According to the governor of the Bank of Canada, the global financial crisis could have been avoided if every country had had a banking system like Canada’s. He went on to say that the world would have been spared this global financial catastrophe if other international economic powers had a banking system “as sober and sensible” as ours. The World Economic Forum has recently rated Canada as having the soundest banking system in the world.
“What we did was that we had an absolute restriction on how much leverage, how much borrowing our banks could do,” he said. Taking a swipe at the failed system to the south, he went on to add that Canada was most sensible in refraining from handing over money to unqualified borrowers. The States were offering “Sexy” options for anyone wanting to borrow “but it turns out some of the sexier things that they were doing were quite foolish.”
Banks have made terrible decisions that have “short circuited some of the very basic aspects of banking.” While other international banking systems are trying to stop the unravelling of their financial sectors, Canada has already put in place certain measures to prevent such a disaster. Eliminating the 40 year, zero money down option was the start. The government has also reinforced its banking systems with loan guarantees to prevent the slide into economic despair. A slide many other economic powers of the world will be unable to avoid.
It is important to note that although our economy has significant ties to our friends from the south, our banking system remained independent and developed a safer, more sensible policy on protecting our economy.
Sean Kavanagh