Finance Minister Jim Flaherty and the banks are headed for a showdown over the institutions’ desire to skirt federal rules by selling insurance on their websites.
Speaking to reporters in Washington on the weekend, Mr. Flaherty said the issue, which first emerged in October, is “still around,” even though the Harper government is intent on stopping the practice, which the Finance Department insists violates the spirit of rules that forbid the big banks from selling insurance in their branches.
“We’ve had the discussions, but I’m going to have to make clear to them what they can do on their websites,” Mr. Flaherty told reporters after attending a meeting of the committee of finance chiefs that guides the work of the International Monetary Fund. “I will be meeting with some of the bank executives within the next 10 days or so and that will be one of the subjects we’ll talk about.”
This parochial concern sprang up amid weightier issues of sovereign debt risk and the state of the world economy because of a campaign that put Mr. Flaherty in a position he rarely inhabits: squarely on the same side as the country’s financial institutions.
At a meeting of the Group of 20 finance ministers and central bank governors on Friday, Mr. Flaherty tripped up a push by Britain, Germany and France to win G20 endorsement of a levy on financial institutions to raise funds for future bailouts and curb risky behaviour.
Mr. Flaherty’s efforts drew quick praise from the Canadian Bankers Association, which isn’t usually so eager to applaud a politician who makes a point of reminding audiences that he is the “minister of finance” not the “minister of banks.”
A vocal, and lonely, critic of the bank levy proposal ahead of the meeting, Mr. Flaherty rallied emerging market powers to his side, killing whatever momentum the Europeans, with tacit support from the United States, had for a global bank tax. The G20 rejected an interim report by the IMF that recommended a levy, calling on the fund to go back to the drawing board to consider other options, including Canada’s suggestion that banks be told to sell debt that would convert to equity capital when trouble hits.
Mr. Flaherty and other Canadian officials were buoyant after their diplomatic win, demonstrating that the world’s established economic powers will have more difficulty dictating the agenda of the G20 than they did the work of the smaller Group of Seven, whose leaders ceded co-ordination of the world economy to the larger group last year. Mr. Flaherty’s aggressive stand against some of Canada’s traditional allies also reflects a new confidence on the world stage based on Canada’s relative success in weathering the financial crisis.
“It is unique for Canada to stand out so distinctly,” Tom Bernes, acting executive director of the Centre for International Governance Innovation and a former Canadian executive director at the IMF, said in an interview in Washington over the weekend.
Mr. Flaherty suggested that he bested the supporters of the bank levy by having a better understanding of the developing economies in the G20, saying he sensed there would be little enthusiasm for a tax “based on my experience with the Asian countries in particular.”
Mr. Flaherty acknowledged there was “some hesitancy to disagree so clearly” with so many of his G7 allies, but he decided that “our first duty is to our own countries.”
But it would be a mistake to think Mr. Flaherty, who has irritated financial institutions on everything from user fees at cash machines to codes of conduct on credit cards, has suddenly gone soft on the banks.
Asked whether he thought his political opponents back in Ottawa might use his alliance with Bay Street over the global levy against him, Mr. Flaherty raised the insurance issue as an example of why the banks “aren’t very happy with me.”
Nor does he seem to care.
“I don’t live in a world where I think the banks are that fond of me, nor should they be,” Mr. Flaherty said. “They’re in business to make a profit, but they have a protected public position in Canada, so they have to accept that government has a significant role to play and that role is on behalf of the Canadian people.”
Mr. Flaherty said he has personally viewed the banks’ websites, and accepts that it will be logistically difficult for them to satisfy the government’s directive to keep information about insurance policies away from their general banking pages.
He doesn’t seem to care about that, either.
“It’s not an easy thing to do,” Mr. Flaherty said. “But I think we can get there in a way that will be businesslike, that they can live with.”
Speaking to reporters in Washington on the weekend, Mr. Flaherty said the issue, which first emerged in October, is “still around,” even though the Harper government is intent on stopping the practice, which the Finance Department insists violates the spirit of rules that forbid the big banks from selling insurance in their branches.
“We’ve had the discussions, but I’m going to have to make clear to them what they can do on their websites,” Mr. Flaherty told reporters after attending a meeting of the committee of finance chiefs that guides the work of the International Monetary Fund. “I will be meeting with some of the bank executives within the next 10 days or so and that will be one of the subjects we’ll talk about.”
This parochial concern sprang up amid weightier issues of sovereign debt risk and the state of the world economy because of a campaign that put Mr. Flaherty in a position he rarely inhabits: squarely on the same side as the country’s financial institutions.
At a meeting of the Group of 20 finance ministers and central bank governors on Friday, Mr. Flaherty tripped up a push by Britain, Germany and France to win G20 endorsement of a levy on financial institutions to raise funds for future bailouts and curb risky behaviour.
Mr. Flaherty’s efforts drew quick praise from the Canadian Bankers Association, which isn’t usually so eager to applaud a politician who makes a point of reminding audiences that he is the “minister of finance” not the “minister of banks.”
A vocal, and lonely, critic of the bank levy proposal ahead of the meeting, Mr. Flaherty rallied emerging market powers to his side, killing whatever momentum the Europeans, with tacit support from the United States, had for a global bank tax. The G20 rejected an interim report by the IMF that recommended a levy, calling on the fund to go back to the drawing board to consider other options, including Canada’s suggestion that banks be told to sell debt that would convert to equity capital when trouble hits.
Mr. Flaherty and other Canadian officials were buoyant after their diplomatic win, demonstrating that the world’s established economic powers will have more difficulty dictating the agenda of the G20 than they did the work of the smaller Group of Seven, whose leaders ceded co-ordination of the world economy to the larger group last year. Mr. Flaherty’s aggressive stand against some of Canada’s traditional allies also reflects a new confidence on the world stage based on Canada’s relative success in weathering the financial crisis.
“It is unique for Canada to stand out so distinctly,” Tom Bernes, acting executive director of the Centre for International Governance Innovation and a former Canadian executive director at the IMF, said in an interview in Washington over the weekend.
Mr. Flaherty suggested that he bested the supporters of the bank levy by having a better understanding of the developing economies in the G20, saying he sensed there would be little enthusiasm for a tax “based on my experience with the Asian countries in particular.”
Mr. Flaherty acknowledged there was “some hesitancy to disagree so clearly” with so many of his G7 allies, but he decided that “our first duty is to our own countries.”
But it would be a mistake to think Mr. Flaherty, who has irritated financial institutions on everything from user fees at cash machines to codes of conduct on credit cards, has suddenly gone soft on the banks.
Asked whether he thought his political opponents back in Ottawa might use his alliance with Bay Street over the global levy against him, Mr. Flaherty raised the insurance issue as an example of why the banks “aren’t very happy with me.”
Nor does he seem to care.
“I don’t live in a world where I think the banks are that fond of me, nor should they be,” Mr. Flaherty said. “They’re in business to make a profit, but they have a protected public position in Canada, so they have to accept that government has a significant role to play and that role is on behalf of the Canadian people.”
Mr. Flaherty said he has personally viewed the banks’ websites, and accepts that it will be logistically difficult for them to satisfy the government’s directive to keep information about insurance policies away from their general banking pages.
He doesn’t seem to care about that, either.
“It’s not an easy thing to do,” Mr. Flaherty said. “But I think we can get there in a way that will be businesslike, that they can live with.”
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