Bank Capital and Bank Structure: A Comparative Analysis of the US, UK and Canada

Abstract

This study investigates a 100-year history of the asset-risk and capital structure choices of the publicly-traded banks located in the UK, Canada and US. These three countries were chosen because their diverse regulatory and banking structures, while sharing common legal and cultural institutions. For example, the US has historically fostered small banks, and a regulatory system split between national and state regulators. In contrast, Canada has sought financial-sector stability through a small number of large nationally-branched banks that have acted cooperatively with bank rescues during periods of crisis, prior to the presence of their central bank. Finally, the UK established an early tradition of internationally-diversified banking assets and developed a "life-boat" support system orchestrated by the Bank of England. These differences in bank structures and regulatory framework form the basis of our analysis.