Financial Services and Regulation - Op Eds

The Bank of Canada once again held its policy rate at 5 per cent on Wednesday, as expected.

After two months of disappointment, with the annual change in the Consumer Price Index ticking up in July and August, inflation resumed its descent in September, falling to 3.8 per cent from 4 per cent. That, plus weak economic numbers, made it practically certain – confirmed by the expectations of financial markets – that the central bank would hold.

The real questions concern the bank’s end point for monetary policy in the medium term and what that means for Canadians.

The bank is probably at the end of its tightening cycle. But this doesn’t mean interest rates are coming back down to where they were before…

In public policy, as in life generally, we often recognize mistakes by others more easily than we recognize mistakes we make ourselves. Italy just goofed big-time with a windfall tax on its banks, and Canadians should take notice.

Last month, the coalition government of Italian Prime Minister Giorgia Meloni announced a surtax of 40 per cent on the profits of the country’s banks. The announcement triggered a crash in bank stocks – a loss of €10-billion in a single day – and a storm of criticism from investors, economists and elected representatives, including members of the coalition.

Ms. Meloni’s government has since backtracked, capping the amount at 1 per cent of bank assets, and exempting smaller banks. But the…

Fitch’s recent downgrade of U.S. public debt, dropping it one notch below “AAA,” is good reason to examine the relationship between U.S. debt and the dollar’s future as a reserve currency. The greenback is just the latest in a series of preferred currencies that have been used for foreign exchange reserves and to denominate other assets. But reserve currencies, unlike diamonds, aren’t necessarily forever, and that affects their issuers’ capacity to manage their public debt.

The British pound was the world’s reserve currency in the 19th and early 20th centuries, with a typical exchange rate a century ago of around US$5, vs. US$1.25 per pound today. The pound faded after 1945 because of Britain’s massive war debts, the…

Our national “productivity gap” has spurred analyses, reports and media articles for decades. While public debate in Canada has focused on productivity improvement for more than 50 years, we have made limited progress. Fresh thinking is required.

While innovation through research and development (R&D) is certainly important to productivity growth – and has preoccupied the federal government over the past half-century – there is also a connection between firm size and productivity. The larger the firm, the more productive it typically is. Logically, then – and the research supports this proposition – one way to increase our productivity is to increase the size of our companies from small and medium to large. Something we have…

It has been 15 years since the $100,000 deposit insurance limit for eligible deposits at the Big Six banks and a host of other smaller federally-regulated deposit-taking institutions came into force. Inflation since then suggests the time has come to raise it. But we may want to think about other changes, too.

Canada has a fragmented deposit insurance system. In addition to the federal system managed by the Canada Deposit Insurance Corp.(CDIC), deposits of provincially incorporated institutions, like most credit unions and caisses populaires, are backed by their respective provincial deposit insurance corporations. Coverage limits in those systems range from $100,000 in Quebec to full coverage in the four western…