MEXICO CITY (Reuters) - The head of Bank of Nova Scotia BNS.TO suggested on Friday that Canada’s third largest bank should be exempt from tougher global regulations that will eventually be imposed on banks considered “systemically important” domestically.
Chief Executive Rick Waugh cited his company’s heavy reliance on operations outside Canada as a feature that set it apart in the handful of banks that dominate in Canada, and could make it exempt from extra regulatory scrutiny.
Leaders from the Group of 20 advanced and emerging countries have already agreed to impose a capital surcharge on the world’s biggest banks, as part of a broader regulatory push aimed at preventing global financial crises and taxpayer-funded bailouts.
Now they are turning their sights to so-called domestic SIFIs, or systemically important financial institutions, banks deemed big enough to cause harm to their country’s financial system should they run into trouble.
The Financial Stability Board, the G20’s regulatory task force, has said it would complete work on this framework by the end of this year.
Although no criteria have been set for deciding which banks would be targeted, Waugh said Canada’s big banks should not all be treated the same.
“I think we have to be very careful on that because the business models are different and that’s a healthy thing. That’s what you should want. You don’t want everybody the same because then we all become systemic,” Waugh told Reuters on the sidelines of a meeting of the International Institute of Finance in Mexico City.
Scotiabank, as the bank is commonly known, has long billed itself as Canada’s most international bank, with operations in more than 50 countries, particularly in Latin America and Asia. It has said it wants to continue to increase its foreign business, targeting assets shaken loose from banks that have been hit by the fallout of the European debt crisis.
“Every business model is different. ... Now half of our earnings are outside Canada. Another bank who is 80 percent Canada is a different model. So yes, one size does not fit all,” he said.
“We’re very unique, without international subsidiaries which are stand-alone. Other banks are in Canada and the U.S. and that is different. We’re one of the smaller Canada banks,” he said.
The other top Canadian banks are the Royal Bank of Canada RY.TO, Toronto-Dominion Bank TD.TO, Bank of Montreal BMO.TO, Canadian Imperial Bank of Commerce CM.TO and National Bank of Canada NAT.TO.
Waugh said it was too early to know how any eventual rules for domestic SIFIs would be decided or implemented.
Canada’s banks emerged from the global financial crisis in relatively good shape and none needed bailouts. But analysts believe at least some of the country’s top five or six banks are candidates as domestic SIFIs.
Waugh and other bankers who gathered in Mexico pushed back against tougher global financial regulations, arguing the uncertainty they had created in the banking sector had crimped lending and was hurting economic growth and jobs.
The FSB has also completed work on new capital and liquidity rules from 2013 for banks, known as Basel III.
Reporting By Louise Egan; Editing by Peter Cooney