Historically, Canada's banking system has not been a particularly large player on the global stage.
The Bank of Nova Scotia has been involved with a number of project outside the country over the past 20 years, but overall, the balance of Canadian banks have invested the majority of their funds within Canada.
Due to the country's stability and steady growth for many years, the banking system is more robust than many of the banks global competitors.
So the apparent conservative approach to lending appears to be beneficial on the surface.
What is troubling, is this latest article calling the banks systemically important.
Since the beginning of the financial crisis in 2008, many of the global banks (American and European primarily) had massive assets bases and market capitalization compared to their Canadian counterparts.
2007 Global ranking by Shareholder equity ($m)
Rank Entity Score
1 Bank Of America Corporation 135,271 ($m)
2 Citigroup Inc 119,783 ($m)
3 JP Morgan Chase & Co. 115,790 ($m)
4 HSBC 114,928 ($m)
5 Mitsubishi UFJ Financial Group 81,940 ($m)
6 Royal Bank Of Scotland Group 78,730 ($m)
7 ING Groep NV 78,088 ($m)
8 Crédit Agricole 77,462 ($m)
9 Wachovia Corporation 69,716 ($m)
10 BNP Paribas 67,378 ($m)
11 Banco Santander SA 62,072 ($m)
12 Industrial & Commercial Bank Of China - ICBC 58,975 ($m)
13 Barclays Plc 53,050 ($m)
14 Unicredito Italiano Spa 50,726 ($m)
15 Wells Fargo & Company 45,814 ($m)
16 Deutsche Bank AG 44,142 ($m)
17 Bank Of China Limited 44,137 ($m)
18 China Construction Bank Corporation 42,294 ($m)
19 Mizuho Financial Group 40,724 ($m)
20 UBS AG 40,703 ($m)
You will note that not one Canadian bank is in the top 20 banks in 2007.
For 2012/2013 the rankings are as follows:
|Rank||Bank||Country||Market cap, US$b, 25/01/2013|
|1||Industrial & Commercial bank of China (ICBC)||China||237.97B|
|3||China Construction Bank||China||188.12B|
|4||Wells Fargo & Co||US||185.06B|
|5||JP Morgan Chase & Co.||US||179.40B|
|6||Agricultural Bank of China||China||147.27B|
|7||Bank of China||China||132.85B|
|9||Bank of America||US||125.24B|
|10||Commonwealth Bank of Australia||Australia||105.77B|
|12||Royal Bank of Canada||Canada||89.18B|
|13||Westpac Banking Corporation||Australia||88.84B|
|17||Mitsubishi UFJ Financial Group (MUFG)||Japan||75.10B|
|18||Australia and New Zealand Banking (ANZ)||Australia||74.03B|
|19||Sberbank of Russia||Russia||73.40B|
|21||Bank of Nova Scotia (Scotiabank)||Canada||68.85B|
|22||Goldman Sachs Group||US||67.89B|
|23||National Australia Bank||Australia||65.37B|
|25||Royal Bank of Scotland Group||UK||65.23B|
|28||Bank of Communications||China||60.90B|
|29||Lloyds Banking Group||UK||59.86B|
|32||Sumitomo Mitsui Financial||Japan||49.83B|
|33||China Merchants Bank||China||46.77B|
|34||Deutsche Bank AG||Germany||45.83B|
|35||Mizuho Financial Group||Japan||45.62B|
|37||Bank of Montreal||Canada||41.49B|
Now you will note that 3 Canadian banks are in the top 21 world banks since the financial crisis.
As we observe, only 4 Canadian banks are in the top 37. The smallest "systemically important" Canadian bank (National Bank Of Canada) is way down the list (below 55th place - in fact about 120th place based on asset value) with market capitalization of only $11 Billion.
So this begs a question.
How in the world can such a small bank with only $11 Billion in market capitalization and about $159 Billion in assets be systemically important?
Are the derivatives held by all the banks so intertwined and inseparable that this small bank with its counterparty risk could conceivably bring down the entire financial system?
It certainly makes one stop and ponder the safety of cash deposits in Canadian banks in the wake of the events in Cyprus.