As some of the toughest new banking rules, known as Basel III, are imposed across the globe, John Taft, CEO of retail brokerage firm RBC U.S. Wealth Management, thinks the rest of the world is now turning "into what Canada was, going into the financial crisis."
The Canadian banking system "survived the financial crisis virtually unscathed—no Canadian bank failed, none even cut their dividends," said Taft. "This despite the fact that there are six banks in that economy that account for 90 percent of the deposits."
"Canada is all about 'too big to fail' and it didn't seem to affect the performance of the banking sector up there," he explained.
Taft noted Canada's banks are outperforming U.S. banks due to its regulatory system, high-quality mortgage system, higher capital ratio, funding from stable retail deposits and conservative culture.
It's Canada's ability "to make money quarter in, quarter out off the Canadian banking franchise that has allowed Canadian banks to go out and make acquisitions in the U.S.," he went on to say.
This strong base will allow Canada to make international acquisitions as well, added Taft.
In addition, as the Dodd-Frank financial oversight law rolls out, there is no question "the costs of operating smaller financial institutions are going to go through the roof," Taft went on to say. "There has to be consolidation across the board."
Right now it's the regional banks that are in the best position to be the consolidators, he concluded.