Canadian Economy, Banks Expected to Avoid Deep Troubles

The Canadian economy is on the precipice of a recession or a long period of stagnation, according to Standard & Poor’s, but the country’s banks appear better-prepared to weather the downturn than their counterparts in the U.S. and Europe.

The Canadian government gets high marks for reacting quickly to worsening credit conditions, S & P said, and for facilitating greater financial market liquidity.

Unlike other jurisdictions where policy makers have been to date more focused on restoring confidence in the solvency of their financial institutions, in Canada the erosion in confidence has been relatively less severe, lessening the need for measures such as the purchase of bank preferred shares by the government.

As a result, S & P expects Canada to avoid a deep recession, even as falling equity and home prices continue to work through the economy.

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