If the story of Canadian bank mergers were a novel, it would never find a publisher.
Since four of the five big Canadian banks proposed a pair of mega-mergers nine years ago, the Canadian government has ponderously studied the question of whether to let the northern country’s big banks merge. The result has been an epic tale whose plot has gone nowhere.
The latest non-chapter in this non-saga came Wednesday when Canada’s new Conservative government released a policy paper on financial services reform. The paper had been promised by the previous Liberal government, which had postponed it several times before being voted out of office in January.
The paper is largely technical, and a statement from Finance Minister Jim Flaherty said it is largely designed to cut red tape and improve disclosure. The one mention that the 43-page document does make about bank mergers is to propose that the approval of some transactions be shifted from the finance minister’s office to the financial services regulator, the Office of the Superintendent of Financial Institutions.
Also, the Conservatives stuck to an election promise they made to the insurance industry not to allow banks to market insurance products in their branches. Royal Bank of Canada, the country’s largest bank, has been pushing the government to ease the Depression-era legislation that prohibits such sales.
The subject of bank mergers has been on the periphery of Canadian politics since then finance minister Paul Martin in 1998 ruled that Royal Bank could not buy Bank of Montreal, and Canadian Imperial Bank of Commerce could not buy Toronto-Dominion Bank. The banks had agreed to the mergers a year earlier. The only major Canadian bank that was not proposing a deal was Bank of Nova Scotia.
There had been some speculation that a right-wing government would be more accommodating to the banks than their centrist predecessors. However, the party led by Prime Minister Stephen Harper has formed a minority government – meaning the three opposition parties together hold more seats in Parliament than the governing Conservatives – so the government is leery about any moves that could offend voters.
That means the status quo is likely to remain for some time. Canada will still have five big banks. They will not be subsidiaries of foreign companies. And they will not sell insurance in their branches.—Peter Moreira
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