Financial Reform: Canadian Bankers' Association Calls For Moratorium On Global Banking Overhaul
OTTAWA - Canada's bankers want to apply the brakes on sweeping new regulations being forced on them as a result of the 2008 financial collapse, possibly putting them on a collision course with the government and the Bank of Canada.
Canadian Bankers Association President Terry Campbell surprised a luncheon of policy-makers and industry executives Tuesday with a call for Ottawa to call a push the pause button on future reforms.
"We are facing the biggest regulatory implementation exercise the Canadian banking industry has ever undergone, and it is not done yet," he said.
"I think it would be useful for the federal government to hit the 'pause' button and to take stock of the new regulatory paradigm."
Commons finance committee chair James Rajotte, a Conservative MP from Alberta, seemed surprised by the appeal, but said afterwards if bankers have concerns, "we will certainly listen."
The proposal puts the private sector banks potentially in conflict with Bank of Canada governor Mark Carney, who as head of the Swiss-based Financial Stability Board has been a leading proponent of the reform process and has had little patience with what he has called "back-sliding."
Carney's position has been generally supported by the Canadian banking sector, but ruffled feathers south of the border. In one celebrated encounter last fall, he verbally clashed with Jamie Dimon, head of JP Morgan Chase & Co., at a closed-door meeting in Washington over the regulation push.
In recent interviews, Carney has said policy-makers are open to working with stakeholders about the end game of reforms, but appeared to dismiss notions of halting the process.
If there is "regulatory overload," he told the Financial Times in January, "it pales in comparison to the difficulties, the lost output, the lost jobs ... quite frankly, the suffering that's happening in a variety of economies, our economies, as a consequence of the failure of the system."
Speaking to reporters after the speech, Campbell was not specific about what proposed regulations he wanted to stop, saying the banking community needs time to assess if reforms already enacted or in the pipeline will work together, or possibly have "unintended consequences."
He insisted Canada's banking community is not opposed to stiffer regulations, including more capital requirements, that have already been approved.
"There were problems that needed to be resolved," he conceded. "
"But what we are asking for is let us do a collective stock-taking to see if it all works together. There has been rule after rule after rule ... I think it would be very healthy if everyone were to pause and say, 'Does this all work together.' "
Campbell said policy-makers need to strike a balance between taking risk out of the system and overburdening the banking community with too many regulations that stifles innovation and growth.
He said the danger is that regulators may prevent banks from offering new, legitimate services. He also said regulations are so complex and require so many resources for compliance that they could drive smaller financial institutions out of the market, resulting in less competition.
"It is not far-fetched to think of a start-up company deciding to forego a banking licence and carry on as an unregulated financial services entity instead, because of the regulatory environment," he said.
He added that conforming to regulations could take so much time and human resources that the critical activity of assessing risks could wind up taking a back seat at financial institutions.
"Wouldn't it be ironic if, by attempting to take risk out of the system, the end result was to be increased risk," he said.
The call of a pause came on the same day that Bank of Nova Scotia chief executive Rick Waugh told his annual meeting that banks, not regulators, should take the lead in making sure mortgage loans are responsible.
Waugh said regulations, such as mortgage rules play an important role, but the ultimate responsibility rests with lenders.
What Canada's Bank CEOs Earned Last Year
6. Louis Vachon, National - $7.5 Mln
<strong>Profit per dollar earned by the CEO: $162.27</strong> National Bank's Louis Vachon took home $7.5 million, the lowest total of any of the six major banks, but the most in terms of the bank's net income.
5. Gerry McCaughey, CIBC - $9.5 Million
<strong>Profit per dollar earned by the CEO: $326.32</strong> Gerry McCaughey's total compensation grew 12 per cent, to $9.5 million, in 2011. Source: <a href="https://www.cibc.com/ca/pdf/investor/proxy2012.pdf" target="_hplink">CIBC Management Proxy Circular</a>
4. Bill Downe, BMO - $9.9 Million
<strong>Profit per dollar earned by the CEO: $330.81</strong> Bill Downe's total compensation for 2011 was up 4.2 per cent from his 2010 pay of $9.5 million. Source: <a href="http://ca.reuters.com/article/businessNews/idCATRE81Q1W320120227" target="_hplink">Reuters</a>
3. Gordon Nixon, RBC - $10.1 Million
<strong>Profit per dollar earned by the CEO: $480.40</strong> Gordon Nixon's total compensation fell 8 per cent in 2011, to $11 million. Source: <a href="http://www.rbc.com/newsroom/2012/0206-proxy.html" target="_hplink">RBC Management Proxy Circular</a>
2. Rick Waugh, Scotiabank - $10.6 Mln
<strong>Profit per dollar earned by the CEO: $501.71</strong> Waugh's total earnings for 2011, at $10.6 million, were down slightly from the $10.66 million he earned in 2010. Source: <a href="http://www.thestar.com/business/article/1137400--scotiabank-ceo-s-pay-down-slightly-from-2010" target="_hplink">Toronto Star</a>
1. Ed Clark, TD Bank - $11.3 Million
<strong>Profit per dollar earned by the CEO: $517.45</strong> Ed Clark's total compensation for 2011 was meant to be around $12 million, but the bank's board scaled it back to $11.3 million -- roughly the same as in 2010. Source: <a href="http://www.thestar.com/business/article/1135817--td-bank-ceo-ed-clark-s-pay-down-to-11-3-million-in-2011" target="_hplink">Toronto Star</a>