As part of our federal election coverage, Investment Executive explores the positions of the major federal political parties on the top issues affecting the financial services industry.

Here we look at where the parties stand in the unending debate on bank mergers:

The three major federal parties are leaning in different directions on the issue of possible mergers involving Canada’s Big Six chartered banks: the Liberals are still straddling the fence, the Conservatives appear to be cautiously supportive and the New Democratic Party is against.

However, the issue, bubbling since 1998 when then-minister of finance Paul Martin nixed two merger proposals, is firmly on the backburner in this campaign. Political integrity, gun violence and tax reduction are among issues that have seized centre stage in this contest.

The Liberal party says that potential mergers, and the wider matter of Canadians’ access to banking services, are important, but it hasn’t yet made a policy decision.

“In the past year, the political atmosphere has not been conducive to a productive dialogue that would lead to a sound policy decision,” says a Liberal party spokesperson.

The prime minister said in early January that a Liberal government would revisit the issue after the election, but remained steadfastly non-committal on whether his party supports or opposes mergers.

Several pieces of federal financial services legislation, including the Bank Act, will come under mandatory review in 2006, with any changes having to come into force by October. The Liberals suggest that any policy movement on mergers might be tied to those reviews.

“Until then, the minister of finance will accept submissions from stakeholders regarding bank mergers and all other aspects of financial regulation,” the spokesperson says. “Financial sector regulation will never be completely divorced from politics, but the minister has indicated that to ensure as productive a process as possible, politicization must be minimized.”

Meanwhile, the Conservative party says it is concerned that the Liberals’ delay in releasing “a clear statement on merger policy … is impeding necessary change from occurring in the financial services industry.”

According to a spokesperson, the Conservatives believe that “the competitive position of Canada’s Schedule I banks is not as strong as it once was,” in part because of the emergence of Internet-based financial services.

The Conservatives say they will work to clarify the federal position on the issue, making sure that competitive balance is protected and that the ability of consumers and businesses to access capital is not compromised if mergers are allowed.

“We support certain restrictions on mergers and will respond to any moves in the marketplace by first testing the impact on competition and consumers’ interest,” says the spokesperson, adding that the Conservatives expect credit unions and caisses populaires to step into rural and underserved markets in the event of a merger involving the Big Six banks.

“Mergers should only be allowed if there is a plan to guarantee that employees and branches are picked up by other financial institutions,” the spokesperson says.

As for the NDP, the party is concerned that Canada’s chartered banks have become unresponsive to the needs of individual consumers, small businesses and communities, and feels that this overshadows the merger issue.

“The NDP remains to be convinced of the merits of bank mergers and continues to find merger proposals wanting in their ability to demonstrate their benefit to the public,” said NDP finance critic Judy Wasylycia-Leis in an open letter the minister of finance last August.

A party spokesperson says that the letter represents the NDP’s current stand on mergers — a position that hasn’t changed since 1998, when the NDP came to the conclusion that the proposed mergers would lead to a deterioration in access to services and a rise in costs.

Instead, the NDP would like to see changes in the financial services landscape including laws mandating that banks reinvest in communities, improve transparency, not abandon poor or rural communities, lower credit card rates, allow small businesses to access capital, regulate the payday loan company sector, and protect banking jobs.

“If these issues were satisfactorily addressed and a fundamental shift in the landscape of Canada’s banking and financial system became evident … [it] would provide a basis for the reconsideration of our bank merger policy,” says the NDP finance critic.