The Standing Senate Committee on Banking, Trade and Commerce recommends in favour of allowing big bank mergers in its latest report.

Coming from the senate, the report, released yesterday, doesn’t necessarily change the state of play for possible bank mergers. Still, it is certainly a step in the right direction.

The report recommends that in contemplating a merger, the Minister of Finance should first consider the likely effect of a deal on the prosperity and competitiveness of the national economy. “Moreover, the Minister should contemplate the increased choice of competitively priced financial services for all Canadians in every region of the country and for Canadian businesses, particularly small and medium-sized enterprises, that could ultimately result from such a merger.”

It recommends that the minister approve deals that have been signed off on by the Competition Bureau and the Office of the Superintendent of Financial Institutions, unless there are compelling reasons to believe otherwise. It also says that parliamentary committee review of deals is not necessary.

The report recommends that merging banks should be required to undertake a risk management analysis, and that the government should review its merger review process. It also says that the government should harmonize its merger review process with those of other countries.

And, it says that the federal government should undertake a review of barriers to entry into the financial services sector for both domestic and international competitors and take other actions — including tax changes — that would foster competition. A report should be tabled in Parliament no later than June 30 2003, it says.