Good afternoon and thank you all for coming.
I would like to start off by thanking the Vancouver Board of Trade for hosting this lunch. You’ve had
quite the list of speakers in the last few weeks alone, and it’s a tremendous honour to be at the
podium with you today.
I’d also like to thank all the local bankers who are here today. Very much appreciated. And I’m
particularly grateful for the support of HSBC, who is the sponsor of our lunch. And I understand we
have some graduate business students who have joined us. I hope you find my presentation useful
and maybe some of you will consider a career in banking.
I’m just over one year into my position at the CBA and this is my first trip as President to British
Columbia. As you can imagine, a lot of my work takes place in Toronto, and in Ottawa (because
our industry is federally regulated), but I intend to be a regular here in B.C. One of the great
strengths of our banks is that we have a national banking system and it is critically important for me
to engage with bankers in this city and across B.C. more generally.
I don’t have to tell you that this is an exciting time for Vancouver and B.C. You’re the focal point for
Canada’s increasingly important trading relationships with Asia, and with that comes an increased
demand for capital to supply surging investments. This, in turn, supports growth across Canada. I
celebrate the success that this province and its entrepreneurs have achieved and will continue to
achieve in the future.
Banks Contribute to Their Local Community
I’d like to talk about two key things in meeting with you today.
First, I’ll speak to the value that Canadians tell us they derive from their banks and the banking
industry. And second, I’ll discuss the regulatory environment in which banks seek to offer that
But before going there I want to set the stage by touching on the profound commitment of our
banks to building a stronger, more prosperous country.
You see it in communities large and small right across Canada and right here in Vancouver.
It is a deep and sustained commitment, built up over time. When it comes to community support,
our banks are there. From health to sports, culture to education, and charities such as the United
Way and Red Cross, banks are leading sponsors and contributors. Countless bankers work hard to
make their communities a better place for all.
Here in Vancouver you see very tangible signs of those commitments all over the city:
- You can visit BMO’s Sustainability Gallery at Science World.
- TD brings music alive with the TD Vancouver International Jazz Festival.
- RBC sponsors cycling races and Blue Water projects, combining fitness with clean water initiatives.
- CIBC raises millions for cancer through their annual Run for the Cure – which was started right here in B.C.
- CWB partners closely with Big Brothers/Big Sisters throughout the Vancouver area.
- The Scotiabank Charity Challenge and half marathon raise money for community charities.
- And HSBC fosters access to learning in the city’s Downtown Eastside in partnership with UBC
and the Vancouver Board of Education.
The CBA itself is active in the community with our high school financial literacy program, called
Your Money. Using local bankers who volunteer their time, some of whom are here today, we’ve
hosted over 1,000 seminars and taught more than 32,000 students in B.C. over the past 13 years
about the basics of how to budget, save, and protect their money.
This is non-partisan, non-commercial, strictly educational, and is only delivered at the request of the
schools. The kids love it and so do their teachers. It’s a small but important part of helping kids get
an early grounding in financial literacy.
Contributing to Economic Growth
As you know, bank support for communities doesn’t stop there.
The fact is, banks have played – and continue to play – a central role in financing much of
Canada’s and B.C.’s growth. And we do that in a number of ways.
First, we’re a major part of the economy in our own right.
In 2011, for example, employment in the banking sector has grown to 274,000 Canadians –
employment in banks in B.C. has grown by four per cent in the last decade – and last year, banks
paid just over $11 billion in dividends to shareholders. When I say “shareholders”, I’m including
individual Canadians who own bank shares through their pensions and their retirement funds, plus
individual retirees who directly own bank shares to help fund their retirement.
And when we look at the business of banking, we support the success of other economic sectors by
Last year in B.C. alone, banks authorized $12 billion to the construction industry, almost $7.4 billion
to manufacturing, $4.4 billion to mining, quarrying and oil wells, and $3.4 billion to agriculture. If you
take small and medium-sized enterprises as a whole, bank lending totalled almost $12 billion in this
And that’s just the lending part. Banks offer businesses a wide range of support and advisory
services, from guidance on how to start a business and develop a business plan all the way to
succession planning for entrepreneurs looking to retire.
My reason for starting this way is to set the stage for the two main points that I said I wanted to
First, I want to share some perspectives on the value that Canadians recognize they derive from
their banks. In other words, what do Canadians think about their banks and the services and
products they provide? And, what does that mean for the future?
Second, I want to discuss the connection between bank customers and the regulatory environment
coming out of both the global financial crisis and, closer to home, national and provincial public
policies that impact banks.
