Unscathed by the global economic snarls of recent years, and as host of G8 and G20 summits later this month, Canada is presenting itself as a model of sound fiscal management and banking regulation.

After a short, but pronounced recession in late 2008 to mid-2009, the Canadian economy has rebounded heartily and is expected to post the largest growth among G7 nations this year and the next.

Contrary to its neighbour and biggest trading partner, the United States, Canada did not have to come to the aid of its banking sector and its real estate market flourished despite an international mortgage crisis.

Moreover, Canada entered the recession on a solid financial footing, which had allowed it to post back-to-back budget surpluses over the previous decade and trim its debt by about $100 billion.

Due to a drop in government revenues linked to the recession and massive spending aimed at softening the economic downturn, Canada posted a record $47-billion deficit at the end of fiscal 2009-2010 on March 31.

This represents, however, a mere 3.0% of its gross domestic product, “far below what we’re seeing in Europe and the United States,” said Patrick Leblond, an Ottawa University economics professor.

And the country, which already boasts the lowest debt as a %age of economic activity of any industrialized nation, expect a quick return to balanced budgets.

“It’s clear that Canada is in on a solid footing in terms of its banks, its financial system and the government’s finances,” commented Leblond.

Caution best describes the approach taken by those responsible for managing Canada’s public finances, as well as setting monetary policy and financial regulations.

It is true that “it’s easier in Canada,” said Finance Minister Jim Flaherty, because the country has only “five or six large banks” and “three large insurance companies.”

“Entering the financial crisis Canada’s banks were well regulated, well capitalized and well managed. This remained true throughout the crisis and remains true today,” according to the Canadian Bankers Association.

“The key,” said Prime Minister Stephen Harper, has been “a regulatory framework designed to avoid reckless risk and ensure transparency.” It is also important to “properly link risk, performance and reward,” he noted.

Canadian banking rules, which are reviewed every five years to keep pace with the sector, impose a limit on how much debt banks can carry of 20 times their liquidity.

“This ceiling applies not only to banking activities, but to all financial activities of financial firms,” a rule that is unique among industrialized nations, said Leblond.

It is not surprising, he said, that Canada, whose banking sectors emerged largely unscathed from the financial crisis, opposes the idea of a bank tax.

“The fundamental point on financial sector reform is getting standards right on quality and quantity of capital and caps on leverage,” Flaherty said.

It has applied equally rigorous rules for its housing sector, which resulted in only 0.44% of mortgages in Canada defaulting in March, according to the Canadian Bankers Association.