The Future Of Banking Canadian Essay Research — страница 3

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financial institutions. These form part of the prudential requirements and are influenced by the desire to avoid major downstream commercial links and the impact of conflicts of interest in the allocation of credit. The Task Force will be reviewing these downstream ownership rules and seeks comments, particularly as to whether the degree of intervention that they represent is the minimum necessary to attain the relevant public policy objectives. the federal financial institution statutes require Ministerial approval as a condition to a wide range of transactions, including mergers between regulated financial institutions. This authority is used, for example, to enforce the “big shall not buy big” doctrine that currently limits mergers between major Canadian financial

institutions. The Task Force will canvass these provisions and their application, attempting to formulate recommendations as to how Ministerial discretion should be exercised. We will also consider what types of transactions should be caught by the rules concerning mergers. the internationalization of trade and investment flows are reinforcing the globalization of wholesale financial services and are, in turn, being themselves reinforced by this globalization. ?Changes in the macro-economic environment, in particular low inflation – together with the demographic effects of the baby boom – are leading to changed needs and preferences for retail financial services. New forms of intermediation allow the benefits of equity investment to be more closely tailored to individual risk

preference. most important driver of change is technology, and the tremendous increase in power and reduction of cost that has occurred in communications and information processing. I am struck by the observation I have heard that if the rate of productivity increase and cost decrease that we have seen in the computer industry over the past 25 years had applied to the automobile industry, I would be able to buy a Rolls Royce for less than a dollar and drive around the world on a tank of gas Financial services have become, first and foremost, an information industry. And so it is no wonder that they are being fundamentally transformed. rapid, and accelerating, pace of change. Credit Card Expertise to Canada” ?”Great West Life Tops Royal Bid for London Life” These Canadian

developments reflect trends that are certainly evident internationally. They also indicate the cascading effect of change both on Canada’s domestic institutions and on Canadian consumers. big financial institutions merge. Others announce new acquisitions or enter into new markets. Still others refine their product lines to become the best in the world in a narrower sphere of activity. There are concerns that the Canadian regulatory regime may be increasingly out of sync with the reality of changing imperatives for business. It is suggested that the system should allow greater competition and more flexibility in organisational structure and business powers. ?It is claimed by some, for example, that there is not enough competition in some Canadian financial services markets –

particularly price competition and access to credit and particularly in regional and non-urban markets. We are told that more providers would be welcome and would benefit consumers. Conversely we are cautioned that policies which would reduce the number of providers would be harmful. ?At the same time, we are being told that the existing restraints do not allow Canadian institutions to pursue the strategies and alliances that are increasingly necessary and, as a result, that their ability to continue to prosper – and to benefit Canada and Canadians – is at risk. ?Some see a very direct trade-off between large Canadian domestic institutions becoming bigger and more internationally oriented, and the quality of competition in domestic markets. ?Some point to the present

restriction on individual shareholdings in Canadian banks to 10% as critical to ensuring both a sound system and a Canadian controlled system. Others urge the elimination of this same rule on the grounds that it inhibits the growth of the sector by what they claim to be a somewhat crude protectionist measure from another, distant time. We are also hearing that our regulatory system is throwing up barriers that disadvantage consumers by denying them choice. ?On the one hand, we are told that allowing banks to retail insurance and enter the auto leasing field would offer greater choice and lower prices to consumers. ?But we are cautioned that anti-competitive behavior based on increased market power may also result, to the detriment of existing suppliers and their employees and