Banking reforms: Lessons from Canadian regulatory system
WEDNESDAY, 09 NOVEMBER 2011 00:00 BUKKY OLAJIDE BUSINESS SERVICES - MONEY WATCH

Do you know that the global recession that hit the world’s financial sector, which started from the United States of America did not affect Canadian financial sector?

In 2011, the World Economic Forum named Canada’s banking system, the world’s soundest, which makes it the fourth year in a row that the Canadian banking system ranked number one in the world. BUKKY OLAJIDE identified robust risk management as one of the major factors that characterize Canadian banks.

IT is a known fact that Canada’s banking system is the World’s soundest. So many reasons could be responsible for this.

First, Canadian banks are well managed which makes them less prone to risk-taking than their counterparts in the United States and Europe.

They are well regulated, forced to adhere to stricter rules than those that govern most other banking systems including those in the United States.

Canada’s banks are also well-diversified organisations whose investment banks are anchored by solid deposit taking institutions.

Consequently, the banks are well capitalised, having more cash-on-hand than most similar institutions in the developed world, taking a very conservative approach with their investors’ funds.

The country’s system of national institutions diversifies regional risk, so a downturn in an individual economic sector is balanced while national system contributes to economic growth by moving funds from areas of excess deposits, to regions where growth is creating demand for new credit.

At the yearly lecture of the Chartered Institute of Bankers of Nigeria ((CIBN) which took place recently, the choice of Canada and specifically the Royal Bank of Canada as the reference bank is informed by the facts that Canada remains the only big economy in the world not affected by the global economic meltdown.

The Royal Bank of Canada, apart from being the largest bank in Canada, as observed by the President of CIBN, Mr. Laoye Jaiyeola, has very robust risk management and governance framework that ensured its withering through the global economic crisis unscathed.

“The banking system of Canada is strong and resilient and we need to hear how they make it,” said Jaiyeola.

The yearly lecture of the CIBN is a traditional public policy lecture instituted to acquaint the Nigerian public with developments in both the local and global economies.

With this year’s theme: “Building a Resilient Financial System to withstand External Shocks: Lessons from selected economies, the lecturers over the years have been delivered by renowned experts in chosen contemporary areas of the economy.


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