TORONTO (Reuters) - Canadian banks are pushing the federal government for a broad review of the financial sector in the hope of gaining the right to sell insurance in their branches and to provide leases to car buyers.
The recommendations to knock down regulatory hurdles is in the run-up to a regular five-year review of Canada’s Bank Act that the government’s finance department will conduct in 2012.
Finance Minister Jim Flaherty has said the coming review will deal with fine-tuning the current framework, rather than looking at sweeping changes.
But Canada’s banks hope to keep the long-standing issue of insurance reform on the radar, and they think the recent turmoil in the auto industry might help persuade the government to give them access to the leasing business.
“A number of the auto lessors either pulled out of the market or significantly retrenched and pulled back (during the recent crisis),” said Terry Campbell, vice-president of policy at the Canadian Bankers Association.
“That left consumers with fewer options, it left dealers with fewer options, and it left manufacturers with fewer options.”
He noted that the finance department began its own consultations last year to weigh whether to abolish the 29-year bank on banks providing car leasing.
Ian Lee, a professor at Ottawa’s Carleton University and a former banker, says allowing banks into auto leasing and other areas currently serviced by unregulated lenders would be good for borrowers and for the auto industry in general.
However, he doubts the government will act on the proposal.
“It’s a minority government, and this will be assuredly controversial,” he said.
Canada’s Conservative government currently needs the support of at least one other party to enact legislation, meaning it may shy away from enacting controversial reforms.
Lee also expects no movement on the long-standing ban on banks selling insurance at their branches.
With growth prospects slim in the traditional domestic branch-banking space, the big banks have been increasingly pushing into insurance, but they are forced by current rules to sell insurance in offices separate from their traditional branches.
This has led to instances in which banks have built bank branches and insurance offices next door to each other.
Opponents of allowing banks to sell insurance in their branches say that customers getting a car loan, for instance, should not be simultaneously buying insurance for that car.
Campbell acknowledged the chances are slim that the government will reconsider its position on insurance.
“We understand that the government has made their position very clear here. They’re not going to change the rules. But we wanted to be on the record,” he said.
The CBA submission makes 33 recommendations in total, including a plea for more consultation with the banking industry before regulatory changes are made, and a request to make it easier for banks to raise capital through foreign subsidiaries.
Additional reporting by John McCrank; editing by Peter Galloway