Financial Post, Pail Vieira and Wojtek Dabrowski, 14 January 2006
Ottawa, Toronto - A Conservative government would deny chartered banks the right to sell many types of insurance directly to customers in their branches, the Stephen Harper-led party said yesterday.
The revelation, contained in a one-sentence statement in the party's official platform, could represent a major setback for the banks should the Conservatives emerge as victors following the Jan. 23 vote. Opinion polls are indicating as much with 10 days to go, with the only question being whether the Conservatives win a minority or majority.
The banks had fought for years for these specific changes to the Bank Act regarding insurance. "We're disappointed," said an official at one of the Big Five banks. "There's no economic rationale and obviously consumers are better served when they've got more access to products, which if you're retailing through branches, you would."
The major banks had put a lot of hope in federal legislators changing the laws, as indicated in an interview Gordon Nixon, chief executive of Royal Bank of Canada, gave last month to the Financial Post.
He said Royal Bank believed changes should be made to the Bank Act when it comes up for review this year. "And the one that we've been pushing the hardest on ... is the ability to distribute insurance products through our bank-branch network."
The banks have been permitted to buy insurance operations since 1992 and have been doing so aggressively. But Canada remains one of the few industrialized countries that imposes restrictions on direct insurance sales by banks through their branches. The banks' hopes seem dashed if the Conservatives, as expected, form the government.
A spokeswoman for the Canadian Bankers Association said it expects the government to review the Bank Act, as Ottawa is obligated to do, and the banking group will table its position at that time.
Banks have been frustrated for years with Ottawa, most notably on failing to permit bank mergers, or at least provide rules on possible mergers. An Ottawa source close to the banks said banking officials are not convinced a Conservative government would behave any differently than the Liberals.
However, Conservative finance critic Monte Solberg told the Reuters News Agency yesterday that a Conservative government is indeed ready to consider mergers among banks and set up a clear vetting process to consider proposals.
The Conservative position on in-bank insurance sales had come as no surprise to some observers. A letter dated Dec. 16 to the Insurance Brokers Association of Canada (IBAC), states that Mr. Solberg "has always taken the position that we oppose banks retailing insurance through their branches. "Given the upcoming Bank Act Review we have recently received many questions from your brokers to clarify our policy on this. Be assured that our position remains exactly the same."
Despite Mr. Solberg's assurances, Ottawa sources say lobbyists for insurance brokers pressed the Conservative party to announce its opposition to in-branch insurance retailing.
In a statement, Dan Danyluk, IBAC's president, applauded the Conservative party's move, saying allowing bank-branch insurance sales would "quash healthy competition" by giving banks an unfair advantage over other players.
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Ottawa, Toronto - A Conservative government would deny chartered banks the right to sell many types of insurance directly to customers in their branches, the Stephen Harper-led party said yesterday.
The revelation, contained in a one-sentence statement in the party's official platform, could represent a major setback for the banks should the Conservatives emerge as victors following the Jan. 23 vote. Opinion polls are indicating as much with 10 days to go, with the only question being whether the Conservatives win a minority or majority.
The banks had fought for years for these specific changes to the Bank Act regarding insurance. "We're disappointed," said an official at one of the Big Five banks. "There's no economic rationale and obviously consumers are better served when they've got more access to products, which if you're retailing through branches, you would."
The major banks had put a lot of hope in federal legislators changing the laws, as indicated in an interview Gordon Nixon, chief executive of Royal Bank of Canada, gave last month to the Financial Post.
He said Royal Bank believed changes should be made to the Bank Act when it comes up for review this year. "And the one that we've been pushing the hardest on ... is the ability to distribute insurance products through our bank-branch network."
The banks have been permitted to buy insurance operations since 1992 and have been doing so aggressively. But Canada remains one of the few industrialized countries that imposes restrictions on direct insurance sales by banks through their branches. The banks' hopes seem dashed if the Conservatives, as expected, form the government.
A spokeswoman for the Canadian Bankers Association said it expects the government to review the Bank Act, as Ottawa is obligated to do, and the banking group will table its position at that time.
Banks have been frustrated for years with Ottawa, most notably on failing to permit bank mergers, or at least provide rules on possible mergers. An Ottawa source close to the banks said banking officials are not convinced a Conservative government would behave any differently than the Liberals.
However, Conservative finance critic Monte Solberg told the Reuters News Agency yesterday that a Conservative government is indeed ready to consider mergers among banks and set up a clear vetting process to consider proposals.
The Conservative position on in-bank insurance sales had come as no surprise to some observers. A letter dated Dec. 16 to the Insurance Brokers Association of Canada (IBAC), states that Mr. Solberg "has always taken the position that we oppose banks retailing insurance through their branches. "Given the upcoming Bank Act Review we have recently received many questions from your brokers to clarify our policy on this. Be assured that our position remains exactly the same."
Despite Mr. Solberg's assurances, Ottawa sources say lobbyists for insurance brokers pressed the Conservative party to announce its opposition to in-branch insurance retailing.
In a statement, Dan Danyluk, IBAC's president, applauded the Conservative party's move, saying allowing bank-branch insurance sales would "quash healthy competition" by giving banks an unfair advantage over other players.