Put simply, banking customers in British Columbia and across Canada are best served by strong
and profitable banks, and that is best achieved when we get the balance right between regulation
on the one hand and innovation and competitiveness on the other.
So let’s get to my first point – some perspectives on the value that Canadians tell us they get from
Our polling shows that more than 90 per cent of Canadians feel positively about their bank. This
level exceeds what you find for other service-oriented industries.
While of course I’d like to say there’s a correlation between this positive opinion and my first year as
the CBA’s President, the numbers have in fact been steadily rising over the last 14 years.
Credit here goes to the banks themselves for their hard work on continuous improvements in
customer service. Think back 20 or 30 years ago to the far fewer choices you had in products,
services and hours of operation. Banks committed themselves to a constant stream of innovation
over that time, an evolution that has worked to the consumer’s advantage.
So let’s dig a little deeper in our public opinion research and find out why Canadians now have such
a favourable opinion of banks.
It was clear from the results that four things stand out.
First, Canadians value the stability and soundness of our banks.
This is particularly true when you ask Canadians to compare our banks to banks around the world.
Eighty-four per cent of Canadians believe that Canada’s banks are more stable.
And they believe this for good reason.
Our banks came through the recent global financial crisis without any taxpayer funded bailouts,
there were no bank failures and they continued to lend. As we all know, this was not the case with
many banks in many other countries around the world.
The World Economic Forum, for the fourth year in a row, said our banks are the soundest in the
world. I cannot emphasize enough the importance to our economy of having strong, properly
functioning banks. And we cannot take this strength for granted. It’s something that bankers, policymakers
and regulators must continually work at.
Second, Canadians value the safety that banks provide in terms of financial transactions and
Eighty-two per cent of Canadians see banks as doing a good job of protecting their personal
information and transactions.
Banking customers can securely use their “chip and PIN” debit and credit cards at thousands of
merchant locations across the country. Banks help ensure that these systems are secure and
efficient, and if fraud does occur, there is zero liability for the customer. They get their money back.
Customers also know, and highly value, the fact that banks will keep their private information just
that – private. Banks are very diligent in their fight against financial fraud and will help customers
solve any privacy problems in the regrettable cases when financial fraud occurs.
Third, they value the added convenience and choice in how they bank./p>
For the most part, that convenience and choice comes from substantial and ongoing investments in
technology and innovation by our member banks. This clearly resonates with Canadians, as
seventy-six per cent of those polled rate quite highly the performance of banks when it comes to
introducing technologies that improve the convenience of banking.
Customers can bank online, use banking apps on their smart phones, call telebanking
professionals, and get quick access to their accounts at more than 17,000 bank machines across
Canada and more abroad.
They can also use the extensive and growing branch banking system for in-person service, in many
cases seven days a week and in the evening. Plus they can drop into a Canadian bank branch in
many parts of the U.S. – as many British Columbians do – and in a growing number of countries
around the globe. And for those customers who prefer to always bank on the go, they will soon be
able to use their smartphones and BlackBerrys to buy their morning coffee.
On this last point, you may recall hearing about the new guidelines for mobile payments using
smartphones that the CBA announced two weeks ago. These guidelines are open, secure and
voluntary, and clear the way for financial institutions and others to offer mobile payment products
and services to their customers. Exciting times!
That’s the convenience side. What about choice? Is there enough choice in banking these days?
Well. Eighty-seven per cent of Canadians believe so, and that’s before they were told that there are
about 70 banks in Canada.
Customers are a click away from finding another bank or another product. It’s something that isn’t
emphasized enough in this country – consumers have more power than they often realize. In a
marketplace with lots of competition and choice such as we have in Canada, with an array of
information tools at their disposal (particularly on-line), with appropriate disclosure, and a consumer
regulator there to ensure adherence to the rules – with all of these things in place, consumers are in
the driver’s seat because they can make informed choices.
I said a moment ago that banks are innovating to offer new products and services to their
One product in particular that I’ll highlight is Pooled Registered Pension Plans (PRPPs), which have
been proposed by the federal government. These will provide a pension savings opportunity to
small businesses and to self-employed Canadians that didn’t exist before. We encourage Premier
Clark’s government to move forward with legislation that will bring the multiple advantages of
PRPPs to British Columbians.
Fourth, Canadians see the value in having banks that are profitable.
