Main Street or Bay Street: the only choices?
Sweeping changes in the financial world have brought the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. financial services The examples and perspective in this article or section may not represent a worldwide view of the subject.
Please [ improve this article] or discuss the issue on the talk page. industry to a fork in the road A Fork in the Road is an Australian travel television series airing on SBS and hosted by Pria Viswalingam.
Described by SBS as "the thinking-person’s travel show" the program takes the viewer off the beaten track and takes a look at the lives of the people . Down one path -- we might call it Bay Street -- is an internationally competitive banking system consisting of a few large banks. For some financial services, however, Bay Street may not provide the vigorous competition needed to serve Canadians This is a list of Canadians. Architects
I suggest, however, that policymakers' choices need not be so limited. A middle road may give Canadian banks the chance to achieve international competitiveness and at the same time promote domestic competition. In this Commentary, I propose such an option.
The proposed bank mergers of 1998 previewed the concerns that will be raised by the Canadian competition authorities about future mergers as they come forward. The reviews of those merger proposals made it clear that merging parties would need to divest To deprive or take away.
Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. themselves of large parts of their business to meet those concerns. There might be few buyers both qualified and willing to take over of the business parts that must be let go. The middle road I propose here creates a framework under which foreign banks may be more willing to be buyers when a merger is proposed. It might also signal that they would be treated as suitable buyers when the time came.
Under the framework I propose, foreign banks would be permitted to conduct full banking operations in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of through their branches. Foreign banks would not need to create stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context.
"We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." subsidiaries with separate capital and governance Governance makes decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. structures in order to carry on full-line banking. Prudential Prudential is the name of two different companies and buildings named after them:
Purview refers to the enacting part of a statute. It generally begins with the words be it enacted and continues as far as the repealing clause. of Canadian regulators could be overcome by a system of mutual reciprocity reciprocity
In international trade, the granting of mutual concessions on tariffs, quotas, or other commercial restrictions. Reciprocity implies that these concessions are neither intended nor expected to be generalized to other countries with which the contracting parties , committing the other countries' authorities to providing oversight
Oversight may refer to:
Furthermore, while this middle-road approach (let us call it "Reciprocity Road") would reduce concerns about the impact of major bank mergers on domestic competition by introducing new potential buyers into Canadian banking, it would also create new opportunities for Canadian banks in those countries that accepted Canada's invitation to adopt such a reciprocal Bilateral; two-sided; mutual; interchanged.
Reciprocal obligations are duties owed by one individual to another and vice versa. A reciprocal contract is one in which the parties enter into mutual agreements. arrangement.
The Changing World of Banking
World banking has undergone sweeping change over the past five years. Tables 1 and 2 show that, of the top ten world banks in 1995, only three remained in the top ten just five years later, whether measured by tier 1 capital Tier 1 Capital
A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves.
Equity capital includes instruments that can't be redeemed at the option of the holder. or by assets. Table 3, which takes account of recent and pending mergers, reveals that every top-ten institution today has engaged in a significant merger or acquisition within the past three years. Even more striking is the fact that, of the ten leaders of 1995, five have merged to form other banks that now lead the league.
This unprecedented wave of mergers has been the major force shaping the world's largest banks. Some earlier US bank mergers, such as Wells Fargo Wells Fargo
armored carriers of bullion. [Am. Hist.: Brewer Dictionary, 1147]
See : Protectiveness
company that handled express service to western states; often robbed. [Am. Hist. with Norwest For the sniper, see .
Norwest Corporation and BankAmerica with NationsBank NationsBank was one of the largest banking corporations in the United States, based in Charlotte, North Carolina. In 1998, it acquired BankAmerica to become Bank of America. , were part of a general restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of US banking set loose by the removal of archaic geographical restrictions. More recent US transactions, especially those of Citigroup Citigroup
U.S. holding company formed in 1998 from the merger of Citicorp (itself a holding company incorporated in 1967) and Travelers Group, Inc. The $70 billion merger included one of the largest U.S. investment banks, Salomon Smith Barney Inc. , were made possible by the lifting of restrictions on combining banking with insurance and the securities business. The Japanese mergers have a totally different motivation: they are an attempt to shore up an impaired banking system. Finally, the European European
emanating from or pertaining to Europe.
European bat lyssavirus
European beech tree
see cryptococcosis. mergers may be the most significant for the future of world banking: Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/) (ISIN: DE0005140008, NYSE: DB) (English: German Bank , HSBC HSBC Hongkong and Shanghai Banking Corporation
HSBC Humane Society of Broward County (Florida)
HSBC Humane Society of Bay County (Bay County, Michigan) , and Union Bank of Switzerland appear to be transforming themselves into truly global banks.
The mergers taking place in world banking are important for the future of Canadian banks. They may portend por·tend
tr.v. por·tend·ed, por·tend·ing, por·tends
1. To serve as an omen or a warning of; presage: black clouds that portend a storm.
2. a restructuring of world banking around a small group of dominant global banks, a trend many banking observers have predicted. If so, Canadian banks will need to develop strategies for adapting to that changing environment.
Much evidence indicates that mergers have been and remain the major means by which banks increase their size. Internal growth rarely changes market shares by much. Major Canadian banks themselves were built through successive mergers and takeovers. The national, and possibly global, banks emerging in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. owe their current positions to recent mergers and acquisitions. These dramatic changes raise questions about the future of Canadian banks. Some will likely renew their proposals for mergers, as part of their strategies to deal with the challenge.
Canadian Banks from a World Perspective
Canadians have come to view their banks as being very large. But that view is correct only from a domestic perspective. Comparing Canada's "big five" (2) with the world's largest banks gives a different picture. The assets of the big five rank only between 55th and 70th in the world banking league. Their average size, whether measured by assets or tier 1 capital, is no more than one-third that of any of the ten largest banks.
Tables 1 and 2 show that, despite many changes in world banking, Canadian banks have managed to hold their places in the rankings over the past five years. (3) They also seem to have managed to increase their relative size somewhat. But though Canadian banks have substantially reworked themselves, their changes pale relative to how the world's largest banks have recently changed. When pending mergers and acquisitions are considered, as Table 3 shows, Canadian banks combined are only as big as Citibank and just over half the size of the proposed Mizuho Bank Mizuho Bank, Ltd. (株式会社みずほ銀行 . (4)
Does Size Matter?
The consequences of choosing Main Street over Bay Street depend very much on whether size matters for success in banking. If it does, the choice of Main Street domestic standards means that we can expect Canada's banks to keep falling behind the world's banking leaders. If size does not matter, the choice of Main Street maintains the present state of competition without bearing costs in terms of the global competitiveness of Canadian banks. Still, the proposals I present in this paper make sense whether or not size matters.
It is difficult to find a clear message on the importance of size in banking, at least in terms of the present scale of Canadian banks. Lessons based on the past offer little guidance for a new world in which megabanks will dwarf the banks from which most evidence has come. (5) Moreover, the evidence itself is unclear because of the various ways in which size can matter. Those aspects where size may matter most may not yet have been studied adequately to present clear conclusions.
Santomero and Eckles (2000), in their recent survey of the evidence on the consequences of greater size, identify possible effects of overall size in terms of its impact on operating costs operating costs npl → gastos mpl operacionales , operating revenues operating revenue
Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. , and the ability to make the large financing commitments necessary to compete globally.
Economists have directed much effort to exploring the effects of scale on costs and, to a lesser degree, revenues. With respect to costs, Santomero and Eckles find that, "[a]lmost universally, the gains from strict cost efficiency are illusory il·lu·so·ry
Produced by, based on, or having the nature of an illusion; deceptive: "Secret activities offer presidents the alluring but often illusory promise that they can achieve foreign policy goals without the " (2000, 4). With respect to revenue effects, on the other hand, evidence increasingly suggests that benefits from mergers do show up. These benefits, however, usually arise from gaining greater size through combining banking with other business activities; they are less likely to be significant for mergers within banking itself.
Many of the perceived benefits of larger size are found in areas where there is little empirical evidence. Santomero and Eckles argue most strongly that a bank's size will be important for its global competitiveness:
Most large-scale financings require substantial book positions which would be impossible in absence of a large balance sheet. This is of increasing relevance today as the nonfinancial industrial structure consolidates globally. The latter trend has forced financial firms to increase the scale of their ownership position in underwritings, syndications and new issues. With the decline in the size of selling groups and increased pressures on comanagers, balance-sheet size becomes a comparative advantage as does distributional capability, which is related to operating scale. (2000, 14.)
To an extent, the economic evidence regarding the benefits of greater size may not be relevant to policymakers in their choice between Main Street and Bay Street. It is normally up to managers acting on behalf of stockholders to determine corporate strategy in the absence of strong public policy concerns. The actions of banks' managements in 1998 indicated their strong belief in the benefits of size. But unease about the adequacy of competition in domestic markets does provide a policy concern with respect to bank mergers. While this unease may in the end block such mergers in the present environment, policymakers should seek options that can resolve or minimize the conflict between Main Street and Bay Street, especially when corporate management clearly perceives the benefits from greater size.
