Consider the example of Canada. Canadian banks historically had balance sheets like other banks, and participated in complex global interbank networks since the early 19th century. Yet Canadian banks, throughout their history, avoided systemic banking crises – with the exception of two short-lived suspensions of convertibility in 1837 and 1839 in response to crises originating in the United States. (...)
Many observers of Canadian banking credit its superior performance to its regulatory structure. As we have emphasized, however, regulation is the outcome of political bargains. In the United States, instability was permitted by regulators because it served powerful political interests (rural populists and unit bankers in the pre-1980 period, and urban populists and mega-banks afterward). In Canada, the banking system was not used as a means of channeling subsidized credit to a favored political constituency, so there was no need to tolerate instability.
Charles W. Calomiris: The Political Foundations of Scarce and Unstable Credit. 2013
Canada was the only of the G8 countries not to have a bank bailout, and not to go into recession. That was in large part because of its much tighter banking laws, in particular its demands for higher levels of capital reserves. In essence, the Canadian example saw the bankers being protected from themselves by the regulators' reluctance to deregulate. (…)
Since 1923, there have been only two bank failures in Canada. In the US, there have been 17,000. (…) During the great leverage fiesta of the boom, only Canada didn't join the leverage party: while the other leverage ratios were in the 30 to 1 range and often much higher, Canada's banks have an average leverage ratio of 18 to 1. That in essence is the reason why they din't blow up and take the rest of the economy ith them.
John Lanchester: Whoops! Why everyone owes everyone an no one can pay. Penguin books, 2010
What a great country.