Seventy-six per cent of Canadians understand that banks, like all companies with shareholders,
have to focus first on providing good returns to those who own their shares. And, as I mentioned
earlier, the shareholders in this case are millions of Canadians depending on bank shares as part of
So if that’s what Canadians are saying about banks, what’s underpinning the performance of banks
as institutions supporting the broader economy?
Well, principally, it is the longstanding traditions of careful, prudential lending and bank
management in Canada, the origins of which are much older than the country itself.
But let’s be clear. It is also the strong, clear regulatory framework in which banks operate in this
The Regulatory Environment
And that brings me to the second part of my speech. I want to touch on the regulatory environment
– and the business environment more broadly – with some perspectives on trends and
developments that could impact bank customers across Canada including here in British Columbia.
The regulation and supervision of banks served us well going into and through the recent global
financial crisis. Nevertheless, there are both potential challenges to our system of regulation as
well as opportunities to improve it. Let me touch on a few.
The first is the international regulatory environment that has developed in response to the financial
crisis that began in the U.S. in 2007-08 and spread around the world. As you know, it did not start
here, but Canada has certainly felt the effects.
Over the last three years, there has been an immense effort by international bodies – the G20, the
Basel Committee, the Financial Stability Board, and a host of other international organizations – to
revamp and restructure the regulatory system around the world so that the problems that led to the
financial crisis never happen again. And Canada is very much part of these efforts, both in terms of
helping to craft the rules and also implementing domestic versions of international standards here in
this country. In fact, even though the financial crisis did not originate here, Canada’s banks are
presently facing the biggest regulatory implementation exercise in Canadian banking history. And it
is not done yet – there is a host of other regulations and supervisory requirements either in train
now or on the horizon.
Let me be clear. There is no question that significant reform of the world’s financial system was
needed, and I don’t exempt Canada from this. Even though our system was strong before the
crisis, there were lessons that we had to learn from the crisis as well. And there is no question that,
once all the international reforms are in place, the world’s financial system will be more stable and
less prone to shocks. The opportunity for Canada through this process is to ensure that our banks
retain their reputation, and their position, as being the strongest and soundest in the world.
The questions I would pose, however, relate to the law of unintended consequences. For example,
what will be the long-term consequences of the new regulatory environment on competition in
Canada’s financial sector? While the regulatory implementation exercise we are going through is
significant enough for big banks, it has a disproportionately large effect on smaller institutions. Are
we building a regulatory environment in which smaller institutions could find it difficult to compete or
uneconomic to carry on business? And if so, what are the implications for consumers if there is
ultimately less competition in the marketplace?
Similarly, in the effort to take risk out of the system, are we building a system that will emphasize
stability at the expense of innovation? Clearly a balance between the two is needed, because it will
be the consumer who will be impacted if a proper balance is not ultimately achieved.
Because we are still in the thick of regulatory implementation, these remain questions, but they are
questions that policy-makers and regulators need to keep firmly in mind as the international
regulatory reform exercise continues to unfold.
The second area in the regulatory landscape I want to touch on is also international in nature, and it
is the problem of extraterritoriality, that is, efforts by foreign governments to apply their laws to the
Canadian operations of Canada’s banks. There are a growing number of examples, but probably
the most egregious case is a U.S. law called the Foreign Account Tax Compliance Act – or FATCA.
And here again, we see the potential for major impacts on individual Canadian consumers.
FATCA is intended to prevent “U.S. persons” from evading U.S. tax using financial accounts held
outside of the U.S. This certainly makes sense and we understand the rationale, but the way the
law has been drafted means that Canadian banks, insurance companies and other financial
providers in effect become enforcement arms of the U.S. tax authorities.
Unless this U.S. law is changed, FATCA will mean that Canadian banks will need to prove to the
U.S. authorities that their customers here in Canada, and in their subsidiaries around the world, are
not U.S. citizens, failing which they will be subject to significant financial penalties. In addition to
the hugely complex documentation and compliance systems that will have to be built to satisfy the
U.S. requirements, FATCA will be a nightmare for Canadian customers and the front-line bank staff
who will need to administer this U.S. law.
We are very pleased that federal Finance Minister Jim Flaherty has been active on this file, raising
concerns with his U.S. counterparts. But there is much more to be done, and I would encourage
everyone in this audience that if you are not yet familiar with FATCA, find out more – the CBA has
good information on its website. The more you know about this U.S. statute, the more concerned
you will be and I encourage you to make your voice known.
The third area I want to touch on brings us closer to home. Here at home, getting the balance right
on domestic regulations and policies is important to ensuring a competitive, innovative banking
One of the key policies that enables banks, and for that matter all businesses, to grow and
contribute to the economic prosperity is a competitive tax regime.