Banking in the Canadian Economy
Getting policy right with respect to banking is critically important to Canada. A vigorous banking sector has been one of the strengths of the Canadian economy from Confederation A union of states in which each member state retains some independent control over internal and external affairs. Thus, for international purposes, there are separate states, not just one state. onward on·ward
Moving or tending forward.
adv. also on·wards
In a direction or toward a position that is ahead in space or time; forward. . Canadian banks have usually operated in a more flexible framework than banks elsewhere. In addition, they attained at·tain
v. at·tained, at·tain·ing, at·tains
1. To gain as an objective; achieve: attain a diploma by hard work.
2. their size at an early stage through permissive permissive adj. 1) referring to any act which is allowed by court order, legal procedure, or agreement. 2) tolerant or allowing of others' behavior, suggesting contrary to others' standards.
PERMISSIVE. merger policies. This combination of flexibility and size together with Canada's national system of banking, allowed Canadian banks to develop strength in global banking through, among other things, their experiences in managing dispersed dis·perse
v. dis·persed, dis·pers·ing, dis·pers·es
a. To drive off or scatter in different directions: The police dispersed the crowd.
b. branch networks.
Recent Canadian banking policy has attempted to preserve the balance between the strength of the banks and adequate competition in banking services. In particular, banking policy since the 1960s has been characterized char·ac·ter·ize
tr.v. character·ized, character·iz·ing, character·iz·es
1. To describe the qualities or peculiarities of: characterized the warden as ruthless.
2. by a succession of measures reflecting the "pro-competitive" thrust of the Royal Commission on Banking and Finance (the Porter Commission). That commission was the most thorough study of Canada's financial system, and it provided a blueprint blueprint, white-on-blue photographic print, commonly of a working drawing used during building or manufacturing. The plan is first drawn to scale on a special paper or tracing cloth through which light can penetrate. for much of the subsequent banking reform. The 1967 amendment to the Bank Act eliminated the ceiling on bank lending rates and disallowed bank agreements on deposit rates. (6) The 1980 amendments opened the entry to foreign bank subsidiaries and removed many of the barriers between financial businesses, allowing banks fully into the mortgage market, and other institutions directly into the payments system. The 1992 amendments removed many remaining distinctions that separated different types of financial institutions.
Parts of Finance Minister Paul Martin's recent package of financial sector reforms continue the tradition. The proposed reforms open the payments system to new players, such as mutual fund companies, insurance companies, and investment dealers, improving their ability to compete for household financial business. The reforms also give major institutions more choice in their institutional structures and allow greater range in ownership options. Most significant for the banks, it repeals the unwritten LAW, UNWRITTEN, or lex non scripta. All the laws which do not come under the definition of written law; it is composed, principally, of the law of nature, the law of nations, the common law, and customs. "big shall not buy big" policy that blocked major mergers from the 1980s onward. The reform formalizes the merger review process for future repeats of the 1998 Royal-BMO and CIBC-TD proposals. On the other hand, it also adds parliamentary hearings to consider different dimensions of the public interest.
This more open approach to mergers will turn out to be completely hollow hollow
1. a depression.
2. contains a cavity.
backbone has a downward curvature in the center.
a mythical disease of cattle in primitive communities; treated by removal of the horns. , however, if it fails to solve one overshadowing issue -- that is, if it fails to reconcile the banks' desires to grow through mergers with the public's need for competition. Martin's legislation unfortunately does not make future mergers among major banks much more likely to succeed than were the 1998 proposals; those met their major roadblock when the competition test found both proposals to cause a "substantial lessening of competition" in a variety of markets.
To understand the problem facing any future mergers, it is useful to examine the basis of the Competition Bureau's concerns about the mergers.
The Competition Test
The failed mergers left one benefit for similar future proposals through the insights they gave into the workings of the competition test. (7) The review of bank mergers was routine in some dimensions and not in others. The Competition Bureau -- Canada's antitrust Antitrust
The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. watchdog -- handles merger proposals in other industries by the hundreds. The 1998 bank merger proposals drew forth the bureau's first assessment of mergers among major banks. Anticipating the problems such mergers could pose, the bureau adapted its merger enforcement guidelines guidelines,
n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. to deal with the specific features of banks and their business, and issued the revised guidelines for discussion before the merger review (see Canada 1998a). Without specific application, even those efforts at formulating and clarifying the evaluation criteria left plenty of room for uncertainty and interpretation. Although the mergers never reached the stage of negotiating remedies, the bureau's review provided banks and their watchers with a look at the merger guidelines The Merger guidelines are a set of internal rules promulgated by the Antitrust Division of the United States Department of Justice (USDOJ) in conjunction with the Federal Trade Commission (FTC). in practice.
Still, merger reviews are not an end to the process. Would-be merging parties have several options after an unfavorable review. They may seek to have the merger approved by challenging the bureau's finding before the Competition Tribunal A general term for a court, or the seat of a judge.
In Roman Law, the term applied to an elevated seat occupied by the chief judicial magistrate when he heard causes.
tribunal n. , the final authority for competition questions. Alternatively, they can work with the bureau in devising remedies. (8) The most important contribution of the 1998 reviews may be the message they send regarding possible remedies needed to overcome the bureau's concerns.
The bureau's scrutiny ranged over every market in which the participating banks operated. In many markets, the absence of undue lessening of competition could be determined without intensive study. In practice, the bureau narrowed its concerns to the banks' securities business, the credit card business, and branch banking, all of which differ substantially with respect to the severity of the problems they present and the possibility of remedy. Moreover, the two merger proposals raised quite different concerns despite the apparent sameness of the large banks involved.
The Competition Bureau expressed concern about a substantial lessening of competition in just two submarkets of the securities business. The first -- full-service brokerage, defined as securities trading securities trading, financial activity involving transactions of property such as stocks, bonds, commodities, and currency (see securities). Although the trading of stocks and bonds dates back several centuries in many Western nations, the development of the combined with advice -- was judged to be local because of the importance of local branch offices in delivering the services. (9) The other market of concern -- equity underwriting Underwriting
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
2. The process of issuing insurance policies. for issues greater than $50 million -- was judged to be national in scope.
Joining under one roof the full-service brokerage businesses of BMO's Nesbitt Burns and the Royal's RBC Dominion Securities
v. less·ened, less·en·ing, less·ens
1. To make less; reduce.
2. Archaic To make little of; belittle.
To become less; decrease. competition in 39 of the 63 local markets served by both banks, and might lessen competition in a further 16 markets. The joining of TD Evergreen evergreen, term commonly used as synonymous with conifer and applied also to all those broad-leaved plants that bear green leaves throughout the year. Of the latter, most are plants of the tropics, subtropics, and other areas where the growing season is prolonged (e. with CIBC's Wood Gundy, in contrast, would lessen competition in only one of the 22 shared markets, with a possible lessening in two others.
The concerns with equity underwriting arose solely from the combination of Nesbitt Bums with RBC Dominion Securities. The bureau's concern here was tentative tentative,
adj not final or definite, such as an experimental or clinical finding that has not been validated. because of uncertainties about the appropriate way to measure market share. The bureau found that the merging parties had a market share greater than the bureau's critical 35 percent threshold on the basis of a measurement that gave full credit to lead underwriters Lead underwriter
The head of a syndicate of financial firms that are sponsoring an initial public offering of securities or a secondary offering of securities. Could also apply to bond issues. in determining market share. Still, it concluded that further detailed review was needed before a lessening of competition could be confirmed.
The credit card business of the banks also posed analytical analytical, analytic
pertaining to or emanating from analysis.
control of confounding by analysis of the results of a trial or test. difficulties because of the range of different activities in this business that, in the bureau's view, constitute separate markets. The Competition Bureau identified the following separate markets:
* the issuing of credit cards to consumers -- issuing cards to consumers and taking responsibility for their credit card payments,
* the acquiring of card transactions -- repaying merchants for transactions for which they have accepted credit cards, and
* the supplying of network services -- bringing different card issuers and transaction acquirers together to create a framework though which consumers can use cards to make purchases, and merchants can be reimbursed for their sales.
The mergers created little danger of substantially lessening competition in credit card issuing. Many Canadian financial institutions -- domestic banks, foreign banks, caisses populaires, and credit unions -- issue credit cards to their customers. Many other card issuers -- especially so-called monolines -- are in the business of issuing credit cards to customers with whom they do no other business. Furthermore, many consumers hold multiple cards and will be aware of the features and terms offered by different issuers. Taking these and other features into account, the bureau found no competitive problems with respect to card issuing from either merger.
Acquiring card transactions differs substantially from issuing cards. An acquirer of credit card claims generally must maintain commercial banking relationships with retail businesses that accept cards for payment. This requirement prevents many specialized spe·cial·ize
v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es
1. To pursue a special activity, occupation, or field of study.
2. card-issuing institutions, especially consumer-oriented institutions, from being active in acquiring. (10) Merchants (unlike consumers, who may hold several cards) often confine their business to only two acquirers, one each for Visa and MasterCard. The Competition Bureau examined the impact of the proposed mergers on the market for acquiring from two perspectives: the separate MasterCard and Visa networks and the overall credit card market -- so-called primary merchant acquiring.
The bureau foresaw that the two mergers would have quite different impacts on competition with respect to acquiring in the two networks. A shift in BMO's credit card business to Visa was a nonstarter because it would have deprived MasterCard of its major member. The bureau saw no problems for competition within Visa from a shift of the Royal's business to MasterCard because the large number of Visa members meant that one fewer would not lessen competition. In contrast, the CIBC-TD merger would have united two of the top three Visa acquirers, which, in the bureau's view, would have substantially lessened less·en
v. less·ened, less·en·ing, less·ens
1. To make less; reduce.
2. Archaic To make little of; belittle.
To become less; decrease. competition within the Visa network.
