Bank Mergers Necessary: Investment Managers
Money managers also recommend deregulating financial services market, according to survey
Release Date: 14 July 1998
VANCOUVER, BC>>> An overwhelming majority (87 percent) of Canada's senior investment managers, with over $125 billion in total assets under management, either strongly agree, agree or somewhat agree that consolidation in the Canadian financial sector is necessary if Canada is to retain its position as a global leader in financial services, according to the Fraser Institute's Survey of Senior Investment Managers (Summer 1998).
Strong support for deregulating the financial services market
Eighty-five percent of respondents either strongly agree, agree or somewhat agree that the federal government should move to deregulate the financial services market by allowing both greater foreign entry and domestic consolidation. Only 12 percent oppose the concept of accelerated de-regulation, three percent somewhat disagree, and nine percent strongly disagree. "The message from the senior money managers appears to be clear: allow the bank mergers to proceed and introduce competition into the financial services sector," said Fazil Mihlar, Director of Regulatory Studies at the Fraser Institute.
Ninety-one percent of respondents predict, with varying degrees of certainty, that the current trend of consolidation in the financial services sector will continue over the next six months.
Twenty percent foreign content rule: Not necessary for financial stability
The most striking results of this survey relate to the foreign content restrictions on tax-deductible retirement savings. Ninety-one percent of senior investment managers surveyed indicate that the 20 percent foreign content restriction is not an important or desirable policy for financial stability. The remaining nine percent support the restrictions, believing it promotes financial stability.
Strong opposition to foreign content restrictions is confirmed by the 69 percent of respondents that support the complete elimination of these restrictions. Twenty-four percent indicate they support the Senate Finance Committee's recommendation that the foreign content restriction be raised to 30 percent. Six percent support an increase in the foreign content restriction so that it lies somewhere between the 30 percent recommended by the Senate but less than a complete elimination. None of the respondents support a decrease in the foreign content restriction. "These results suggest that it is perhaps time for Ottawa to re-visit the foreign content rules. Moreover, if the restriction is eased, Canadians will be better able to diversify their retirement investment portfolios," noted Mr. Mihlar.
Privatize Canada Deposit Insurance Corporation
The investment managers also indicate some specific priority areas for deregulation and privatization. Eighty-eight percent of respondents either strongly agree, agree, or somewhat agree that the Canadian Deposit Insurance Corporation should be reviewed with a view towards greater privatization. Only 6 percent of respondents oppose such a review process.
Most important issue facing Ottawa: High taxes
Seventy-five percent of the respondents indicate that Canada's high level of taxation is the most important issue facing the federal government. This represents an increase of 11 percent from the survey taken three months ago, when investment managers also indicated taxation was the most important issue.
Separation of Quebec: Unlikely
Eighty-one percent of the managers surveyed felt it somewhat unlikely, unlikely or very unlikely that Quebec will separate within the next five years. This is a significant turnaround from the previous survey in which 59 percent of respondents thought that Quebec separation was probable.
Continued High Approval Rating for Finance Minister Martin
Eighty-eight percent of the responding investment managers rate the federal minister of finance as either doing a very good or good job in the finance portfolio.
Continued High Approval Rating for the Bank of Canada
Ninety-four percent of respondents state that the Bank of Canada is doing an excellent, very good, or good job in its conduct of monetary policy.
Foreign exposure seen as the greatest threat to Canadian financial stability
According to the investment managers polled, foreign rather than domestic shocks pose the greatest threat to Canadian financial markets: 47 percent of respondents feel that it is U.S. financial market instability, 34 percent believe that it is the Asian economic slowdown, while just 6 percent feel that it is a rise in Canada's inflation rate.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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