The Difference Between Lending and Democracy
The logic is simple (especially when lending to 'prime' customers (people with a relatively clean credit history, i.e. most people), where margins are fairly tight) - it takes a lot of 'good' loans that repay in full to offset one bad loan that a bank has to write-off.
I was reminded of this simple truth when reading an article in the Vancouver Sun today, which offered as good news that, "Almost three-quarters of respondents in the RBC poll said they are well positioned to withstand a decline in the housing market."
That is not good news! If there was a decline in the housing market, and one quarter of Canadians were not able to 'withstand it,' that would be a massive financial crisis for this country.