A panel appointed by the federal government to assess Canada’s international competitiveness recommends that the ban on bank mergers be dropped, but that the “widely-held” rule be retained. The Competition Policy Review Panel released its final report today.

In the report, the panel recommends that, “The Minister of Finance should remove the de facto prohibition on bank, insurance and cross-pillar mergers of large financial institutions subject to regulatory safeguards, enforced and administered by the Office of the Superintendent of Financial Institutions and the Competition Bureau.”

However, it says that the widely-held rule, which applies to banks with equity of over $8 billion and demutualized insurance companies with equity over $5 billion at the time of demutualization and restricts any person from holding more than 20% of the voting shares or 30% of the non-voting shares, should be retained.

“Canada has the potential for comparative advantage in financial services, which could be further exploited internationally. At the same time, allowing greater international competition as well as more competition between bank and non-bank lending institutions would benefit both the financial services sector and the public interest in competitive and efficient markets,” it says, adding that limits to both scale andcompetition can be problematic.

The panel also calls on the federal government to improve securities regulation, saying, “The federal government should show leadership regarding national securities regulation and resolve this matter expeditiously.”

The panel, chaired by former BCE executive Lynton Wilson, includes these recommendations in its final report, which puts forward a series of policy recommendations aimed at making Canada a more attractive destination for talent, investment and innovation.

“The panel believes that Canada needs to be more open to competition, as competition spurs the productivity enhancements that underpin our economic performance and ultimately our quality of life,” says Wilson. “With our Competitiveness Agenda we hope to seize the attention of Canadians from all walks of life, to develop a more competitive mindset in Canada, and to create the conditions in Canada for global economic success.”

The report makes a number of specific policy recommendations to the federal government, and also calls for action by other levels of government, the business community, post-secondary educational institutions and individual Canadians to make Canada more competitive in the context of economic globalization.

Specific policy recommendations to the federal government include:

  • amending the Investment Canada Act to reduce barriers to foreign investment by increasing review thresholds; reversing the onus to require the government to demonstrate that an investment would be contrary to the national interest before disallowing a transaction; increasing transparency and predictability; and preserving a distinct approach for the cultural sector while also initiating a broad review of Canada’s cultural policies;
  • liberalizing investment restrictions in the Canadian air transport, uranium mining, and telecommunications and broadcasting sectors, and removing the de facto ban on mergers in the financial services sector;
  • updating and modernizing the Competition Act in line with best practices internationally; and
  • creating a Canadian Competitiveness Council to give voice to and advocate for competition in Canada, and ensure sustained attention by governments on national competitiveness.

The panel also identifies a number of broad public policy priorities bearing on Canada’s competitiveness, and makes recommendations for action in these areas, including: taxation; regulation; innovation; international trade; and, strengthening the role of directors in mergers and acquisitions.

“One of our key findings is that Canada needs to get its act together as a nation,” says Wilson. “As governments, as businesses and as individuals we need to work better together and collaborate more effectively in the service of our national competitiveness. Competition is global, and the pace of economic activity will continue to accelerate. We must ensure that our policies and our mindset reflect global realities, and our national interest.”