By Promit Mukherjee and David Ljunggren
OTTAWA, Oct 9 (Reuters) – The Bank of Canada on Thursday warned against imposing more regulations on the financial sector, instead urging measures to encourage competition and innovation that it said could help offset U.S. tariffs.
“As the world heads into a period of greater economic nationalism and more industrial policy, we need to resist the urge to add protections,” senior deputy governor Carolyn Rogers said in Toronto.
Greater contestability, more new entrants and more innovation in the financial sector would lead to competition that was good for consumers, for productivity and for our economy, she said, adding: “We should lean into it.”
Rogers has consistently stressed the need to improve Canada’s sluggish productivity, arguing this would help insulate the economy against the threat of inflation.
Canada’s banking sector is highly concentrated, with just six banks collectively holding 93% of all banking assets.
Many argue that this level of concentration has clear negative impacts on productivity, innovation, capital allocation, cost and consumer choice, Rogers added.
The financial sector is an area where productivity gains could propagate throughout the economy, Rogers said, highlighting the need for boosting innovation and competition.
“It’s a sector where policy-makers should regularly ask themselves if we’ve got the level of competition right,” she said, noting what she called “reasonable calls for reflection” as to whether regulations were too tight.
Rogers said the need for productivity had become even more important after U.S. President Donald Trump imposed a series of tariffs that shook the Canadian economy.
Canada’s labor productivity has been negative for six out of the last eight quarters with wholesale trade, utilities and manufacturing posting significant declines in the second quarter, primarily due to the impact of Trump’s tariffs.
“Higher productivity won’t make Canada immune to U.S. trade policy, but it would help buffer the effects,” Rogers said.
Her speech last year sparked discussions amongst company executives, economists, analysts and others about Canada’s poor productivity, which they said was hurting its competitiveness against other G7 allies.
Rogers said recent initiatives such as real-time payments and open banking were steps in the right direction.
“They are both close to implementation, but each needs a final push to get across the finish line,” she said.
((Reuters Ottawa bureau))
Keywords: CANADA CENBANK/
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