The U.S. Banking System From a Northern Exposure: Stability versus Efficiency

Abstract

This article asks whether the vaunted comparative stability of the Canadian banking system has been purchased at the cost of creating an oligopoly. We assembled a data set that compares bank failures, lending rates, interest paid on deposits, and related variables over the period 1920 to 1980. Our principal findings are (1) interest rates paid on deposits were generally higher in Canada; (2) interest income received on securities was generally slightly higher in Canada; (3) interest rates charged on loans were generally quite similar; and (4) net rates of return to equity were generally higher in Canada than in the United States.