The Wall Street Journal, Marie-Josée Kravis--

Canada's five largest banks would pass the U.S. government stress test brilliantly. They were profitable in the last quarter of 2008, are well capitalized now, and have had no problems raising additional private capital. On average only 7% of their mortgage portfolios consisted of subprime loans (versus 20% in the U.S.). And no major Canadian bank has required direct government infusions of capital.

Advocates of increased regulation of U.S. financial markets have concluded that more stringent rules governing leverage and capital ratios account for Canada's impressive performance. They champion such measures here. In a Toronto speech earlier this year about reforming the U.S. banking system, former Fed chairman and Obama administration adviser Paul Volcker said the model he is considering "looks more like the Canadian system than it does the American system."

Nevertheless, Canadian banks operate in a very different context. Copying the Canadian banking system in this country, without understanding how its banking and housing sectors operate, would be a mistake.

Read more: http://online.wsj.com/article/SB124165325829393691.html#mod=djemEditoria...

Ms. Kravis is a fellow at the Hudson institute.

Read more:

• Commentary: (Brookings) Know Thy Neighbor: What Canada Can Tell the U.S. About Financial Regulation
• Event: Responding to the Financial Crisis: A Conversation with Senator Bob Corker
• In the Classroom: Banking in North America
• In the News: TD Bank: 'It's a good Canadian story'