Econmics Essay Example | Topics and Well Written Essays - 250 words

Econmics - Essay Example (Ratnovski & Huang, 2009) The authors recognize that there are various factors that have led to the resilience of the banking sector in Canada. To this effect, he has subdivided the paper into two sections dealing with factors that may have contributed to the resilience. In the first section, they identify capitalization, liquidity as well as what funding structure the banks have employed. These are the conditions that existed before the crisis began and they play a major role in the paper to identify some of the strengths of the Canadian banks. To get the real picture, the authors have compared the structure of the Canadian banks with that of other countries in the region. This enables a reader to identify the differences in Canada and other countries, which was the sole reason for the banks being able to withstand the crisis. It is important to understand that these differences may not be the same in each country but, generally, there are structures that are common in the other OECD countries that are not present in Canada. The authors have identified these differences and the reader can be able to understand why the structures are an important part of the banking sector. Still in the first section, the authors explain how capitalization can be a problem to banks whenever a crisis appears. The authors define capitalization and this enables the reader to understand how this aspect of the banking sector plays a role. For simple comparison, the authors define capitalization as the ratio of the net worth of the bank, having subtracted its debts, to its total assets. This definition sets the pace for the reader to catch up with the authors. The article shows the strengths of the Canadian banks with regard to this aspect. The relative strength of the banks is seen as one of the advantages that Canadian banks have over other OECD banks. Liquidity in