‘Fragile by Design: The Political Origins of Banking Crises and Scarce Credit’, by Charles Calomiris and Stephen Haber. Quoting
http://press.princeton.edu/titles/10177.html :
> Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households.
> Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues.
Paper by the authors available from https://www.frbatlanta.org/-/media/documents/news/conference... .
> Canadian banks historically had balance sheets like other banks, and participated in complex global interbank networks since the early 19th century. Yet Canadian banks, throughout their history, avoided systemic banking crises – with the exception of two short-lived suspensions of convertibility in 1837 and 1839 in response to crises originating in the United States. Moreover, prudential regulation was absent for much of Canada’s history, as was a central bank (until 1935). According to the structural theory of crises, the exposure of Canadian banks to liquidity risk should have been higher than in many other countries, given that the Bank of Canada did not come into existence until 1935. According to the externalities theory and the myopia theory, the absence of activist prudential regulation in Canada during most of its history should have been associated with a higher frequency of banking crises, but it was not.
Note that you write "central banks and regulations intended to smooth the economy" but at that last quote points out, "prudential regulation was absent for much of Canada’s history", so something is incomplete in your understanding.