Canadian banks as the article mentions are publicly owned only in the sense of being listed on the stock market and as you thought in effect privately owned. Our banks are no doubt more regulated than in the US and so were not exposed to as many risky investments as many US banks--but they have no been completely immune either. In spite of their high rating internationally they have nevertheless suffered from the effect of events elsewhere. Recent earnings reports though show they are surviving in relatively good condition.
As well as the large banks there are 681 Credit Unions and 914 Caisse Populaires (mostly in Quebec). There are ten million members to these co-operative financial institutions. 70 per cent of Quebeckers belong to a caisse populaire and 60 percent of Saskatchewan residents belong to credit unions. I have not had an account in a regular bank for aeons.
See this site for more on credit unions:
http://www.fin.gc.ca/toc/2003/ccu_-eng.asp
Blog: http://kenthink7.blogspot.com/index.html Blog: http://kencan7.blogspot.com/index.html
--- On Sat, 2/28/09, Michael Pollak <mpollak at panix.com> wrote:
> From: Michael Pollak <mpollak at panix.com>
> Subject: [lbo-talk] The Canadian banking model
> To: lbo-talk at lbo-talk.org
> Date: Saturday, February 28, 2009, 7:20 AM
> [Can our Canadian friends elaborate on the idea that
> Canadian banks are "all broadly owned by public
> shareholders." Is that in any way different from the
> normal meaning of being a publicly owned company -- i.e.,
> being entirely owned privately?]
>
> [Rhetorically it's a nifty move to say that adopting
> the Canadian model would mean going back to Hamilton's
> original vision.]
>
> http://www.nytimes.com/2009/02/28/opinion/28tedesco.html
>
> The New York Times
> February 28, 2009
>
> Op-Ed Contributor
>
> The Great Solvent North
>
> By THERESA TEDESCO
>
> Toronto
>
> HAS the world turned upside down? America, the capital
> of capitalism,
> is pondering nationalizing a handful of banks.
> Meanwhile, Canada, whose
> banking system had long been notorious for its stodgy
> practices and
> government coddling, is now being celebrated for those
> very qualities.
>
> The Canadian banking system, which proved resilient in
> the global
> economic crisis, is finally getting its day in the sun.
> A recent World
> Economic Forum report ranked it the soundest in the
> world, mostly as
> the result of its conservative practices. (The United
> States ranked
> 40th).
>
> President Obama has joined the adoring throng. He
> recently said that
> Canada has "shown itself to be a pretty good
> manager of the financial
> system in the economy in ways that we haven't always
> been here in the
> United States." Paul Volcker, former chief of the
> United States Federal
> Reserve, commented that what he's arguing for
> "looks more like the
> Canadian system than the American system."
>
> Most people don't know that the vision behind
> Canada's banking system,
> made up of a few large, national banks with branches
> from coast to
> coast, actually had its beginnings in the United States.
> Canada's
> system is the product of a banking framework inspired by
> Alexander
> Hamilton, the first American secretary of the Treasury.
> Hamilton
> envisioned the First Bank of the United States,
> chartered in 1791, as a
> central bank modeled on the Bank of England.
>
> Canadians found inspiration in Hamilton's model, but
> not all Americans
> did. In the 1830s, President Andrew Jackson opposed
> extending the
> charter of the Second Bank of the United States,
> perceiving it as
> monopolistic. Money-lending functions were then assumed
> by local and
> state-chartered banks, eventually giving rise to the
> free-market,
> decentralized system that America has today.
>
> Today, Canada's system remains truer to
> Hamilton's ideal. The five
> major chartered banks, the few regional banks and
> handful of large
> insurance companies are all regulated by the federal
> government.
> Canadian banks are relatively constrained in the amounts
> they can lend.
> Canadian banks are required to have a bigger cushion to
> absorb losses
> than American banks. In addition, Canadian government
> regulations
> protect the domestic banks by limiting foreign
> competition. They also
> keep banks broadly owned by public shareholders.
>
> Since Canada's financial services sector was
> deregulated in 1987,
> permitting the banks to buy brokerage houses, they have
> enjoyed vast
> earnings power because of their diverse businesses and
> operations. And
> in contrast to the recent shotgun marriages at bargain
> prices between
> ailing Wall Street brokerages and American banks,
> Canadian banks paid
> top dollar decades ago for profitable, blue-chip
> investment firms.
>
> Canadian banks are known to be risk-averse, and this has
> served them
> well. While their American counterparts were loading up
> their books
> with risky mortgages, Canadian banks maintained their
> lending
> requirements, largely avoiding subprime mortgages. The
> buttoned-down
> banks in Canada also tended to keep these types of
> securities on their
> books, rather than packaging them and selling them to
> investors. This
> meant that the exposures they did have to weak mortgages
> were more
> visible to the marketplace.
>
> The big five Canadian banks -- Royal Bank of Canada,
> Toronto-Dominion
> Bank, Bank of Nova Scotia, Canadian Imperial Bank of
> Commerce and Bank
> of Montreal -- survived the recent turmoil relatively
> unscathed. Their
> balance sheets remain intact and their capital ratios
> are comfortably
> above requirements. Yes, Prime Minister Stephen
> Harper's government may
> buy as much as 125 billion Canadian dollars (about $100
> billion) worth
> of mortgages, increasing banks' capacity to lend.
> But this is small
> change compared with the scale of Washington's
> bailout.
>
> Few would have predicted that Canadian banks, long
> derided as among the
> least autonomous because of stringent government
> oversight, would
> emerge from the global mayhem as some of the more
> independent
> international players.
>
> Since Mr. Obama seems to admire the Canadian banking
> system, his
> administration might want to take a page out of its
> playbook.
>
> This would entail building a national banking system
> based on a small
> number of large, broadly held, centrally and rigorously
> regulated
> firms. Imitating the Canadian model would require
> sweeping
> consolidation of American banks. This would be a very
> good thing.
> Washington had difficulty figuring out the magnitude of
> the financial
> crisis because there are so many thousands of banks that
> it was
> impossible for regulators to get into all of them.
>
> Washington is already on the path to achieving
> consolidation.
> Eventually, some of the larger banks into which the
> government is
> injecting taxpayer money will probably be deemed beyond
> help, and will
> either be allowed to die or be partnered with other
> banks. The market
> will take its cues from this stress-testing, and make
> its own bets on
> which banks will survive. It's hard to predict how
> many will have
> survived when the dust settles, but the new landscape
> might consist of
> only 50 or 60 banking institutions. More radically,
> Washington could
> take over the licensing of banks from the states, or, at
> the very
> least, consider more stringent regulation of global and
> super-regional
> banks. After all, the Canadian system is considered
> successful not only
> because it has fewer banks to regulate, but because
> regulation is based
> on the tenets of safety and soundness.
>
> There is no time to waste. Reconfiguring the American
> banking structure
> to look more like the Canadian model would help restore
> much-needed
> confidence in a beleaguered financial system. Why not
> emulate the best
> in the world, which happens to be right next door? At
> the very least,
> Hamilton would have approved.
>
> Theresa Tedesco is the chief business correspondent for
> The National
> Post.
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