The primary merchant-acquiring market was more complicated to analyze and, in the bureau's view, raised competitive concerns. The bureau saw the market as undergoing a transition from being local to becoming national. It identified the relevant competitors at the national level as BMO BMO Bank of Montreal (Canada)
BMO Before Market Open
BMO Biometrics Management Office
BMO Ballistic Missile Office
BMO British Mathematical Olympiad
BMO Balkan Mathematical Olympiad
BMO Business Management Office , Scotiabank, CIBC CIBC Canadian Imperial Bank of Commerce
CIBC Centres Interinstitutionnels de Bilan de Compétences
CIBC Commonwealth Institute of Biological Control (Trinidad)
CIBC Commercial International Brokerage Company , the Royal, and TD, with the National Bank and Caisses Desjardins as significant competitors in Quebec. Both proposed mergers have taken the resulting combination close to the bureau's critical threshold Critical threshold, a notion derived from the percolation theory, refers to a threshold, that summons up to a critical mass. Under the threshold the phenomenon tends to abort, above the threshold, it tends to grow exponentially. , possibly resulting in substantially less competition. The two mergers proceeding together would, in the bureau's view, have definitely resulted in a substantial lessening of competition.
The Competition Bureau's analysis of competition between networks was strongly influenced by the existing rules of the card networks against membership in both networks -- so-called dual membership. These rules meant that the combined Royal-BMO would have had to switch entirely to one or the other network. (11) The shift to Visa of BMO's card business would have crippled crip·ple
1. A person or animal that is partially disabled or unable to use a limb or limbs: cannot race a horse that is a cripple.
2. A damaged or defective object or device.
tr.v. MasterCard by depriving it of its dominant member. Only a move by the combined bank to MasterCard would ensure adequate competition between networks. No such concern resulted from the CIBC-TD merger because both were members of Visa.
As a first step in dealing with traditional banking, the Competition Bureau defined the relevant geographic market area for each activity; distinguishing national, regional, provincial, and local markets. Next, it identified the actual and potential competitors in each market. Finally, the bureau compared the effective competition and market shares after the hypothetical Hypothetical is an adjective, meaning of or pertaining to a hypothesis. See:
Consumer products served through local branches included personal long-term Long-term
Three or more years. In the context of accounting, more than 1 year.
1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. investments (mutual funds, bonds, and stocks); personal short-term Short-term
Any investments with a maturity of one year or less.
1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. savings (guaranteed investment certificates A Guaranteed Investment Certificate is a Canadian investment that offers a guaranteed rate of return over a fixed period of time, most commonly issued by trust companies or banks. , money market mutual funds, Canada and provincial savings bonds Savings bond
A government bond issued in face value denominations from $50 to $10,000, with local and state tax-free interest and semiannually adjusted interest rates.
A nonmarketable security issued by the U.S. , and treasury bills); personal transactions accounts; student loans; residential mortgages; and personal loans or lines of credit. The business products identified with branches included term loans, business transactions accounts and related services, and operating loans. The bureau found no problems of competition in many of these markets, often because of the presence of non-bank competitors. The bureau found that each merger would lead to a substantial lessening of competition in the markets for the following local market services: transactions accounts, residential mortgages, and personal loans or lines of credit, for consumers; and business transactions accounts and operating loans, for businesses.
The bureau's review showed that the Royal-BMO merger would have resulted in a definite lessening of competition in 104 of the 224 local markets in which both banks operated and a possible lessening of competition in 71 others. The CIBC-TD merger, in contrast, would have resulted in a substantial lessening of competition in 36 of the 189 common markets and a possible lessening of competition in a further 53.
The bureau also examined the market for business operating loans between $1 million and $5 million and declared the relevant market to be provincial in scope. Here, the bureau found that the Royal-BMO merger would have caused a substantial lessening of competition in all of the British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography
, Saskatchewan, Manitoba, Ontario, and Nova Scotia Nova Scotia (nō`və skō`shə) [Lat.,=new Scotland], province (2001 pop. 908,007), 21,425 sq mi (55,491 sq km), E Canada. Geography
markets. The CIBC-TD merger would have had a lesser effect, producing a substantial lessening of competition only in Prince Edward Island Prince Edward Island, province (2001 pop. 135,294), 2,184 sq mi (5,657 sq km), E Canada, off N.B. and N.S. Geography
One of the Maritime Provinces, Prince Edward Island lies in the Gulf of St. , Yukon, and the Northwest Territories Northwest Territories, territory (2001 pop. 37,360), 532,643 sq mi (1,379,028 sq km), NW Canada. The Northwest Territories lie W of Nunavut, N of lat. 60°N, and E of Yukon. .
Is the Competition Test an End or Beginning?
The Competition Bureau's review identified the competition problems that would have needed resolution if it were to approve the two proposed mergers. Usually the bureau's reviews of merger applications continue the process, considering and negotiating remedies. If the merging parties commit themselves to remedies that overcome all the bureau's concerns, the merger can proceed. The divestment divestment to strip one's investment from an entity. of parts of the combined business offers an obvious and frequently used solution. (To allow its takeover to go through, for example, TD undertook to divest itself of Canada Trust's MasterCard acquiring and issuing operations and a number of its branches.) Given the bureau's concerns, what would have been needed to have allowed the 1998 mergers to proceed?
The banks surely anticipated the need for remedies in the securities business when they first contemplated the mergers. The steps needed for the CIBC-TD merger would have been relatively minor, requiring divestment of brokerage offices in just a few markets. The remedy for the Royal-BMO merger needed to be more drastic. Across-the-board divestments were necessary in virtually all markets where both securities subsidiaries operated. Still, this would not have been an obstacle if, as was likely, the banks had been prepared to divest themselves of one or the other of Nesbitt Bums and RBC RBC red blood cell.
RBC or rbc
red blood cell
n See red blood cell count.
red blood cells; red blood (cell) count (see blood count). Dominion dominion, power to rule, or that which is subject to rule. Before 1949 the term was used officially to describe the self-governing countries of the Commonwealth of Nations—e.g., Canada, Australia, or India. as a price for the merger.
For the Royal-BMO proposal to have gone forward, the merged bank would have had to remain within the MasterCard empire and sell off its Visa interest. Such a step would certainly have appeared feasible for the card issuing part of the business. Potential purchasers included, in addition to other Visa members, monoline issuers from the United States seeking to expand into Canada.
The market for credit card acquiring appeared to raise more difficult issues. The purchaser of a divested acquiring business would need sufficient scale to absorb such a major operation and also be able to establish the business relationships with merchants. The outlook in this market has changed since the time of the merger review. The acquisition of Canada Trust's acquiring business by First Data suggests that specialized monolines may be potential buyers of acquiring businesses. In addition, BMO and the Royal gained approval for Moneris (as a joint subsidiary) to acquire both MasterCard and Visa transactions on their behalf. While this move by itself did not affect the market shares for acquiring in either of the two credit card networks, it did combine two competitors in the primary acquiring market. Significantly, it gained approval. Although those developments suggest that the problems in acquiring activities may appear less difficult than at the time of the proposals, the bureau did raise concern about Royal-BMO dominance of MasterCard if former Royal customers decided to stay with the merged bank.
Branch market activities appear to pose the largest problems because of the substantial scale of the divestment required. The Royal-BMO merger, for example, would have required the disposal of branches in at least 104 markets, with the sale of multiple branches in some markets, to meet the bureau's thresholds. Although branches might possibly be sold in groups to different buyers, purchasers cannot buy branches just for their consumer banking business. They must also establish business relationships to overcome the bureau's concerns about business transactions accounts and loans.
Who Would Buy?
Who would likely be willing and qualified buyers for divestments? The most likely candidates include credit unions and foreign banks wishing to increase their presence. In neither group are there likely to be enough sufficiently qualified buyers who will come forward.
Credit Unions and Caisses Populaires
Credit unions and caisses populaires -- deposit-taking institutions cooperatively owned by their customers -- are limited as buyers by their decentralized de·cen·tral·ize
v. de·cen·tral·ized, de·cen·tral·iz·ing, de·cen·tral·iz·es
1. To distribute the administrative functions or powers of (a central authority) among several local authorities. organization. Local units are autonomous, and only a few have more than one office. Provincial centrals -- themselves cooperatives formed by local unions -- coordinate many of the locals' activities. The provincial centrals differ in their goals and their strength from province to province. A national organization provides common services to the central and promotes common policies, but does not deal directly with consumers and businesses.
Certainly the strong presence of caisses in Quebec and credit unions in British Columbia and Saskatchewan has already helped to sustain competition in those markets. Some credit unions have recently shown a willingness to expand their local networks by buying bank branches in British Columbia, Alberta, and Saskatchewan. Individual locals will undoubtedly be interested in buying some branches. Provincial centrals may encourage the conversion of former bank branches into new locals.
The credit union system can likely provide some help with bank divestment under present circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact.
2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , but it is not likely to be the entire solution. Credit unions are primarily oriented o·ri·ent
1. Orient The countries of Asia, especially of eastern Asia.
a. The luster characteristic of a pearl of high quality.
b. A pearl having exceptional luster.
3. toward serving individual consumers and would need to switch their focus toward serving business in order to overcome some of the concerns about competition. The uneven development of cooperative institutions across the country also rules them out as significant buyers of divested branches in many areas, especially in Ontario, with its large number of problem markets. Also, no part of the system has the scale or national scope to resolve the problems of credit card acquiring.