We commend the B.C. government on its decisions in recent years to reduce corporate and
personal income tax rates. This has helped to make B.C. a more attractive jurisdiction in which to
work, invest and set up businesses, benefitting B.C.’s economy.
I also want to commend the government on its move a few years ago to eliminate taxes on the
capital of corporations, a tax which is widely recognized as a barrier to attracting new capital
investment. Unfortunately, we're seeing troubling trends in some provinces, and calls from some
people here in B.C., when it comes to taxing the capital of financial institutions – something that is
both perverse and counter-productive for the growth of the economy. Perverse, because banks are
required to have large amounts of capital for safety and soundness reasons, and it doesn’t make
sense to tax what is needed for prudential reasons. Counter-productive, because capital supports
lending and when you tax away capital you are reducing the availability of credit to other sectors of
And on the topic of taxes, we also see some worrying calls from some quarters in Canada, but
mostly from outside of Canada (e.g. France and Germany), for an international financial transaction
tax. Such a tax would have an impact on financial institutions and also on Canadians.
The call for such a tax has been around for years but took on a new life during the recent global
financial crisis when banks in many countries experienced financial difficulties and needed
taxpayer-funded government bailouts. This was not the case in Canada – no banks failed and no
banks needed a taxpayer funded bailout because our banks are prudent and well-managed. Those
calling for such a financial tax see it as a way to recoup the costs of bank bailouts in other
Fortunately our federal government disagrees, as do 85 per cent of Canadians according to our
recent polling. It doesn’t seem fair to make the customers and shareholders of financial institutions
in Canada pay for the bailouts of a handful of financial institutions in other countries.
Minister Flaherty also believes, as do we, that stability in the financial sector, solid capital bases
and good risk management are more important. A financial transaction tax would not make banking
safer. Good rules and good management do, and we have that in Canada.
National Securities Regulator
The fourth area in my regulatory tour d’horizon is the issue of a national securities regulator in
Canada. We still believe that there are significant benefits to having a national system – a stronger
international voice for Canada, better fraud prevention, stronger enforcement, and a streamlined
process for investors. But moving to a more cohesive system has to be done in a collaborative,
cooperative manner, one that respects jurisdictions.
Ottawa’s approach to securities regulation is evolving given the Supreme Court of Canada’s opinion
of last December. We know that your government has been an active participant in the project, and
we commend the government for that. We encourage them, along with all other provincial and
territorial governments, to continue to work with the federal government to develop a common
securities regulatory regime that has the capacity to support fair and competitive markets for all
Lastly, I would like to comment on bank robberies, an issue that is always a sensitive and troubling
issue for our industry. Now this isn’t directly related to the regulatory or tax environment as the
other issues I’ve mentioned are, but it certainly is linked to judicial policies and practices in the
province. Bank robberies are dangerous, unpredictable situations that put the public and bank
employees in harm’s way. That is why we spend a lot of time and energy working with our member
banks and with police and law enforcement authorities to figure out ways to reduce the incidence of
Here’s the good news: bank robberies have declined in B.C. over the last ten years – thanks to
efforts by the police, the government which has dedicated Crown Prosecutors to the issue, and of
course, the banks themselves. But let’s be clear: robberies are still a very real problem,
particularly in Greater Vancouver.
Unfortunately, in B.C., sentences for robbers remain lighter than in other jurisdictions. Moreover,
sentencing has not addressed the fact that many offenders here suffer from addiction problems –
so many of those committing financial institution robbery are repeat offenders. So, more work
needs to be done, and we will want to reach out to the government to explore other avenues to
further advance sentencing reform.
My time here is running out. You’ve heard me talk about how our banks are playing their part in the
communities and economy of British Columbia. I’ve touched on the global and local regulations
and policies that affect banking.
The point I want to leave you with is this: We have a strong, sound and profitable banking system in
Canada. One that benefits the economies of British Columbia and Canada. But also one that
benefits bank customers – be they individual consumers or businesses large or small.
As governments and regulators move forward with implementing rules and policies, we all need to
consider whether these will ensure that our banking system is able to maintain its strength, its
innovation and its service to customers. We will be there with British Columbians as your province
continues to grow and prosper.
Let me conclude by saying how very privileged I feel to work for a Canadian success story, a great
industry that is woven into the fabric of each of our communities and into the strength of British
Columbia’s economy and of Canada’s.
Thank you for coming.