Eoin Callan and Barbara Shecter, National Post; with files from Paul
Vieira in Ottawa
Thursday, October 30, 2008
The severity of the global financial
crisis has created a sudden opening for Ottawa to ram through a plan to
create a single Canadian watchdog to oversee financial markets and
replace a jealously guarded system of provincial supervision.
Prime Minister Stephen Harper will
force the issue at a meeting of premiers in Ottawa and expects to head
to Washington days later armed with a credible pledge to create a
national securities regulator, as world leaders gather for the most
ambitious economic summit since the end of the Second World War.
Prime Minister Stephen Harper
(right) talks with Finance Minister Jim Flaherty during a
meeting in Harper's office in the Langevin Block in Ottawa on
Oct. 28, 2008.
||The creation of a
central authority has been three decades in the making and is
seen as vital to bringing Canada into line with other
industrialized nations and improving Ottawa's ability to react
when the stability of the financial system is threatened.
"It seems ludicrous that others
around the world are looking to merge regulation of securities,
banking and insurance and we don't even have a single securities
regulator," said one person advising the government.
The political opening was
created in the past two weeks following urgent appeals for
federal relief from provincial ministers and financial
institutions, including Desjardins, the biggest lender in
A breakthrough came this week after face-to-face negotiations between
Finance Minister Jim Flaherty and Monique Jerome-Forget, the Finance
Minister of Quebec, the biggest stumbling block to a single regulator.
The federal Finance Minister agreed to belatedly include Desjardins in a
national plan to backstop banks, but attached conditions, according to
people familiar with the dialogue.
As part of the deal to guarantee new borrowing in international markets
by Desjardins, Quebec softened its opposition to moves toward a federal
regulator that would include a seat for each province on its governing
board, people close to the process said.
Both Ms. Jerome-Forget and Mr. Flaherty declined to comment on the
Desjardins fiercely resisted the link between its plea for a federal
backstop and government supervision, but was excluded from the talks
after officials in Ottawa indicated discomfort at underwriting billions
of potential borrowings without closer oversight of the institution's
Mr. Flaherty told a Bay Street audience Wednesday that "given the
unprecedented turmoil in international financial markets," it was "time
to move toward a single securities regulator."
The Minister said Canada faced a "new reality" after the "sudden and
dramatic" collapses on Wall Street, with each "raising the risk of
Canada's system being side-swiped."
He stressed it was important the new Canadian Securities Regulator
"reflects regional interests, yet can quickly respond with a single
voice to market developments."
Mr. Flaherty's staff are thought to have a working draft of the
legislation ready, following consultations with Washington and London
and recent cross-country hearings held by a special panel appointed by
the Minister to revive the long-dormant issue.
His comments on Bay Street on Wednesday set the stage for preliminary
negotiations between the federal Minister and his provincial
counterparts on Monday at Pearson International Airport, before he flies
to Brazil for crunch talks with finance chiefs from the Group of 20
most-industrialized nations, itself a warm-up to the leaders' meeting
Mr. Flaherty will be conspicuous in the company of G20 finance ministers
in that he will be the sole finance chief who does not have some direct
authority over securities regulation.
"The fact that one of them has no national presence makes us look like a
banana republic," said Michael Code, a lawyer who presented to the
Expert Panel on Securities Regulation that was established by Mr.
Flaherty in February.
The advisor said the current financial and economic crisis is "Exhibit
A" in the case for a national regulator because of the global nature,
and the coordinated response of governments.
Currently, the heads of the central bank and the government's finance
department have to meet with the leaders of 13 provincial and
territorial securities regulators when acting on the world stage.
This was blamed for slowing Canada's reaction to the crisis at critical
moments, including when regulators temporarily suspended the practice of
short selling, when financial speculators bet a stock will fall.
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