Royal Bank of Canada tops a list of four Canadian banks ranked among North America's 10 largest. (CBC)

Canada's banks, which have long hankered to merge to become big enough to compete on a world scale, now find themselves among North America's largest with some of their U.S. rivals on federal life-support.

The CBC's Marivel Taruc reported Tuesday that the Canadian banking system is being called the world's soundest in the wake of a credit crisis that began with junk mortgages in California and mutant debt securities on Wall Street.

"So the U.S. banks' loss is very much the Canadian banks' gain," Taruc said, "and this is going to add to the praise, right around the world, of the solid banking sector that Canada has."

A new ranking by Bloomberg News puts four Canadian banks among North American's top 10 as measured by assets, with Royal Bank of Canada in seventh place.

Toronto-Dominion Bank, Bank of Nova Scotia and Bank of Montreal are eighth, ninth and 10th, respectively. A year ago, only Royal made the list.

Canada’s six largest banks made money in the latest quarter while big U.S. banks such as Citigroup, Wells Fargo and Bank of America lost billions, Bloomberg said Tuesday in a report on its website.

"Canadian banks have remained profitable, outperforming their peers, because of tighter government restrictions on lending and capital requirements," it said.

"The country’s six biggest lenders reported less than $20 billion Cdn ($15.7 billion US) in debt-related writedowns since the credit crisis began in 2007, about two per cent of the $887.1 billion recorded by banks and brokerages worldwide."

Stayed closer to home

Canadian banks have long chafed at Ottawa's reluctance to let them merge, saying they need to achieve sufficient size to compete internationally. But they were lucky this time to have stayed closer to home than major overseas banks now humbled by bad mortgage-related bets in the United States.

The Canadians, not immune to the temptation, took their lumps on such bets too — as they did in past decades in lending to Third World dictators, real estate promoters and rogue energy traders.

But they didn't lose their shirts.

The Globe and Mail reported Tuesday that they are beginning to turn down some of the funding Ottawa is making available to them, a sign they are recuperating from the financial crisis.

The banks have stopped selling the government the full amount of mortgages they could under a $125-billion mortgage purchase program, the centrepiece of the federal government's plan to help the industry, the newspaper said, quoting an unnamed banker.