An article that sheds some positivity on our markets.
Canada's banks ranked the soundest
Eric Beauchesne, Canwest News Service
Published: Thursday, October 09, 2008
OTTAWA - Canada has the world's soundest banking system, according to a report released this week by the World Economic Forum amid soaring concerns about the health of banking systems here and around the world.
Canada's banks received a score of 6.8 out of possible seven in a survey of more than 12,000 senior executives in 134 countries who were asked to rank the soundness of bank's in their own countries in the annual survey by the Swiss-based non-profit think-tank.
It squeezed ahead of the banks in five other countries - Sweden, Luxembourg, Australia, Denmark and the Netherlands - all of which received a score of 6.7 per cent.
In contrast to Canada, the United States, where the current financial market storm erupted and where several major financial institutions have gone under or been taken over, was ranked 40th in terms of the soundness of its banks with a score of 6.1 out of seven.
The report supports the contention of Finance Minister Jim Flaherty, who reassured Canadians on Thursday that their bank deposits are in no jeopardy and that Canada's financial system is sound and solvent.
"I can assure Canadians that their deposits are safe," Flaherty told reporters prior to heading out to Washington for a meeting with his G7 counterparts and central bank governors, where they will discuss ways to end the current financial crisis which has toppled some of the world's major financial institutions and deepened the global credit crunch.
The bank soundness survey results were contained in the World Economic Forum's latest Global Competitiveness report, which ranked Canada 10th out of 134 countries in terms of overall competitiveness, well behind the U.S. which was ranked No. 1.
"Despite the financial crisis, the United States continues to be the most competitive economy in the world," the report said.
Canada, however, moved up in the ranks this year from 13th spot a year ago.
"Canada benefits from top-notch transport and telephony infrastructure; highly efficient markets, particularly labour and financial markets, and well-functioning and transparent institutions," it said. "In addition, the educational system gets excellent marks for quality, which has prepared the country's workforce to adopt the latest technologies for productivity enhancements.
Canada's main weakness is its economic stability, which it blamed on its relatively high level of government debt, which it put at 70 per cent of GDP, placing it at 107 out of 134 countries, it said.
That ranking is surprising given the fact Flaherty has repeatedly boasted that Canada has the lowest debt of any country in the G7 major industrial countries, putting it at around 20 per cent of GDP.
However, the World Economic Forum measure is gross government debt as a share of GDP, while the Canadian government measure cited by Flaherty is net debt, which deducts the assets in the Canada and Quebec pension plan, a Finance Department official explained.
Regardless, the World Economic Forum report acknowledges the Canadian government's debt level is easing.
Meanwhile, the report explained that the reason the U.S. is still ranked as having the most competitive economy is because "it is endowed with many structural features that make its economy extremely productive and place it on a strong footing to ride out business cycle shifts and economic shocks."
"Thus, despite rising concerns about the soundness of the banking sector and other macroeconomic weaknesses, the country's many other strengths continue to make it a very productive environment," it said.
"However, the United States has built up large macroeconomic imbalances over recent years, with repeated fiscal deficits leading to rising and burgeoning levels of public indebtedness," it added. "This indicates that the country is not preparing financially for its future liabilities and is on the road to making interest payments that will increasingly restrict its fiscal policy freedom going into the future."
© Canwest News Service 2008