Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or ...)?
The financial crisis of 2008 engulfed the banking system of the United States and many large European countries. Canada was a notable exception. In this paper we argue that the structure of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk -- the mortgage market and investment banking -- and was tightly regulated by one overarching regulator. In contrast the relatively weak, fragmented, and crisis prone U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds (the shadow banking system) combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2007-2008 was not contained.
|Date of creation:||Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sylla, Richard & Legler, John B. & Wallis, John J., 1987. "Banks and State Public Finance in the New Republic: The United States, 1790–1860," The Journal of Economic History, Cambridge University Press, vol. 47(02), pages 391-403, June.
- Bordo, Michael D. & Rockoff, Hugh & Redish, Angela, 1994. "The U.S. Banking System From a Northern Exposure: Stability versus Efficiency," The Journal of Economic History, Cambridge University Press, vol. 54(02), pages 325-341, June.
- Odell, Kerry A. & Weidenmier, Marc D., 2004. "Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907," The Journal of Economic History, Cambridge University Press, vol. 64(04), pages 1002-1027, December.
- Keay, Ian & Redish, Angela, 2004. "The micro-economic effects of financial market structure: evidence from 20th century North American steel firms," Explorations in Economic History, Elsevier, vol. 41(4), pages 377-403, October.
- Eugene N. White, 2011. ""To Establish a More Effective Supervision of Banking": How the Birth of the Fed Altered Bank Supervision," NBER Working Papers 16825, National Bureau of Economic Research, Inc.
- Freedman, C., 1998. "The Canadian Banking System," Technical Reports 81, Bank of Canada.
- Bordo, Michael D. & Rockoff, Hugh & Redish, Angela, 1996.
"A comparison of the stability and efficiency of the Canadian and American banking systems, 1870–1925,"
Financial History Review,
Cambridge University Press, vol. 3(01), pages 49-68, April.
- Michael D. Bordo & Angela Redish, 1996. "A Comparison of the Stability and Efficiency of the Canadian and American Banking Systems 1870-1925," NBER Historical Working Papers 0067, National Bureau of Economic Research, Inc.
- R. Alton Gilbert, 1986. "Requiem for Regulation Q: what it did and why it passed away," Review, Federal Reserve Bank of St. Louis, issue Feb, pages 22-37.
- Hugh Rockoff, 2009. "Upon Daedalian Wings of Paper Money: Adam Smith and the Crisis of 1772," NBER Working Papers 15594, National Bureau of Economic Research, Inc.
- Kryzanowski, Lawrence & Roberts, Gordon S, 1993. "Canadian Banking Solvency, 1922-1940," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 361-76, August.
- Moen, Jon & Tallman, Ellis W., 1992. "The Bank Panic of 1907: The Role of Trust Companies," The Journal of Economic History, Cambridge University Press, vol. 52(03), pages 611-630, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17312. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.