All of Canada’s biggest six banks – Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and National Bank of Canada – are registered to lobby federally.Fred Lum/The Globe and Mail
Some of the Conservative government's biggest banking-sector proposals will go unfulfilled this spring, creating an opportunity for banks to regroup and lobby the government on key promises over the summer and into the fall.
Big-ticket banking-policy measures – including commitments for a "bail-in" regime for systemically important banks and for a comprehensive financial consumer code – were left out of the Tories' budget implementation bill introduced in Parliament this month.
That's creating uncertainty for a multibillion-dollar industry about when and how the changes may arrive as the Conservatives and the opposition parties, about even in the polls, head into an election scheduled for Oct. 19. At the same time, it buys time for the banks to lobby the government for tweaks to a number of proposals.
"It gives all parts of the economy that are affected additional opportunities to make representations to government and work to make sure that the policy that comes out at the other end is both sound and practical," said Scott Thurlow, a lawyer and independent government relations consultant who has worked with financial-sector clients.
What are the issues?
Finance Minister Joe Oliver proposed new "bail-in" rules last year under the international Basel III framework, which came about after bank failures and bailouts as part of the 2008 financial crisis.
No Canadian banks required bailouts and Canada's system is regarded as strong internationally. Still, the Conservative government's proposal would prevent taxpayers from being asked to bail out the country's banks in the event of the rescue of a systemically important bank. It would require bank investors, including bondholders and shareholders, to absorb losses before public funds are used for a bailout.
The policy is complex and several details need to be worked out, including which Canadian banks may be considered systemically important, said Stephen Clark, a banking lawyer and chair of the financial services practice at Osler, Hoskin & Harcourt LLP in Toronto.
"If you have that debate, and you decide that bank X is and bank Y isn't, there's a cost, then, to that bank," Mr. Clark said. "You're dealing with the entire international community as they all move towards standardization for capital and there's a lot of moving pieces."
Parallel to the bail-in policy discussions, banking lobbyists have been following Canada Deposit Insurance Corp.'s review of its deposit insurance limit, currently at $100,000.
On the tax front, the Canadian Bankers Association, representing banks operating in Canada, including the biggest six, has said it looks forward to participating in government consultation on plans to remove tax benefits from derivatives called "synthetic equity arrangements."
The government estimates that it will recoup $365-million starting in 2016-17 and $1.24-billion over four years from the tax measure, one of the biggest announced in the 2015 budget plan, with the revenues coming mostly from Canada's largest banks.
The government is also working to wrap up a comprehensive financial consumer code, a populist plan that the Conservatives can add to their "consumers first" campaign pledges. The proposal involves amendments to the Bank Act and new rules for banks' dealings with consumers, including clearer information and new cancellation and complaints processes.
Who's affected?
All of Canada's biggest six banks – Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and National Bank of Canada – are registered to lobby federally with their own in-house staff. Other financial institutions, such as credit unions and credit-card companies, are also registered.
Several banks have retained consulting firms, such as Earnscliffe Strategy Group to lobby for CIBC, Public Affairs Advisors for Visa, Lorimer Public Affairs for BMO and Prospectus Associates for Bank of Nova Scotia, according to the lobbyist registry.
Consumer groups are also lobbying for tougher consumer banking measures.
"I think the banks are more comfortable with the present rules than any changes to the rules," said John Lawford, head of the Public Interest Advocacy Centre. "The longer they can put this off, the better for them."
The biggest challenge?
Any outstanding legislative measures may be introduced in a second budget bill, an approach the Conservative government has taken in previous years. The problem for the banks is the uncertainty created between now and the finalization of policies.
"Who can predict the outcome of an election?" said Don Moors, a lobbyist and senior vice-president at Temple Scott Associates in Ottawa, who has some financial-sector clients. "Obviously, they just have to wait for the outcome and then make assessments on that basis."
Mr. Moors said a second budget implementation bill will depend on the outcome of the election, although if the Conservatives are re-elected, a bill could be introduced before the end of the year.
Canadian Bankers Association spokesman Robin Walsh said via e-mail that "the timing of the introduction of the legislation is up to the government."
What's next?
While cabinet ministers are busy in unofficial campaign mode this summer, departments and agencies will continue their work and can issue regulations outside the official campaign period.
Over the summer, and in the fall while Mr. Oliver is knocking on doors, lobbyists will continue to talk to senior officials in key departments as well as within the Office of the Superintendent of Financial Institutions and Canada Deposit Insurance Corp.