For more information, see the direct blog post here and the discussion here.
But it doesn’t seem to be as simple as “Canadian banks are more tightly-regulated”.
1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn’t matter if a local housing market goes bust).
2. We don’t have Glass-Steagal. The investment banks joined the retail banks some years ago.
3. We don’t have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.
4. (Except in Alberta), mortgages are fully recourse. You can’t just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.
I wouldn’t describe those differences as “Canada is more regulated”.
But we do have higher capital requirements. And mortgages over 80% must be insured (mostly by the government-owned CMHC).
My Conversation with Larry Summers
47 minutes ago