This situation could possibly change. The new legislation permits the chartering of a federally regulated association that would have all the powers of a federal financial institution, including the powers to operate nationally in dealing with consumers and businesses. Such an association could be owned by either the Credit Union Central of Canada Credit Union Central of Canada is the national trade association for credit unions in Canada, outside Quebec. The Toronto-based organization provides federal government relations, media relations, represents the industry in many associations and organizes several conferences each , two or more provincial centrals, or ten credit unions coming from at least two provinces. Such an alternative may be an attractive way for credit unions to expand their scope. If credit unions follow this route, they may become more significant purchasers of the branches and other businesses that big banks will need to divest themselves of if they wish to merge.
Foreign banks can now do business in Canada through two channels. Some 36 foreign banks operate in Canada through their stand-alone subsidiaries, which can carry on the same business as the major banks. These subsidiaries were constrained con·strain
tr.v. con·strained, con·strain·ing, con·strains
1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force.
2. in size through rules on concentrated ownership that limited any party to no more than 65 percent of the ownership of any bank with equity of $750 million or more. That limit rises to $1 billion with the passage of the proposed financial legislation. The law also provides that the minister of finance can exempt a foreign bank from this restriction and has indicated to foreign banks that their Canadian subsidiaries can continue to be wholly owned. Nevertheless, the presence of such a rule, whatever the assurances, will still influence the perceptions of foreign banks.
The experience of foreign bank subsidiaries in Canada has not been favorable fa·vor·a·ble
1. Advantageous; helpful: favorable winds.
2. Encouraging; propitious: a favorable diagnosis.
3. . Many have found it difficult to build a branch network de novo [Latin, Anew.] A second time; afresh. A trial or a hearing that is ordered by an appellate court that has reviewed the record of a hearing in a lower court and sent the matter back to the original court for a new trial, as if it had not been previously heard nor decided. , and some, finding it unprofitable, have left. HSBC, the largest foreign bank in Canada, has 138 branches and accounts for 3 percent of the total bank assets in Canada. Part of its success can be attributed to its takeover of the Bank of British Columbia There have been two Canadian banks with the name Bank of British Columbia.
The first was established by Royal Charter in 1862 and merged with the Canadian Bank of Commerce in 1901. For a number of years before that it ran a branch in San Francisco. and the Continental Bank and their branch networks in the early 1980s. No other foreign subsidiary, however, has more than 0.7 percent of bank assets in Canada.
Foreign banks can also operate through branch offices. These branches avoid many of the costs of stand-alone subsidiaries in that they are integrated parts of the foreign parent and are subject to less Canadian regulation. As a condition for entry, Canadian authorities restricted such branches to wholesale business, preventing them from holding deposits less than $150,000. To date, six foreign banks use branches for doing business in Canada.
Foreign branches can provide only a limited market for the businesses that merging banks will need to divest themselves of. Although branches could become bases for acquiring credit card transactions, the $150,000 floor on their deposit business would prevent them from dealing with many small businesses and providing banking services for consumers. While divestment to foreign bank subsidiaries would avoid those problems, so far foreign banks other than HSBC have shown little interest in expanding their branch networks.
Options with the Status Quo [Latin, The existing state of things at any given date.] Status quo ante bellum means the state of things before the war. The status quo to be preserved by a preliminary injunction is the last actual, peaceable, uncontested status which preceded the pending controversy.
The development of the Canadian banking system may be at an impasse im·passe
1. A road or passage having no exit; a cul-de-sac.
2. A situation that is so difficult that no progress can be made; a deadlock or a stalemate: reached an impasse in the negotiations. . If policymakers allow mergers to move forward without other changes, they will direct Canadian banking down Bay Street -- internationally competitive, but perhaps lacking adequate competition in markets for the services Canadians will need. If they do not allow the mergers to move forward, they will have opted, possibly by default, for Main Street -- meeting domestic needs but too small to compete internationally. Exploring the consequences of each option may help to clarify the choice. If neither option is attractive, policymakers need to search for other routes.
Following the Bay Street route would mean allowing mergers among Canada's largest banks to proceed despite concerns over their competitive impact in domestic banking markets. Canada could follow this route by waiving the competition review for bank mergers, as was done for the airlines, or by lowering the standards to be applied. (12) Such a choice has precedents in countries similar to Canada in terms of their openness and small population base.
Both the Netherlands and Switzerland permitted mergers among their major banks; both are now home to some of the world's largest banks. Yet the parallels with Canada are not perfect. Both countries had numerous local institutions that served consumer needs. In addition, much of the size of their banks was based on international rather than domestic business. Both of the two largest Swiss banks, Union Bank of Switzerland and Credit Suisse The Credit Suisse Group (SWX:CSGN, NYSE: CS) is a financial services company, headquartered in Zürich, Switzerland. It is the second-largest Swiss bank, behind UBS AG. , have more than 70 percent of their assets overseas, while ABN-AMRO, the largest Dutch bank, has 60 percent of its assets overseas. The major Canadian banks all hold less than 50 percent of their assets internationally.
The idea behind for the Bay Street view seems pretty clear: Canada risks losing its internationally competitive banks. Many believe that the trends in world banking mean that size will be critical to global banks, and size can be achieved only through mergers. They believe that the failure of Canadian banks to keep up will confine them to being regional banks at best. This relative decline of Canadian banks would have substantial consequences for the Canadian economy through reducing the opportunities for Canadians to participate as employees and shareholders of local firms with global presences.
The Bay Street route gains credibility from the information and communications revolution that appears to be transforming world banking and finance. Many consumers have already adopted telephone and internet banking, reducing their dependence on local branches. The cast of competitors for local markets is beginning to extend to institutions without a physical presence. The existence of specialized firms and other competitors may alleviate Alleviate
To make something easier to be endured.
Mentioned in: Kinesiology, Applied the concerns about lack of competition in some banking markets. Yet technology has not swept away all concerns about competition. ING Bank and Citizen's Bank -- Canada's exclusively telephone and Internet banks -- account for only 0.3 percent of banking assets, and all the big five banks still maintain extensive branch networks for serving their customers. (13) It still may be premature to expect technology to answer all the concerns about the loss of competition.
The Bay Street route faces a number of risks. Evolving communication and information technology may already have left Canadian banks behind in a race in which five to ten megabanks may have come to dominate world banking, and in which even mergers will fail to create internationally competitive banks. Japan's banks clearly demonstrate that size is not all that matters; its banks, which have dominated world banking tables, are now being restructured in an effort to bring the country's ailing banking system back to health. Larger banks pose problems for regulators. They raise the stakes, and when they go bad they reduce the regulator's options.
Easing the standards for the banking sector under competition law may produce undesirable side effects Side effects
Effects of a proposed project on other parts of the firm. for the banks themselves. Most relevant is the threat of a political backlash to mergers. Canadians already appear to distrust banks and bankers and may object to greater concentration. Like the situation in the airline industry, in which the "rescue" of a fragile competitor created little goodwill, the dilution Dilution
A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities.
Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of competition rules in the banking industry would be interpreted more clearly as driven by the corporate strategies of the banks themselves. In response, policymakers may hobble hobble
leather straps fastened around the pasterns of horses, mules and donkeys. Placed on all four legs and pulled together by a rope, it provides an effective means of casting the horse. large banks with more sweeping government intrusion in their business. A real danger for the banks from such a step would be a movement toward greater public scrutiny and direct regulatory intervention A procedure used in a lawsuit by which the court allows a third person who was not originally a party to the suit to become a party, by joining with either the plaintiff or the defendant. into their business. Banks may find that branch closings will require approval, offerings of small business loans will be mandated, and service charges will be regulated. (14) Though such measures will be costly to the banks and the economy as a whole, bank bashing bash
v. bashed, bash·ing, bash·es
1. To strike with a heavy, crushing blow: The thug bashed the hood of the car with a sledgehammer.
2. is in style and may win the day.
To follow the Main Street route would be to continue the freeze on bank mergers at the expense of banks' hopes for the larger size they feel they need to make them competitive on the world stage. Canada could follow this route by maintaining the unwritten "big shall not buy big" policy, or -- maintaining the spirit of that policy -- by not giving proposed mergers a chance by halting halt·ing
1. Hesitant or wavering: a halting voice.
2. Imperfect; defective: halting verse.
3. Limping; lame. the merger process without considering possible remedies for the problems of competition.
The case for the Main Street route may be strengthened because there is no balance of evidence indicating that size is critical for a bank's success. Disagreement persists even among the banking community. Some bankers believe that their banks must be big to prosper; as a result, they pursue mergers. Others disagree; they choose the strategy of developing specialized areas of expertise. Still, the massive scale of recent investments in information technology may be shifting the balance. Many believe that the size needed to support such investments may be creating a global banking market dominated by 15 to 20 megabanks.
Continuing along Main Street would leave Canada in limited company. Major mergers have been taking place in Japan and the United States, and within and across the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the
European Community countries. Australia stands out in resisting the trend toward fewer and larger banks.
The Main Street route also faces risks. If Canadian banks are unable to support the scale of investment required to keep up with emerging banking technology, denying mergers may only briefly support efficient service to domestic markets. As Canadian banks fall short of best banking practices in the longer run, Canadian consumers and businesses may find their banking needs poorly served.
Are There Side Alleys Off Main Street?
