Friday, 28 August 2009
It was reliance on you and me, that's what explains the strength of Canadian banks during the financial crisis, according to Rocco Huang and Lev Ratnovski in Why are Canadian banks more resilient? And what can we do about risky wholesale funding? posted at Vox. That's right, reliance on deposits instead of wholesale borrowing from other banks explains most of the difference in our banks' performance by insulating them from the freeze-up last fall of the inter-bank wholesale funding market. Maybe they could thank Canadians by lowering fees or raising interest on deposits? That would be fair wouldn't it? After all, if depositors provide the stable basis on which the Royal is able to make large trading profits, some quid pro quo is in order, no? Disclosure: Just on the off chance they do not follow through, I own some bank shares to get my share of the profits.
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