The U.S. bank runs and this rolling financial crisis are not over
John Rapley is a political economist at the University of Cambridge and managing director of Seaford Macro.
When it comes to their banking systems, Canada and the U.S. could hardly look more different. Unlike Canada’s centralized, highly regulated financial system, in which a small number of large banks dominate affairs – with an economy less than a 10th the size of its southern neighbour, Canada hasbanks in the global top 50 – the U.S. remains wedded to its decentralized system of small regional banks.
More broadly, given that they lend to local businesses, regional banks are also disproportionately exposed to the commercial property sector. As I have been writing since the start of the pandemic, this was always going to be the sector that would recover slowly, if ever, from the economic shock of the lockdowns.
Canadian-style regulation may sometimes grate with its customers, given the higher fees and less generous offerings that can result, but we see its virtue in times like these. In effect, in the U.S. right now, some depositors are opting to flee the comparatively light regulation of regional banks to shelter their money in the safer haven of the big beasts.
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