Is the Main Street route for Canadian banks as bleak The bleak is a small pelagic fish of the Cyprinid family. Description
The body of the bleak is elongated and flat. The head is pointed and the relatively small mouth is turned upwards. The anal fin is long and has 18 to 23 fin rays. The lateral line is complete. as described above? Could the banks not find ways other than mergers to gain the size they need? Main Street certainly does not rule out other strategies, such as internal growth, alliances with other international banks, or mergers or takeovers of non-Canadian banks. All of these represent possible growth paths, but all have shortcomings A shortcoming is a character flaw.
Shortcomings may also be:
Internal growth may appear, at least in concept, to be an alternative to domestic mergers. The recent experience of the world's largest banks presented in Table 3 suggests, however, that they have relied significantly on mergers to increase their asset size. Stiroh and Poole reinforce the importance of mergers in US banking, finding that "the increased concentration of banking assets among the largest bank holding companies in the 1990s reflects the steady stream of mergers and acquisitions that so dramatically changed these firms," and that "internal growth was not an important part of the strategies of the largest [bank holding companies]" (2000, 5). Although internal growth may appear to offer banks an escape from their fate under Main Street, it may in practice be nothing more than a faint faint (fant) syncope.
An abrupt, usually brief loss of consciousness; an attack of syncope.
Extremely weak; threatened with syncope. hope.
Strategic alliances might allow Canadian banks to become part of a larger group with the size needed to compete in international banking activities. An important element of any such alliance must be a commitment by all partners to make the alliance work. Without such commitments, partners would be unwilling to commit resources to the alliance, fearing that other members would fail to do the same or would even withdraw. One way of strengthening such a commitment would be through the exchange of shares. If the share exchange were significant, each partner would share to some degree in the success of the other, and thus both would be more willing to commit themselves to their joint endeavors.
Up to now, Canadian banks have not been appealing partners in such alliances because the 10 percent ceiling to any party's interest in their ownership limited their ability to make significant share exchanges. This limitation has become less restrictive with the proposed relaxation re·lax·a·tion
1. The act of relaxing or the state of being relaxed.
2. Refreshment of body or mind.
3. A loosening or slackening.
4. The lengthening of inactive muscle or muscle fibers. of the ownership restrictions in Bill C-8. By allowing a single party's ownership to rise to 20 percent, the new rule offers scope for significant share exchanges between Canadian banks and prospective alliance partners.
Alliances, like internal growth, offer banks a possible side alley alley
an area in a cow barn identified by its particular purpose such as a loafing alley, a walking alley or feeding alley. out of Main Street's traffic clogs. But, like internal growth, alliances may show more promise than practicality. Alliances have not been significant forces in international banking. Moreover, domestic experience with them casts doubts on their prospects for international success. One study of alliances, for example, concludes that they "are frequently subject to high instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability.
detrusor instability , poor performance and premature dissolution Act or process of dissolving; termination; winding up. In this sense it is frequently used in the phrase dissolution of a partnership.
The dissolution of a contract is its Rescission by the parties themselves or by a court that nullifies its binding force and reinstates each " (Parkhe 1993, 301, quoted in Santomero and Eckles 2000, 17).
Takeovers and Mergers
The possibility of direct ownership links through mergers with or takeovers of foreign banks may be another strategy for banks to gain the size necessary to be internationally competitive. These approaches, however, also have their practical limitations.
Canadian banks have already used the takeover strategy. BMO expanded into the United States through the takeover of Harris Bank some 20 years ago, and the Royal has just recently acquired several US banks. This strategy is severely constrained, however, by the scale of the target banks that Canadian banks can take over and digest. While the Royal's most recent takeover of two US banks may have extended its entry into the US market, the targets themselves were medium-sized banks with regionally concentrated business.
Mergers present a different set of problems. The offspring off·spring
1. The progeny or descendants of a person, animal, or plant considered as a group.
2. A child of particular parentage. of a merger between a Canadian bank and a foreign bank must meet stringent conditions -- it must essentially conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?"
coordinate - be co-ordinated; "These activities coordinate well" the requirements for a Canadian bank -- to continue operating in Canada. Although these requirements may not absolutely rule out such a merger, they may be unacceptable to the owners of the potential merger target or to its home country regulators. (15)
The Prospects on Other Paths
Advocates of Main Street can correctly point out that choosing it rules out only mergers among large Canadian banks, leaving other possible paths by which Canadian banks might grow. Such a statement needs to be tempered by recognition that the other paths present difficulties as strategies for growth. Though Main Street does not absolutely rule out banks' further growth, it does close off the tested strategy of domestic mergers for attaining greater size.
A Possible Escape
Neither domestic nor foreign competition appears sufficient under current conditions to overcome the competition concerns raised by the mergers of major banks. Thus, before committing themselves to either Bay Street or Main Street, policymakers should search for other options. This paper proposes a third route -- the use of reciprocal entry agreements (16) -- which could permit foreign banks to supply more effectively the competitive force that mergers between Canadian banks threaten to lose. We might call this third option "Reciprocity Road."
Foreign banks today face obstacles arising from the restrictions under which they can enter and operate in the Canadian market. Their subsidiaries are hampered by the costly corporate trappings of a stand-alone subsidiary, with its separate management and dedicated capital. Moreover, the minimum deposit requirements limit them in serving retail consumer and small business markets, the areas of greatest competitive concern.
These restrictions are justified by the primary objective of prudential regulation: protection of small depositors. The subsidiary option places any retail operations in Canada under the oversight of the Canadian regulator regulator,
n the mechanical part of a gas delivery system that controls gas pressure that allows a manageable flow of drug vapor to escape.
see reducing valve. , on the same footing as domestic banks. The branch option provides business opportunities in Canada in areas where prudential concerns are less significant. Any alternative allowing greater entry into retail deposit-taking should be subject to comparable oversight as exists for domestic banks.
Reciprocity Road -- that is, encouraging reciprocal entry agreements with other countries -- could provide a way out of this conflict. Such agreements would allow each party's banks to offer full banking services through branches in the other's banking markets. The agreements could take various forms. At one extreme would be a full regulatory union of the sort binding the banking markets in the European Union. Another alternative would be less formal, bilateral bilateral /bi·lat·er·al/ (-lat´er-al) having two sides, or pertaining to both sides.
1. Having or formed of two sides; two-sided.
2. agreements or even a unilateral unilateral /uni·lat·er·al/ (-lat´er-al) affecting only one side.
On, having, or confined to only one side. declaration of terms for entry into Canadian banking.
Following this road could substantially expand the scope for foreign banking activities in Canada. It would overcome the current problems of the limited powers of foreign branches and the need for foreign banks to establish subsidiaries to engage in retail banking. In effect, foreign banks would be able to conduct a full range of banking activities in Canada. Such an agreement would widen wid·en
tr. & intr.v. wid·ened, wid·en·ing, wid·ens
To make or become wide or wider.
widen·er n. the group of buyers for any divestitures that might be required of Canadian banks intending to merge.
This route would raise a host of questions. Under reciprocal agreements Reciprocal agreement is an agreement between two U.S. states to allow members of the Bar association from each state to practice in the other. Thus, lawyers who wish to practice in two states do not have to take the bar examination in both states. , who would regulate a bank's activities across national boundaries -- home or foreign authorities? Would banks' activities in foreign countries be subject to double regulation? Or would they slip through the cracks, with no regulation at all? Are differences in regulation across countries so great that regulators could never agree on a common set of rules? Is the devil in the details so that such agreements, however appealing in principle, would never work in practice? We need to consider these questions.
The Single Banking Market: Mutual Recognition at Work
The most challenging of the questions posed above seems to be the last one: Can reciprocal agreements work in practice? If they cannot, why waste any effort in considering them? Fortunately, such an agreement already exists in the European Union's single banking market that now spans all of Western Europe Western Europe
The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , an area with a population and gross domestic product (GDP GDP (guanosine diphosphate): see guanine. ) comparable to that of the United States. Many of the answers about the practicality of reciprocal agreements in banking can be found in the workings of the single banking market.
At the heart of the European Union's single banking market lies the principle of "mutual recognition." (17) This principle requires host countries to allow banks from other members to carry on "banking" activities in their domestic banking markets under home country rules, subject to the regulation and supervision of home country authorities. The directive also delineates the activities subject to mutual recognition by defining banking as the activities shown in Box 1. A host country in the European Union, for example, must allow other members' banks to carry out the permitted activity of leasing regardless of its own domestic rules. On the other hand, a host country is not bound to permit foreign banks to sell auto insurance in their branches, even though they may be allowed to in their home markets.
One danger inherent in mutual recognition is the possibility that members may try to give their national banks a competitive advantage elsewhere in the European Union through setting lax LAX - LAnguage eXample.
A toy language used to illustrate compiler design.
["Compiler Construction", W.M. Waite et al, Springer 1984]. prudential standards. By doing so, they would allow their banks to operate subject to less onerous on·er·ous
1. Troublesome or oppressive; burdensome. See Synonyms at burdensome.
2. Law Entailing obligations that exceed advantages. requirements than their competition. The risks and dangers of a lighter approach to regulation would be shifted to customers and regulators elsewhere in the union who would bear the costs of an institution's failure.
The European Union overcame the costs of such a race to the bottom in safety and soundness by, first, limiting the scope of mutual recognition to defined "banking" activities; second, establishing minimum capital requirements Capital requirements
Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. that apply across the entire market; and, third, placing responsibility with home country authorities for the insurance coverage of deposits collected in foreign markets.
Through the Second Banking Directive's definition of banking activities, the European Union achieved a delicate balance. On the one hand, it avoided the risk of giving member countries a carte blanche CARTE BLANCHE. The signature of an individual or more, on a while. paper, with a sufficient space left above it to write a note or other writing.
