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Why Are Canadian Banks More Resilient?

Author

Listed:
  • Rocco Huang
  • Mr. 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.

Suggested Citation

  • Rocco Huang & Mr. Lev Ratnovski, 2009. "Why Are Canadian Banks More Resilient?," IMF Working Papers 2009/152, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2009/152
    as

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    References listed on IDEAS

    as
    1. International Monetary Fund, 2008. "Canada: Selected Issues," IMF Staff Country Reports 2008/070, International Monetary Fund.
    2. Huang, Rocco & Ratnovski, Lev, 2011. "The dark side of bank wholesale funding," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 248-263, April.
    3. Paul Goldsmith-Pinkham & Tanju Yorulmazer, 2010. "Liquidity, Bank Runs, and Bailouts: Spillover Effects During the Northern Rock Episode," Journal of Financial Services Research, Springer;Western Finance Association, vol. 37(2), pages 83-98, June.
    4. International Monetary Fund, 2006. "Canada: Selected Issues," IMF Staff Country Reports 2006/229, International Monetary Fund.
    5. International Monetary Fund, 2008. "Australia: Selected Issues," IMF Staff Country Reports 2008/311, International Monetary Fund.
    6. Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-762, November.
    7. International Monetary Fund, 2008. "Canada: Financial System Stability Assessment-Update," IMF Staff Country Reports 2008/059, International Monetary Fund.
    8. Mr. Tamim Bayoumi & Ola Melander, 2008. "Credit Matters: Empirical Evidence on U.S. Macro-Financial Linkages," IMF Working Papers 2008/169, International Monetary Fund.
    9. International Monetary Fund, 2006. "Australia: Selected Issues," IMF Staff Country Reports 2006/373, International Monetary Fund.
    10. 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.
    11. Mr. John Kiff, 2009. "Canadian Residential Mortgage Markets: Boring But Effective?," IMF Working Papers 2009/130, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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