CBA President Calls for Financial Regulation That Balances Bank Stability With Innovation and Competition

OTTAWA, ONTARIO--(Marketwire - April 3, 2012) - In a speech to the Economic Club of Canada, Canadian Bankers Association (CBA) president Terry Campbell today said that a sound banking system is a vital part of Canada's economic well-being and that Canadians value the services and products of their banks. At the same time, however, he cautioned that the volume of new international regulations could inadvertently increase risk and reduce competition. It is important that Canada continue to seek the appropriate balance between ensuring banking stability on the one hand and innovation and competition on the other.

"Since Canada's first bank opened its doors 195 years ago, banks have played - and continue to play - a central role in financing much of Canada's growth," said Mr. Campbell. "I cannot emphasize enough the importance to our economy of having strong, properly functioning banks. This is not something that we can take for granted - it is something that bankers, policy-makers and regulators must continually work at."

He pointed out that, in 2010, the banking sector contributed $55.5 billion to the Canadian economy - about 3.5 per cent of the nation's GDP, employed 267,000 Canadians and paid $10.3 billion in dividends to shareholders. Banks also support the success of other sectors of the economy, authorizing $29 billion in credit to the agriculture industry, more than $60 billion to manufacturing and $87 billion to small and medium-sized enterprises to help them grow.

Customers value banking stability and privacy protection, as well as convenience and choice

New public opinion research conducted by Harris/Decima¹ for the CBA found that Canadians value the stability, safety, convenience and choice in their banks.

• 84 per cent of Canadians believe that Canada's banks are more stable than banks elsewhere.
• 82 per cent of Canadians see banks as doing a good job of protecting their personal information and transactions.
• 76 per cent of Canadians rate the performance of banks as good when it comes to introducing technologies that improve the convenience of banking.
• 87 per cent of Canadians believe that there is enough choice in banking, and that's before they were told that there are about 70 banks in Canada.

Striking a regulatory balance

However, in response to the international financial crisis, a series of international banking reforms have been put in place to take what was seen to be unacceptable risk out of the system. While Canadian banks remained strong and stable, our financial system and the economy as a whole were affected by the financial crisis that began elsewhere in the world, and the resulting regulatory changes that have continued since 2008.

Mr. Campbell likened the international regulatory situation to a teeter-totter, with safety and stability on the one end and growth, innovation and competition on the other.

"What has happened since the start of the crisis is that the preponderance of regulatory initiatives driven from the international stage have all been on the 'safety and stability' end of the teeter-totter," said Mr. Campbell.

If you tilt too far in that direction, he continued, you "could have the most stable system in the world but it would be static, immobile, low-growth or more likely no-growth. Taken together, what we are facing is the biggest regulatory implementation exercise the Canadian banking industry has ever undergone - and it is not done yet."

Pause and take stock of new regulations

Given the wave of new regulations since the global financial crisis, Mr. Campbell said it would be useful for the government, regulators and the financial sector to pause and take stock of what needs to be done to ensure that Canada continues to have the strongest, soundest banking system in the world.

"It would be useful for the federal government to hit the 'pause' button and to take stock of the new regulatory paradigm that has been put in place since the beginning of the financial crisis," said Mr. Campbell. "A forward-looking stock-taking that would allow all the players to ask themselves and each other: What have we created here? What are the implications for competition and innovation? Do all the different parts of the new regulatory system work together well? Are there conflicts and inconsistencies? Are there unintended consequences?"

The full text of Mr. Campbell's speech can be found on the CBA's website at the following link:
http://www.cba.ca/contents/files/presentations/pre_20120403_tcampbell_en.pdf.

About the Canadian Bankers Association

The Canadian Bankers Association works on behalf of 53 domestic banks, foreign bank subsidiaries and foreign bank branches operating in Canada and their 267,000 employees. The CBA advocates for effective public policies that contribute to a sound, successful banking system that benefits Canadians and Canada's economy. The Association also promotes financial literacy to help Canadians make informed financial decisions and works with banks and law enforcement to help protect customers against financial crime and promote fraud awareness. www.cba.ca.

Follow the CBA on Twitter: @CdnBankers

¹ Harris/Decima research conducted for the CBA. The findings are based on a national proportionate sample of adult Canadians 18 years or older, interviewed by telephone between December 8 and 18, 2011. The sample of 1001 is accurate within +/- 3.2 percentage points, 19 times out of 20.