2. In the course of business, it not unfrequently occurs that for the sake of convenience, signatures in blank are to favor their banks throughout the market by adopting a broad definition of permitted activities. At the same time, it encouraged competition by spurring member countries to allow their banks to participate in more banking activities in order to prevent their being at a competitive disadvantage, especially in their home market.
The European Union's framework also deals with the danger of loose prudential standards by setting minimum standards in key areas. In particular, a series of directives established minimum standards for member countries with respect to the definition of bank capital ("Directive on the Own Funds of Credit Institutions"), capital adequacy ("Directive on a Solvency Ratio Solvency Ratio
One of many ratios used to gauge a company's ability to meet long-term obligations.
Derived by taking a company's net worth and dividing by total assets.
See also: Asset, Asset Valuation, Balance Sheet, Fundamental Analysis, Income Statement for Credit Institutions"), and large credit exposures ("Directive on the Monitoring and Control of Large Exposures of Credit Institutions"). The two capital directives follow the practice of most industrialized in·dus·tri·al·ize
v. in·dus·tri·al·ized, in·dus·tri·al·iz·ing, in·dus·tri·al·iz·es
1. To develop industry in (a country or society, for example).
2. countries, including Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. , by following the international capital standards set by the so-called Basel Committee of the Bank for International Settlements.
The final element of the single banking market consists of its deposit insurance arrangements. Here the European Union faced a thorny thorn·y
adj. thorn·i·er, thorn·i·est
1. Full of or covered with thorns.
3. Painfully controversial; vexatious: a thorny situation; thorny issues. problem. Before the single banking market, each member country had developed its own deposit insurance arrangements to suit its domestic needs. Later, some form of deposit insurance coverage became necessary to protect customers of institutions operating outside their home market. Without it, institutions would have found it difficult to compete in other countries' retail markets. The host country, however, would have found it difficult to insure Insure can mean:
This regulatory union in banking now offers EU citizens several benefits. It removes significant obstacles to new sources of competition in national markets and has the potential to ease the conflict between domestic competition and size. It also expands the opportunities for its members' banking institutions by freeing entry into other members' markets.
Options for Canada
If the EU regulatory union eased the conflicts facing European policymakers, how might Canada gain the same benefits? There are many possible ways. The most comprehensive approach would be to expand the financial market provisions of the North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. (NAFTA NAFTA
in full North American Free Trade Agreement
Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's ) into a true single banking market. A simpler approach would be for Canada to act alone, making a unilateral declaration that it will give mutual recognition under reciprocal agreements to banks from any countries that meet standards for prudential regulation, supervision, and depositor protection.
A North American North American
named after North America.
North American blastomycosis
see North American blastomycosis.
North American cattle tick
see boophilusannulatus. Banking Market
To pursue the first approach -- a North American banking market or regulatory union -- Canada would have to overcome some hurdles.
The hurdles should not be exaggerated; a base for such a union already exists in the NAFTA. Nevertheless, when the Canada-US Free Trade Agreement and then the NAFTA were negotiated, an economic union in banking services was clearly a non-starter non-starter
a term used to describe young chickens and turkeys that fail to begin normal food consumption. Mainly due to management conditions, but viral infections and contaminated drinking water can have similar results. . At that time, the Canadian and US banking frameworks differed sharply, making mutual recognition infeasible. Canadian banks could operate across the entire country, through branch networks, while US banks were confined con·fine
v. con·fined, con·fin·ing, con·fines
1. To keep within bounds; restrict: Please confine your remarks to the issues at hand. See Synonyms at limit. to their home region and, in some cases, to their home state. Canadian banks had just gained entry into the securities business, while the Glass-Steagall Act The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162), was passed by
Congress in 1933 and prohibits commercial banks from engaging in the investment business. still barred US banks from most securities activities. Settling on home country rules in banking would have given Canadian institutions a strong advantage in the United States that would have been unacceptable to US banks. In turn, Canadian banks would have objected to host country rules because they would have gained very limited powers in the United States for opening up their entire home market to US competitors. (18)
Now conditions in the United States have changed dramatically. The Gramm-Leach-Bliley Act The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition of 1999 allowed banks into both the insurance and securities industries, and the Riegle-Neal Act of 1994 earlier had removed restrictions on interstate in·ter·state
Involving, existing between, or connecting two or more states.
One of a system of highways extending between the major cities of the 48 contiguous United States.
Noun 1. banking, allowing major US banks to become national in scope. With this convergence, the obstacles to a single banking market between Canada and the United States are now more those of desire and determination than practicality. The most difficult step for Canadian authorities will be to capture the interest of the United States, which has much less at stake.
The pursuit of a North American banking market may not, however, provide a timely enough solution for Canada's banking problems. The timetable for strengthening foreign competition in Canadian banking markets is very short because Canadian banks may feel an urgency to bulk up, hence the allure of the Bay Street route. At the same time, customers, together with the competition authorities, may resist mergers among the big five banks unless they see clear evidence of viable competition; Main Street might seem to offer that safety. The third option -- Reciprocity Road -- would speed the process by letting Canada simply go it alone, inviting other countries to join in bilateral agreements for reciprocal entry into each other's banking markets.
Such a step may appear drastic at first, putting the interest of Canadian depositors at stake. That need not be the case, however, if the process follows principles similar to those that guided the formation of the EU banking market. To ensure that it does, the declaration of any such bilateral agreement should include four elements:
* Agreement to allow the other country's (that is, the home country's) banks to offer the same services through its branches in Canada as are offered by Canadian banks;
* government commitment from the home country's authorities guaranteeing that deposits in Canada will be covered by deposit insurance that meets minimum standards;
* commitment by both countries to capital standards compatible with the Basel Accord Basel Accord
Agreement concluded among country representatives in 1988 in Switzerland to develop standardized risk-based capital requirements for banks across countries. ; and
* commitment that reciprocal privileges will be granted to Canadian bank branches in the other country.
Such conditions are consistent with the intent to stimulate competition from foreign banks while protecting Canadian banking customers. The first two elements are the most important.
First, defining the powers of new entrants in terms of host country rules substantially simplifies the situation by avoiding the protracted pro·tract
tr.v. pro·tract·ed, pro·tract·ing, pro·tracts
1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations.
2. negotiations involved in an issue-by-issue approach. Such an approach might appear unbalanced if Canadian banks gained fewer powers abroad than foreign banks gained here, but the rough convergence of the US and Canadian systems reduces these concerns vis-a-vis the United States. The broad definition of banking powers under the Second Banking Directive also means that there should be few concerns over imbalance imbalance /im·bal·ance/ (im-bal´ans)
1. lack of balance, such as between two opposing muscles or between electrolytes in the body.
2. dysequilibrium (2). with countries in the European Union.
Second, a minimum standard for deposit insurance provisions avoids the danger that Canadian depositors would be overexposed o·ver·ex·pose
tr.v. o·ver·ex·posed, o·ver·ex·pos·ing, o·ver·ex·pos·es
1. To expose too long or too much: Don't overexpose the children to television.
2. to the regulatory standards and actions of authorities in the banks' home countries, or that Canadian authorities would be responsible for the oversight of branches over which they have neither sufficient information nor enforcement power to control. The condition ensures that the liability for depositor protection is placed with the party responsible for and able to act with respect to the safety and soundness of these banks. The deposit insurance condition also means that host countries need worry less about the quality of the other party's regulation once they obtain a binding commitment from the other to cover any losses to their depositors. Such an assurance substantially expedites the negotiations, and it also expands the range of potential partners to include countries with lower prudential standards than Canada's.
The third and fourth elements are not strictly necessary to foster greater competition in Canadian markets. The capital requirement adds to the force of responsibilities for losses to foreign depositors to prevent a regulatory race to the bottom. The reciprocal entry requirement provides greater business opportunities for Canadian banks in foreign markets.
The options for Canadian banking under the status quo are unappealing. Unless new competitors can overcome the possible dampening effects of mergers, Canada may have to sacrifice either the prospect of robust, internationally competitive banks or vigorous domestic competition. In this Commentary, I have proposed removing one of the remaining barriers to foreign competitors in Canada by establishing reciprocal agreements with other countries, allowing them into retail banking markets through branches.
Like pushing on a string, however, this "Reciprocity Road" proposal permits but does not assure new competition. Time is not on the side of Canadian banks and Canadians. Banking is restructuring worldwide and may soon be unrecognizable.
What can Canadians expect if Canada does adopt reciprocal agreements, with their principle of mutual recognition? Foreign banks will not likely rush to build their presence. The difficulties of starting a branch network, though eased slightly, will still be there. But adopting a policy of mutual recognition will be worthwhile if it expands the range of potential buyers when the time comes Adv. 1. when the time comes - at the appropriate time; "we'll get to this question in due course"
in due course, in due season, in due time, in good time for divestments arising from future mergers. Mutual recognition would allow foreign banks to acquire the basis for retail branch networks and integrate them into their worldwide operations. By doing so it would loosen the gridlock Gridlock
A government, business or institution's inability to function at a normal level due either to complex or conflicting procedures within the administrative framework or to impending change in the business. that now constricts the future of Canadian banking.
Even without the assurance of its success, Canada should push forward the principle of mutual recognition now. It needs to be in effect when merger proposals come forward. At little cost, Reciprocity Road might be a better choice than either Main Street or Bay Street.
