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 value.

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 supplying credit.

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 province alone.

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 discuss today.

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 their banks.

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 personal information.

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 customers.

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 their retirement.

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 country. 

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.

International Regulations

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.

Taxation Issues

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 marketplace.

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 the economy.

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 countries.

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 Canadians.

Bank Robberies

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 bank robberies.

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.