Reforming the Canadian Financial Sector: Canada in Global Perspective

Jane M. Wilson is a Toronto-based chartered financial analyst in the
investment business.

This policy forum contains the papers presented at a 1996 conference
held in anticipation of the 1996/1997 federal white paper on financial
legislation. Its 15 contributors are mainly from universities, industry,
and regulatory bodies.

Some papers liberally explore the most fundamental issues pertaining to
regulatory reform. Randall Morck and Bernard Yeung trace the purpose of
regulation in balancing the property rights of investors and insiders to
the 17th century. OSFI reviews the trend to qualitative rather than
quantitative supervision. In conjunction with regulation by function
rather than by institution, John Chant proposes a complete functional
split within the banking industry. John Evans considers the practice
elsewhere of regulation by jurisdiction of incorporation; he even
heretically asks whether mergers are truly in the banks’ interest, and
takes a droll look at the banks’ new “holy grail [of] world class
size.” In one of the most scholarly essays, Maurice Levi measures the
extent of international capital market integration—a critical
determinant of regulatory effectiveness.

Other papers consider industry views and address more specific topics.
Jeffrey MacIntosh relates the 30-year war for a national securities
commission and meticulously theorizes “displacing the inertial mass”
with peremptory legal hermetics, only to conclude that such dire tactics
are unlikely. Also covered are developments in large value clearing and
settlement system risk management and the Bank of Canada’s role.

The book suffers some inevitable incoherence as a result of its often
prolix contributors. Readers might be forgiven a wry smile after
finishing Stephen Poloz’s somewhat cynical summation citing the
opportunity cost of all the study, consultation, and negotiation.
Nonetheless, the book does not understate the conundrums confronting
legislators. For them and for other involved professionals, its scrutiny
of the elemental conditions for effective regulation will be of value.