The Great White North is a beauty, eh.
Throughout the financial crisis that pummeled most of the world, Canadian institutions not only survived, they thrived. That success, credited to a mix of regulatory and cultural forces, may offer insight to U.S. institutions and investors.
“All we have to do is look north and we can see a really good model for how to do business as a country,” says Peter Maris, CFP, founder and principal of Resource Financial Group in Wilmette, Ill.
“They are more conservative as a nation than we are and a lot less greedy, if I may use that term,” he explains. “They don’t have adjustable-rate mortgages in Canada. Ninety percent of the banks hold their mortgages to maturity, whereas in the U.S.a loan is originated and then sold off as soon as possible to get it off their books. They are more conservative, and that made for a more stable system when the bottom fell out. Eighty percent of their mortgages were prime mortgages, as opposed to what happened here in the U.S.” Maris points out that the Canadian banking system is ranked No. 1 in the world by the World Bank. “They are very conservative in terms of who they lend to,” he says. “If somebody wants an aggressive loan, they will probably come to the U.S. and head to the junk bond market here.”