Thursday, May 21, 2009

Canadian Banks Seen as Solid!

Canada is considered by many to have a solid, sophisticated and a very well managed banking system.

Canadian banks have a huge financial network consisting of over 8,000 bank branches and over 18,000 ABMs (automated banking machines) and employ approximately 200,000 of our family, friends and neighbours.

The five major Canadian banks are Royal Bank of Canada, Toronto Dominion Bank (which operates as TD Canada Trust in Canada), Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal. Information in the public domain indicates these five banks and the Bank of Canada, account for 90% of the assets of the Canadian banking business. You wonder with all this power, money and influence how the Banks could have lost their epic battle with the Canadian government just a short decade ago over bank mergers.

Former Prime Minister Jean Chretien will rightly be remembered for fighting separatism in Quebec, and for putting Canada's balance sheet in order. He will also be remembered for not caving in to the power of big banks. It was a battle the Prime Minister should have lost. All those top government relations specialists, who, combined, took millions in fees from the wealthy bankers, could not deliver. Chretien beat them back; it was a masterful performance.

Just imagine the "Great Recession" if Bank of America or others had taken over one or two or three of our banks. Goodbye Canada, hello Banana Republic!

The major Canadian banks have a big presence outside of Canada, especially in United States, Latin America, the Caribbean region, and Asia. Our banks are highly regarded in the United States. Recently it has been speculated that Toronto Dominion Bank was asked to join a short list of suitors for BankUnited Financial Corp., [BKUNA-Q] Florida's largest regional bank. BankUnited is a bigggg problem that big shots in Washington need to fix. Given the magnitude of the U.S. banking debacle, I am thinking other distressed U.S. Banks will soon be bought up by Canadian banks as well.

For Canada and for Canadians, we need two important and stable pillars if we are to fight our way out of the "Great Recession":
  • a sound banking and financial system and
  • a sound balance sheet for government at the Provincial and Federal levels
Will we get both?