But what if we open this road and no one decides to come? This question alone may be significant. Some suggest that foreign banks show little interest in entering Canadian markets because they are already well served. Some argue that Canadian banking markets are already competitive enough and that the standards applied to bank mergers are just too high. But we can never be sure as long as legal barriers to potential entrants remain. Back-of-the envelope estimates of the costs of such barriers are no substitute for their removal if we really want to find out whether they are real. If, with these changes, we still find few potential buyers for the divested parts of merged banks, we may need to reconsider re·con·sid·er
v. re·con·sid·ered, re·con·sid·er·ing, re·con·sid·ers
1. To consider again, especially with intent to alter or modify a previous decision.
2. the competition standards we apply to our markets for banking services.
Frank Zappa, in one of his frequent philosophical moments, is alleged to have said: "You can't be a Real Country unless you have a beer and an airline -- it helps if you have some kind of a football team, or some nuclear weapons, but at the very least you need a beer." (19) Frank was close, but he underestimated the national concern with banks. A recent public opinion poll commissioned by the Task Force on the Future of the Canadian Financial Services Sector (the MacKay task force) suggests that Canadians feel more passionately about the national ownership of banks than about the ownership of airlines, the oil and gas industry, or telecommunications companies See telecom company. (Ekos 1998, 51).
Airlines and football preview what we may expect if policymakers follow either of the roads on the present path. If mergers proceed without concern for domestic competition (Bay Street), Canadians may face a replay of our airline debacle. Canada could become the home of national champions competing in the global banking world, but at the expense of Canadian consumers and businesses. If mergers are not allowed (Main Street), banking will follow the path of Canadian football Canadian football: see under football. , leaving us a watered-down product kept alive by a quota quota
In international trade, a government-imposed limit on the quantity of goods and services that may be exported or imported over a specified period of time. Quotas are more effective than tariffs in restricting trade, since they limit the availability of goods rather of imports. All the while, we will keep looking over our shoulders at the happenings in the big league.
Maybe such gloomy gloom·y
adj. gloom·i·er, gloom·i·est
1. Partially or totally dark, especially dismal and dreary: a damp, gloomy day.
2. fates can be avoided, but neither of the two paths available now will ensure it. To preserve a healthy banking system, Canada may need to make strenuous stren·u·ous
1. Requiring great effort, energy, or exertion: a strenuous task.
2. Vigorously active; energetic or zealous. efforts to open it up in practicable practicable adj. when something can be done or performed. ways. This paper suggests one possible way -- establishing reciprocal agreements with other countries.
Box 1: Banking Activities Permitted in the European Union * Deposit taking and other forms of borrowing. * Lending (including consumer credit, mortgage credit, factoring, invoice discounting, and trade finance). * Financial leasing. * Providing money transmission services. * Providing payments services, including credit cards, electronic funds transfer, point of sale, travelers cheques, and bank drafts. * Providing guarantees and commitments. * Trading on their own account or for customers in money market instruments, foreign exchange, financial futures and options, exchange and interest rate instruments, and securities. * Participating in share issues and providing services related to such issues (for shares, bonds, and other securities), including corporate advice and arranging mergers and acquisitions. * Money brokering. * Offering portfolio management and advice. * Safekeeping securities. * Offering credit reference services. * Offering safe-custody services. Source: Murphy 2000. Table 1: Ranking of Major World and Canadian Banks, 1995 By Tier 1 Capital (a) (rank) (US$ billions) 1 Sanwa Bank 22.6 2 Dai-Ichi Kangyo Bank 22.4 3 Fuji Bank 22.2 4 Sumitomo Bank 22.0 5 Sakura Bank 21.4 6 Mitsubishi Bank 19.8 7 HSBC 18.0 8 Credit Agricole 17.3 9 Citicorp 17.2 10 Union Bank of Switzerland 16.2 Average of top 10 world banks 19.9 51 CIBC 6.0 54 Royal Bank 5.7 73 Bank of Montreal 4.5 78 Bank of Nova Scotia 4.4 83 Toronto-Dominion Bank 4.1 Average of top 5 Canadian banks 4.9 Top 5 Canadian banks as % of top 10 world banks 24.6% By Assets (rank) (US$ billions) 1 Sanwa Bank 582 2 Dai-Ichi Kangyo Bank 582 3 Fuji Bank 571 4 Sumitomo Bank 566 5 Sakura Bank 559 6 Mitsubishi Bank 548 7 Industrial Bank of Japan 433 8 Norinchukin Bank 429 9 Long-Term Credit Bank of Japan 372 10 Deutsche Bank 368 Average of top 10 world banks 501 59 Royal Bank 123 65 CIBC 106 68 Bank of Montreal 99 74 Bank of Nova Scotia 94 102 Toronto-Dominion Bank 70 Average of top 5 Canadian banks 98 Top 5 Canadian banks as % of top 10 world banks 19.6% (a) Tier 1 capital as defined by the Bank for International Settlements includes common stock, disclosed reserves, and retained earnings. Source: The Banker, July 1995, pp. 135, 181. Table 2: Ranking of Major World and Canadian Banks, 2000 By Tier 1 Capital (a) (rank) (US$ billions) 1 Citigroup 47.7 2 BankAmerica 38.2 3 HSBC 28.5 4 Bank of Tokyo / Mitsubishi Bank 26.0 5 Chase Manhattan Bank 25.5 6 Dai-Ichi Kangyo Bank 23.5 7 Credit Agricole 23.3 8 Sakura Bank 23.1 9 Fuji Bank 22.7 10 Industrial & Commercial Bank of China 21.9 Average of top 10 world banks 28.0 50 Royal Bank 8.2 53 Bank of Nova Scotia 7.8 57 CIBC 7.6 60 Toronto-Dominion Bank 7.5 63 Bank of Montreal 7.2 Average of top 5 Canadian banks 7.7 Top 5 Canadian banks as % of top 10 world banks 27.5% By Assets (rank) (US$ billions) 1 Deutsche Bank 844 2 Citibank 736 3 BNP Paribas 702 4 Bank of Tokyo / Mitsubishi Bank 678 5 Bank of America 633 6 Union Bank of Switzerland 613 7 HSBC 569 8 Fuji Bank 531 9 Sumitomo Bank 507 10 HypoVereinsbank 506 Average of top 10 world banks 632 55 Royal Bank 178 59 CIBC 163 61 Bank of Montreal 152 66 Bank of Nova Scotia 145 70 Toronto-Dominion Bank 140 Average of top 5 Canadian banks 156 Top 5 Canadian banks as % of top 10 world banks 24.7% (a) Tier 1 capital as defined by the Bank for International Settlements includes common stock, disclosed reserves, and retained earnings. Source: The Banker, July 2000, pp. 178, 214-216. Table 3: World Bank Rankings by Assets, after Transactions, 2000 Rank Assets (US$ billions) 1 Mizuho Bank 1,393 2 Sakura Bank / Sumitomo Bank 997 3 Deutsche Bank 844 4 Bank of Tokyo / Mitsubishi Bank 819 5 Citigroup 717 6 BNP Paribas 702 7 Chase Manhattan Bank 667 8 Bank of America 632 9 Union Bank of Switzerland 614 10 HSBC 569 Average of top 10 world banks 795.4 55 Royal Bank 178 59 CIBC 164 61 Bank of Montreal 52 66 Bank of Nova Scotia 145 70 Toronto-Dominion Bank 140 Average of top 5 Canadian banks 155.8 Top 5 Canadian banks as % of top 10 world banks 19.6% Rank Transactions 1 Mizuho Bank Merger of Fuji Bank, Dai-Ichi Kangyo Bank, and Industrial Bank of Japan, September 2000 2 Sakura Bank / Sumitomo Bank Merger, April 2001 3 Deutsche Bank Acquired Bankers Trust, June 1999 4 Bank of Tokyo / Mitsubishi Bank Merged, 1999 5 Citigroup Takeover of Citibank by Travelers Group, 1998 6 BNP Paribas Banque Nationale de Paris acquired Paribas, 1999 7 Chase Manhattan Bank Acquired J.P. Morgan, September 2000 8 Bank of America Merged with Nationsbank, 1998 9 Union Bank of Switzerland Merged with Swiss Bank Corp., June 1998 10 HSBC Acquired Republic New York Corp., December 1999 Average of top 10 world banks 55 Royal Bank 59 CIBC 61 Bank of Montreal 66 Bank of Nova Scotia 70 Toronto-Dominion Bank Acquired Canada Trust, 1998 Average of top 5 Canadian banks Top 5 Canadian banks as % of top 10 world banks Sources: Table 2; and The Banker, July 2000, pp. 144-145, 246.
The author is indebted in·debt·ed
Morally, socially, or legally obligated to another; beholden.
[Middle English endetted, from Old French endette, past participle of endetter, to oblige to David Bond, Jerry Goldstein Jerry Goldstein (born 23 December 1970) is a space physicist whose research has focused on the Earth's plasmasphere, a high-altitude extension of the ionized portion of the planet's upper atmosphere. , Fred Gorbet, Harry Hassanwalia, Lawrence Kryzanowski, Kari Norman, John Pattison, and Finn Poschmann, among others, for their thoughtful comments, and to Frances Emery emery: see corundum.
Granular rock consisting of a mixture of the mineral corundum (aluminum oxide, Al2O3) and iron oxides such as magnetite (Fe3O4) or hematite (Fe2O3). for her excellent editing.
(1) Throughout this paper, the term "home country" refers to the country where the bank is headquartered; the term "host country" refers to any other country where the bank has operations.
