"In appointing the panel, the federal government took a big step forward in recognizing the importance of competitiveness for the Canadian economy. We now hope it will take the next step and use this report as a guide for its future policy development," said Ms. Hughes Anthony. "With exports accounting for over one-third of our GDP, we need to make sure that Canadian companies can expand internationally and that we can attract jobs and investment to Canada."

Widely Held Rule and Large Bank and Cross-Pillar Mergers

The report recommended that the "widely held" rule for large financial institutions should be retained because it ensures sound governance. This promotes financial sector stability and soundness. The report also recognized the importance of scale for achieving competitiveness. Consequently it recommended that the Minister of Finance should remove the de facto prohibition on bank, insurance and cross-pillar mergers of large financial institutions and subject such mergers only to OSFI and Competition Bureau regulatory safeguards.

Canada's banks have successfully adopted a range of growth strategies over the years while this merger prohibition has been in effect. Nevertheless, as the financial sector around the world has been going through substantial restructuring and consolidation, Canada's financial institutions have not had access to similar options.

"While there is a range of opinions amongst our members on both the widely held rule and large bank and cross-pillar mergers, we told the Panel that it was important to address these issues because domestic structural policies have implications for the international competitiveness of Canadian financial institutions," said Ms. Hughes Anthony. "It is now up to the government to decide what to do with the Panel's recommendations and we look forward to contributing to that discussion."

The banking industry also appreciates the fact that the Panel recognized the high degree of competition that exists in financial markets. "Having a clear and accurate view of competition is key to the development of good public policy," said Ms Hughes Anthony.

Taxation

The CBA also commended the Panel for its recognition that tax policy makes an important contribution to competitiveness, and for recommending the reduction in corporate tax rates and personal income tax rates and the elimination of provincial capital taxes.

"This is excellent news on the tax policy front. Canada competes on a global stage, and both capital and labour are highly mobile," said Ms. Hughes Anthony. "Canada must create tax advantages that encourage business growth, productivity and innovation which will translate into success and prosperity in our own economy."

National Securities Regulation

The banking industry also agreed with the Panel voicing a need for a streamlined regulatory approach to national securities regulation and that this matter needs to be resolved expeditiously.

"Our current system of 13 securities regulators with 13 sets of regulations imposes unnecessary costs and disincentives on small- and medium-sized businesses and of entrepreneurs and businesses seeking capital to grow and create jobs," said Ms. Hughes Anthony. "It can also hamper effective investor protection measures and means that there is no unified voice for Canada on the international stage. This must change."

"Having a banking sector that is highly competitive internationally provides significant benefits to communities throughout Canada," added Ms. Hughes Anthony. "Thirty-four per cent of bank profits now come from foreign activities, but 78 per cent of the jobs and 85 per cent of the taxes are paid here in Canada."

The CBA's January 2008 submission to the Competition Policy Review Panel can be found at the following link: www.cba.ca/en/viewdocument.asp?fl=4&sl=382&tl=&docid=808

The Canadian Bankers Association works on behalf of 51 domestic chartered banks, foreign bank subsidiaries and foreign bank branches operating in Canada and their 257,000 employees to advocate for efficient and effective public policies governing banks and to promote an understanding of the banking industry and its importance to Canadians and the Canadian economy.