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Lessons from the Financial Crisis: Bank Performance and Regulatory Reform

  • Neville Arjani
  • Graydon Paulin
Registered author(s):

    The financial systems of some countries fared materially better than others during the global financial crisis of 2007-09. The performance of the Canadian banking system during this period was relatively strong. Using a case study approach together with empirical analysis, we assess some of the factors that contributed to this favourable outcome with a view to drawing useful lessons for regulatory reform. We argue that an important contributor to positive bank performance was a solid approach to risk management on the part of the Canadian banking system, an approach that was actively fostered by the domestic authorities. Efforts to buttress risk management were favourably influenced by several stressful yet instructive episodes in Canadian financial history. The 2007-09 crisis experience suggests a need to make risk management a pervasive element of financial system culture and emphasizes the importance of robust liquidity management.

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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2013/12/dp2013-04.pdf
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    Paper provided by Bank of Canada in its series Discussion Papers with number 13-4.

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    Length: 40 pages
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:bca:bocadp:13-4
    Contact details of provider: Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
    Phone: 613 782-8845
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    Web page: http://www.bank-banque-canada.ca/

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    1. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, vol. 93(2), pages 259-275, August.
    2. Demirguc-Kunt, Asli & Detragiache, Enrica & Merrouche, Ouarda, 2010. "Bank capital : lessons from the financial crisis," Policy Research Working Paper Series 5473, The World Bank.
    3. Francesco Vallascas & Jens Hagendorff, 2013. "The Risk Sensitivity of Capital Requirements: Evidence from an International Sample of Large Banks," Review of Finance, European Finance Association, vol. 17(6), pages 1947-1988.
    4. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
    5. Rocco Huang & Lev Ratnovski, 2009. "Why Are Canadian Banks More Resilient?," IMF Working Papers 09/152, International Monetary Fund.
    6. Stephen Cecchetti & Michael R King & James Yetman, 2011. "Weathering the financial crisis: good policy or good luck?," BIS Working Papers 351, Bank for International Settlements.
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