Canadian Banking Solvency, 1922-1940

Lawrence Kryzanowski and Gordon Roberts

Journal of Money, Credit and Banking, 1993, vol. 25, issue 3, 361-76

Abstract: The use of market value accounting to restate the year-end balance sheets for Canadian banks strongly suggests that only one surviving bank was economically solvent during the Depression. Like U.S. S&Ls, the authors' alternative hypothesis argues that Canadian banks continued to operate because of the Canadian government's (forebearance) policy of providing an implicit 100 percent guarantee of bank deposits, standing ready to lend to banks, and encouraging early mergers of troubled and healthier banks. Unlike the stylized fact, the role of national branching was to facilitate this policy by reducing the number of banks and lessening competition. Copyright 1993 by Ohio State University Press.

Date: 1993
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