk-return trade-off of Canadian and U.S. banks in the context of market-based banking. It is found that non-interest income is actually more volatile in Canada, essentially because Canadian banks are more involved in trading and capital markets business lines than their U.S. peers. Even though U.S. banks are more exposed to securitization, which contributes to increasing bank risk (Calomiris and Mason, 2004), the analysis here does not conclude that the Canadian banking system is performing significantly better. On one hand, Canadian banks do better in downturns; on the other hand however, depending on the statistics, U.S. banks tend to benefit more from the transition to market-based banking.

Suggested Citation

  • Christian Calm¨¨s & Raymond Th¨¦oret, 2013. "Is the Canadian Banking System Really ¡°Stronger¡± than the U.S. One?," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 1-18, November.
  • Handle: RePEc:bap:journl:130401
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank performance; Market-oriented banking; Securitization; Non-interest income; Financial stability;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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