Bank mergers, insofar as policy … I guess … I would say, are, well, ahhh … dead

T R A N S C R I P T From the question-and-answer session during Prime Minister Paul Martin’s appearance before the Economics Club of New York last week.

Question Prime Minister, let me begin by saying that I can think of no greater testimony to friendship between our two countries than your willingness to speak so frankly and candidly tonight to us. It really illustrates how fortunate we are to have Canada as our neighbour.

My first question relates to the financial services industry. A number of countries are advocating the creation of national champions in key industries such as financial services, but this has also led to a converse concern about reciprocity.

With that in mind, I wanted to ask you about the prospect for change in three Canadian positions relating to the financial services industry. The first is the statutory restriction on acquisitions of more than a certain percentage of voting stock in Canadian banks. The second is the government’s apparent policy against mergers among the five big banks, and the third is what is perceived to be the government’s policy against mergers between the big five banks and the insurers. Martin Well, this is … All three issues are being looked at by parliamentary committees so … and it’s quite conceivable that change … change could occur. I would not see a change in the … in the voting restrictions, which essentially says that nobody can hold more than 20% of a Canadian bank and the reason for that is pretty … is pretty straightforward. Unlike the United States, where I think you have some 9,000 banks, we have five very big banks and then we have … we do have a beginning of a … of a second- tier system, but it’s very small compared to yours.

As far as the bank mergers are concerned, you are probably aware that I was the finance minister who stopped this the last time, which is why you asked the question! [Laughter]

The minister, the minister of finance, the current minister of finance, has said … has put out a paper asking for Parliament to debate the issue. The position that I took was that, in fact, mergers could take place as long as that there was a parliamentary committee which approved them but that it … they could not take place unless one could assure that there would be not a reduction in competition. If that were to occur, then Parliament might well look at it, but right now that has been put on hold.

And in terms of banks and insurance companies coming together, right now certainly our position would be against cross-pillar mergers. We have a number of very, very successful insurance companies who are doing very well and … I’m not sure that public policy would benefit from, in fact, a merger between an insurance company and a large bank in Canada at the present time.