Source: The Canadian Press

The CEO of Sun Life Financial Inc. (TSX:SLF) opposes planned new global bank taxes many countries are considering to crack down on the financial sector after the Wall Street crisis helped spark the recession.

Don Stewart told shareholders at the insurer’s annual meeting Wednesday that proposed new international financial regulations could unduly punish already well regulated Canadian financial companies.

“It would indeed be ironic if Canada, a country which came through the financial crisis better than most, was to find itself at a disadvantage on account of new international rules originating from outside our country,” Stewart said, adding his voice to mounting opposition at home ahead of international economic summits hosted by Canada next month.

Regulators in Europe, the United States and other parts of the world want to tax big banks and impose stricter lending and trading rules to prevent future bank collapses that might trigger another financial crisis.

They argue that cracking down on risky market practices will also cushion countries and consumers from economic turmoil and volatile stock markets.

In a related issue, Stewart said that while Canada’s financial institutions remained relatively healthy during the 2008-2009 recession and stock market fall, many Canadians saw a steep drop in the value of their retirement investments, which brought a crisis in Canada’s pension system into sharp focus.

“With an aging population, if this problem isn’t addressed, individuals and families will experience real hardship in future as more people outlive their retirement savings, said Stewart.

Sun Life (TSX:SLF), a life and health insurer, wealth manager and retirement benefits provider which operates around the world and has 16,500 employees, has been pushing for an expanded national corporate pension system to help workers save for retirement.

On the bank tax, a variety of proposals could have a negative impact on the Canadian financial services industry, Stewart said, joining his counterparts from TD Bank (TSX:TD), Royal Bank (TSX:RY) and Power Financial (TSX:PWF), as well as the federal government, in opposing the moves.

Prime Minister Stephen Harper has been adamant in his stance against a tax on banks that would be used to rescue failing banks. The European Union and International Monetary Fund say the proposal would reduce the chances of a major banking collapse in future.

Ottawa, which will host summits of G8 and G20 leaders next month, has argued that an international bank tax would punish Canadian banks despite their solid performance during the financial crisis of the last couple of years.

While Sun Life would not directly be affected by the bank tax, “it’s hard to see how it’s favourable for Canada,” Stewart said.

He said Canada’s existing regulations are admired in the global regulatory and financial service communities.

“I think the financial crisis has put the Canadian financial institutions in a very strong place vis-a-vis the other international financial institutions,” he said.

“All the questions coming my way… are ‘what are the secrets behind the success of Canadian financial institutions?,’ as opposed to any form of a criticism,” he said.

Stewart said Sun Life is working with policy-makers and regulators to address the prospective challenges from new international regulations, including phasing in the second stage of the new international financial reporting standards.

He said Canadian life insurers, who already operate under a strong disclosure system, would face challenges in adopting the new standards, which he says impact the calculation of liabilities on balance sheets and make the bottom line appear more volatile.

“The Canadian regime has been running close to two decades and its a very stable and a very integrated regime.”

He added that there will be growing pressure on health care and other government services as the ratio retirees to workers increases.

“When you have a situation where benefits could be available today and the payments stretch out a hundred years, you need to worry about intergenerational equity and fairness to future Canadians,” he said.

Sun Life, Canada’s third-largest life insurer, has already proposed its own solution to the pension problem–that would require employers to offer a defined contribution or group RRSP plan, unless they specifically opt out.

By setting up defined contribution plans, which are less costly than the traditional defined benefit plans that are now under intense financial pressure because they guarantee future benefits, more Canadian companies might be encouraged to agree to such pension systems.