2. Consider the following statement: "Governments around the world should continuously apply very strict standards for banks, even in good economic times, so that the kinds of financial problems that developed in the U.S. will not happen again."

Do you agree with the statement? Explain your reasoning. As the worldwide recession deepened in 2009, increasing concern was expressed that many U.S. banks were In financial trouble. That news was in sharp contrast to the situation in Canada, where the top five Canadian banks earned $18.9 billion in profits. Meanwhile, the top five U.S. banks lost $37 billion. A 2009 World Economic forum report ranked the Canadian banking system as the soundest In the world. (The U.S. ranked fortieth.)

There are three major reasons for the differences in performance between U.S. and Canadian banks.

First, Canadian banks are more strictly regulated than U.S. banks. For example, Canadian banks must maintain a bigger cushion to absorb potential losses, and their shares must be widely held. The Office of the Superintendent of Financial Institutions, Canada's banking regulator, gets credit for being very conservative and keeping a close watch on the activities of Canadian banks. There is a bit of irony here, because the characteristics of the Canadian banking system, which have worked well in the recent financial crisis, are the same characteristics that Canadian consumers have complained about for years.