(2) Royal Bank of Canada Bank of Canada
Canada's central bank, established under the Bank of Canada Act (1934). It was founded during the Great Depression to regulate credit and currency. The Bank acts as the Canadian government's fiscal agent and has the sole right to issue paper money. , Canadian Imperial Bank of Commerce The Canadian Imperial Bank of Commerce TSX: CM NYSE: CM, better known to most customers as CIBC, is one of Canada's major banks. CIBC is classified as a Domestic Chartered Bank (Schedule I). (CIBC), Bank of Montreal “BMO” redirects here. For the mathematics competition, see British Mathematical Olympiad.
Bank of Montreal/Banque de Montréal (TSX: BMO, NYSE: BMO) is Canada's fourth largest bank, and is classified as a Domestic Chartered Bank (Schedule I). (BMO), Bank of Nova Scotia (Scotiabank), and Toronto-Dominion Bank The Toronto-Dominion Bank (TD) (TSX: TD NYSE: TD TYO: 8640 ) is a bank headquartered in Toronto, Ontario, Canada. It is one of Canada's Big Five banks, being the second largest bank in the country by assets and market capitalization. (TD).
(3) This comparison may be misleading; Canadian banks move up in the ratings whenever higher-ranked banks merge.
(4) These size comparisons are no more than a rough gauge because of differences among banking systems. Size comparisons are especially sensitive to movements in exchange rates. The comparison of 2000 with 1995, for example, captures the appreciation of the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin"
dollar - the basic monetary unit in many countries; equal to 100 cents relative to the European currencies that are now subsumed under the euro.
(5) Although some studies of large international banks are now appearing, most evidence comes from the US experience, which, while satisfying the statistician's craving craving Psychology A strong desire to consume a particular substance–eg of abuse, or food; craving is a major factor in relapse and/or continued use after withdrawal from a substance of abuse and is both imprecisely defined and difficult to measure. for large numbers of observations, has concentrated on relatively small sized-banks.
(6) The 1967 amendments to the Bank Act rejected the pro-competitive thrust of the Porter Commission in one dimension by introducing a prohibition prohibition, legal prevention of the manufacture, transportation, and sale of alcoholic beverages, the extreme of the regulatory liquor laws. The modern movement for prohibition had its main growth in the United States and developed largely as a result of the on foreign banking in Canada Banking in Canada is one of the most efficient and safest banking systems in the world. According to the Ministry of Finance, Canada’s banks, also called chartered banks .
(7) This section is based on letters from the Competition Bureau to the chairs of various Canadian chartered banks Chartered Bank
A financial institution whose primary roles are to accept and safeguard monetary deposits from individuals and organizations, and to lend money out. The details vary from country to country, but usually a chartered bank in operation has obtained government permission . See Canada 1998b; 1998c; 1998d; 2000.
(8) The Competition Bureau departed from its normal practice of negotiating remedies by stating that it would simply write its letter identifying areas of concern and would not enter any remedial REMEDIAL. That which affords a remedy; as, a remedial statute, or one which is made to supply some defects or abridge some superfluities of the common law. 1 131. Com. 86. The term remedial statute is also applied to those acts which give a new remedy. Esp. Pen. Act. 1. negotiation unless the minister of finance gave approval.
(9) Full-service brokerage is distinguished from discount brokerage A discount brokerage is a business that charges clients significantly lower fees than traditional brokerages, typically offering comparatively fewer services and/or advice. , in which trading services are offered without advice.
(10) Like many other areas of financial markets, the acquiring market also appears to be changing. First Data, a specialized acquirer from the United States, recently purchased the acquiring business of Canada Trust CT Financial Services Inc. was a financial services holding company that was founded in London, Ontario and later had its headquarters in Toronto, Ontario and operated in Canada through subsidiaries including Canada Trustco Mortgage Company and The Canada Trust Company . In addition, BMO and the Royal have formed a joint venture to provide integrated acquiring services for Visa and MasterCard, allowing merchants to deal with only one acquirer. The implication of this change is discussed below.
(11) Although the networks impose these prohibitions themselves, any move to eliminate them would likely raise competitive concerns because of common membership. Dual membership has been the source of much litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.
When a person begins a civil lawsuit, the person enters into a process called litigation. in the United States. See Evans Ev·ans , Herbert McLean 1882-1971.
American anatomist who isolated four pituitary hormones and discovered vitamin E (1922). and Schmalensee 1999, 69-70, chap (Challenge Handshake Authentication Protocol) An access control protocol for dialing into a network that provides a moderate degree of security. When the client logs onto the network, the network access server (NAS) sends the client a random value (the . 8.
(12) For an expression of this view, see Neufeld 2000.
(13) Even with the introduction of new technologies, the number of bank branches has actually increased by over 10 percent from 1990 to 2000. See Canadian Bankers Association The Canadian Bankers Association is an organization representing Canada's chartered banks and provides services to improve the wellbeing of its membership (banking lobby, policy development, research and support) and to consumers of banking services. , Fast Facts (June 13, 2000) and Bank Facts (1992).
(14) Bill C-8 has already moved in this direction. Notice, though not approval, will be required for branch closure. The federal government also gains the authority to regulate the provision of low-cost accounts Low-cost accounts are accounts with monthly fees of no more than C$4.00, offered in Canada. Low-cost accounts came about as a result of an agreement between the Canadian federal government and the banking sector. . It expressed the hope that the banks would provide such accounts voluntarily, without the need for regulation.
(15) Many countries that lack Canada's limits on bank ownership do have review procedures for ownership changes through which their banking authorities could reject a merger if they viewed the loss of a significant national bank unfavorably.
(16) The ability to use reciprocal entry agreements would build on the recent measures that permit foreign banks to operate branches in Canada on a restricted basis.
(17) The principle of mutual recognition is embodied em·bod·y
tr.v. em·bod·ied, em·bod·y·ing, em·bod·ies
1. To give a bodily form to; incarnate.
2. To represent in bodily or material form: in the governing gov·ern
v. gov·erned, gov·ern·ing, gov·erns
1. To make and administer the public policy and affairs of; exercise sovereign authority in.
2. framework of the European Union's Second Banking Directive of 1989. That document established the framework for developing a common market in banking services.
(18) Canadian consumers and businesses would, of course, benefit from opening up by either approach. There is much evidence suggesting that banking reform in both countries typically involves a balancing of different industry interests.
(19) Outdoor concert, Jones Beach, NY, circa circa
prep. Abbr. ca
In approximately; about. 1984. From Internet web site www.science.uva.nl/~robert /zappa/quote; accessed April 24, 2001.
Canada. 1998a. Industry Canada Industry Canada is the department of the Government of Canada with responsibility for regional economic development, investment, and innovation/research and development. The department employs 6104 FTEs across Canada. . Competition Bureau. "The Merger Enforcement Guidelines as Applied to a Bank Merger." Ottawa. July 14.
--. 1998b. Industry Canada. Competition Bureau. "Letter to the Chairmen of Royal Bank of Canada and the Bank of Montreal." Ottawa. December 11.
--. 1998c. Industry Canada. Competition Bureau. "Letter to the Chairmen of the Canadian Imperial Bank of Commerce and the Toronto-Dominion Bank." Ottawa. December 1.
--. 2000. Industry Canada. Competition Bureau. "Letter to the Chairmen of the Toronto Dominion-Bank and Canada Trust." Ottawa. January 28.
Canadian Bankers Association. 2000. Fast Facts June 13.
--. 1992. Bank Facts.
Ekos Research Associates EKOS Research Associates Inc. is a Canadian public opinion research company. They specialize in market research, public opinion research and strategic communications advice, program evaluation and performance measurement and human resources and organizational research. Limited. 1998. Public Opinion Research Relating to relating to relate prep → concernant
relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Financial Services Sector. Research paper prepared for the Task Force on the Future of the Canadian Financial Services Sector. September.
Evans, David S., and Richard Schmalensee. 1999. Paying with Plastic. Cambridge, Mass.: MIT MIT - Massachusetts Institute of Technology Press.
Murphy, Neil B. 2000. "European Union Financial Developments: The Single Market, the Single Currency; and Banking." FDIC FDIC
See: Federal Deposit Insurance Corporation
See Federal Deposit Insurance Corporation (FDIC). Banking Review 13 (1): 1-18.
Neufeld, Edward. 2000. "Ottawa's plan for the decline of Canadian banks." National Post. April 18, p. C19.
Parkhe, A. 1993. "Partner Nationality nationality, in political theory, the quality of belonging to a nation, in the sense of a group united by various strong ties. Among the usual ties are membership in the same general community, common customs, culture, tradition, history, and language. and Structure-Performance Relationship in Strategic Alliances." Organizational Services 4 (2): 301-334.
Santomero, Anthony M., and David L. Eckles. 2000. "The Determinants of Success in the New Financial Services Environment: Now That Firms Can Do Everything, What Should They Do and Why Should Regulators Care?" Economic Policy Review (Federal Reserve Bank of New York The Bank of New York, abbrieviated to BNY, was a global financial services company that existed until its merger with the Mellon Financial Corporation on July 2, 2007. The bank now continues under the new name of The Bank of New York Mellon Corporation. ) 6 (6): 11-23.
Stiroh, Kevin, and Jennifer P. Poole. 2000. "Explaining the Rising Concentration of Banking Assets in the 1990s: Current Issues in Economics and Finance (Federal Reserve Bank of New York) 6 (9).