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Flaherty calls for reforms in Canadian financial services sector

Duncan Mavin

Monday, April 28, 2008

TORONTO - Finance Minister Jim Flaherty on Monday called for a series of reforms to close gaps in Canada's financial services regulations that were exposed by the non-bank asset-backed commercial paper crisis.

Speaking to reporters after a meeting with the country's top bankers in Toronto, Flaherty said he wants a common securities regulator, better financial disclosure by the banks and greater clarity for investors about financial products.

"I want to make sure we regulate in the best interests of Canadians and Canadian investors," Flaherty said. "There will be none of the gaps in our regulations that leave us vulnerable to being sold products without being informed what the product is. Regrettably there was some of that in Canada."

The minister's regular meeting with bank chief executives had taken on special significance because of the ongoing global financial crisis - "a continuing struggle," according to Flaherty - as well as the specific non-bank ABCP issue in Canada.

Flaherty said the Canadian banks are well capitalized and he also noted that the Canadian financial services system has avoided the worst pitfalls that have beset banks elsewhere especially in the U.S.

He said Canada's economic fundamentals remain strong but warned that the country "cannot take these advantages for granted."

In particular, he has received a commitment from the Canadian banks to implement new disclsosure rules within 100 days, and he has asked a financial review panel to draft legislation toward a common securities regulator for Canada.

His calls for some moderate reform appeared to have the backing of the banking industry.

"We're working together," said Bank of Nova Scotia chief executive Rick Waugh as he hurried out of the meeting. "That's what makes the strength of the Canadian system."

The biggest challenge to the federal finance minister's proposed reforms is likely to come from the provincial securities regulators. But Flaherty, who has long been a proponent of a common securities regulator, appears to be pursuing his agenda with extra vigour in light of the global financial issues.

"At the end of the day, when Canadian investors are concerned about securities, they come to Ottawa," he said. During the $32-billion ABCP crisis, which appears to be headed for a protracted private sector solution, investors were seeking advice from the finance ministry and the federal bank regulator. But under the current system, the primary responsibility for dealing with their concerns actually lay with the provincial securities regulator, he said.

Financial Post

Canwest News Service 2008

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