Nothing roils markets and focuses attention like a good old-fashioned bank run. Canadians are witnessing this truth as our American cousins struggle with the financial and political fallout attending the spectacular crash of the tech-focused, California-based Silicon Valley Bank (SVB).

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Google searches of FDIC (the U.S. Federal Deposit Insurance Corporation) are at a 52-week high. U.S. President Joe Biden, U.S. regulators and U.S. Secretary of the Treasury Janet Yellen worked all weekend to head off further bank runs on Monday, blowing up the FDIC’s deposit insurance coverage limit of US$250,000 and guaranteeing all deposits at SVB, regardless of the dollar amount.

In Canada, such financial and political drama is very old-fashioned indeed. A curiosity even. Between 2001 and 2023 the U.S. endured 562 bank failures according to the FDIC, plus the most recent, SVB. In Canada, that number? Zero.

The last material bank failure sparking consequential political shockwaves across the country was a century ago when the Home Bank of Canada collapsed under the weight of bad loans, mismanagement, and new bank regulations proposed by Ottawa in 1923.

SVB’s woes did prompt Canada’s bank regulator to take temporary control of its operations here, but those were relatively inconsequential, run out of a single office on Bay Street.

Why haven’t Canadians seen any SVB-like problems at home?

The answer is not that Canada has better, more competent bankers or superior regulators.

Rather, over time most of the Canadian public and those they elect in Ottawa came to believe that a smaller number of national, well-capitalized, and well-regulated banks with appropriate political oversight were more apt to protect depositors’ savings and the economy generally.

That policy path was a conscious approach to managing risks inherent to banking and was entrenched in the 1920s after 50 years of disappointment with smaller, regional banks. It was deviated from briefly in the 1970s with the creation of two Western Canadian-based banks (the Canadian Commercial Bank and The Northland Bank), two tiny institutions whose failure in 1985 reinforced the policy path taken in the 1920s.

Canada’s banking preferences stand in stark contrast to a U.S. banking system where suspicion of large, national banks was stitched into the political fabric in the 1820s and 1830s by populist president Andrew Jackson. Jackson embodied a fear that large banks concentrated economic power in the hands of a few. That suspicion survives today and is given life by the importance U.S. policymakers and their voters give to sustaining U.S. regional and community banks.

Donald Trump demonstrated this reality in 2018 when he changed U.S. bank rules and reduced the regulatory scrutiny of banks such as SVB. Maxine Waters, a high-ranking Democrat and former Chair of the U.S. House Financial Services Committee, assured viewers on U.S. television Monday that support for regional and community banks would continue because, “We don’t want to be at the mercy of four or five big banks.”

What brought Canada to a radically different conclusion on big banks? Experience.

Between Confederation and 1923, Canada endured a bank failure rate of nearly 40%

The ghosts of Canada’s failed banks are numerous and storied. There is the Commercial Bank of Kingston, Ont., which failed within months of Confederation after the federal government refused to bail it out, a move that cost Canada’s first finance minister his job and put the prime minister, Sir John A. Macdonald, in a difficult spot as he owed the bank $80,000, a huge sum at the time.

In 1871 a Bank Act was passed by Parliament that was supposed to make banking safe for Canadians and businesses. It did nothing of the kind. As the Canadian economy worsened after 1873 smaller, local banks began to fail. New Brunswick witnessed the demise of the Bank of Acadia and then the Westmoreland Bank. In Nova Scotia, the Bank of Liverpool met its demise. Quebec’s Consolidated Bank was next and was followed by the Montreal-based Mechanics Bank, an institution that served largely the working poor. Ontario had its share of bank failures too.

Regional banks were often promoted as the best means to prime local economic growth in Canada’s early years. But in the 1870s 61 per cent of new banks failed. In the 1880s 75 per cent of new banks failed. Some bank investors became wise to this in the 1890s, as did Ottawa, which encouraged bank mergers to weed out weak institutions. Between Confederation and 1923, Canada endured a bank failure rate of nearly 40 per cent. Encouraging large, regulated national banks became the answer to Canada’s banking problem.

The failure of SVB is a curiosity to Canadians. Why? For better or worse — and in the wake of SVB’s demise most would say better — we long ago traded any suspicions harboured about large banks for the comfort of knowing a made-in-Canada big bank system makes for greater financial stability.

John Turley-Ewart is a Canadian financial historian and risk management consultant with extensive experience working on Bay and Wall Street.