Canadian Banking Industry Regulatory Environment Paper.
The process of deregulation coupled with the advancements in technology has largely
contributed to the transformation of the banking industry across the globe. In today’s world,
banks are considered industrial powerhouses that have the capability to revolutionize simple
transactions such as deposits and withdrawals. At the same time, the ever-changing banking
industry is characterized by new innovations that make it more complex and secure in terms of
risk management and enhancement of application systems. The common denominator with most
banks is that they provide credit or loan facilities to clients at a given cost or percentage. Canadian Banking Industry Regulatory Environment Paper.
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However, differences exist in terms of the regulatory environment, power of stakeholders as well
as the lending rates. This paper is an essay that analyzes the banking sector and the environment
in Canada, with specific attention being paid to the industry regulations and any inherent
conflicts among stakeholders.
a) The Regulatory Environment of the Banking Industry in Canada
Canada is one of the countries that basks in the glory of having the most efficient and
advanced systems of monetary regulation across the world. The level of safety and proficiency in
these financial institutions is maintained and kept stable by an organization that is created by the
Canadian government (Anand & Green, 2012). The superintendent’s office that deals with
financial institutions is commonly known as OSFI and its main aim is to oversee baking
activities. OSFI usually officiates its functions within the jurisdiction of the acts of parliament
that require it to monitor and regulate the flow of money in Canadian banks (Mrejen, 2013).
What’s more, this organization is empowered by the government to regulate deposits and
withdrawals of over two hundred banks in this country. The type of banks can range from
foreign, local, domestic or regional banks. At the same time, OSFI also regulates and monitors the financial activities of other lending institutions such as co-operative unions, loan companies
and even trust firms. Canadian Banking Industry Regulatory Environment Paper.
The activities and obligations of OSFI are harnessed and shared by the consumer agency
of Canada. The role of this subsidiary organization is to supervise the various banks and financial
bodies to make sure that they comply and adhere to the codes and rules stipulated by law
(Banking regulation, 2015). At the same time, the consumer agency of Canada also educates
consumers on their rights and privileges when it comes to borrowing or saving money. OSFI is
the main body that is mandated with the task of regulation and supervision of all financial
activities in Canada (Banking regulation, 2015). One of the reasons for this is because it was
created through and act of parliament in the late 1980’s. This creation gave this body the power
to report to the Canadian parliament on any breach of law that pertains to bank operations.
b) Analysis and Influence of Banking Regulations in Canada to Stakeholders
This process of banking regulation in Canada is mainly executed by a number of
important stakeholders within the ministry of finance. These stakeholders include the trustees,
boards of directors, managers and the executive members who are mostly employees of either
former of current banks within Canada (Banking regulation, 2015). These patrons are important
because they are responsible for either the failure of success of any banking institution or
financial organization that operates under the Canadian government. Canadian Banking Industry Regulatory Environment Paper. At the same time, these
people are concerned with the day-to-day operations of most banks. They monitor the cash flow
in terms of deposits, sales revenue, credit facilities, withdrawals and even any loans offered to
customers (Canadian Banking Association, 2015).
It is also the duty of the executives, trustees and managers overseeing banks in Canada to
make sure that the lending process and rates of banks are regulated. This is very important because it has a direct effect on the value of the country’s currency as well as its ratings on the
global financial market. Moreover, trustees and managers also ensure that the lending rates for
loans and credit facilities are constantly reviewed so that they do not inflate the country’s
economy and its overall stability (Lévy et al., 2014). Apart from the official executives and
managers, the stakeholders in all Canadian banks and financial firms can also be the loyal
clients, customers, employees, the shareholders, union members, the general public and also any
other regulatory bodies and forms of authority. Canadian Banking Industry Regulatory Environment Paper.
The respective body that oversees the needs of consumers in Canadian banks ensures that
their priorities are put first in the sense that their needs are satisfied with regards to the financial
services that they seek (Bordo et al., 2015). This always ensures that banks are able to offer
quality services to clients by frequently and constantly improving their services. Alternatively,
employees are also very important to the banking sector in Canada. They are stakeholders who
provide all the vital services to the customers (Ogilvie, 2014).
Hence, regulatory bodies such as OSFI ensure that these members of staff are offered a
working environment that is friendly and at the same time dynamic. Moreover, the process of
regulation also ensures that the tasks and responsibilities of employees working in banks are
recognized through fair remuneration and appropriate reward schemes. Canadian Banking Industry Regulatory Environment Paper.
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c) Positive and Negative Impacts of Banking Regulations and Suitable
Recommendations
One of the positive impact of banking regulation that it is able to control the amount of
money that is circulated by most financial institutions. This is very important because it ensures
that there is some level of equity and stability within the banking sector. In addition, the process
of regulation ensures that the lending rates are maintained in tandem with the country’s economic activities. Secondly, regulation for banks that operate in Canada is very critical
towards maintaining the inflation levels of the economy. Canadian Banking Industry Regulatory Environment Paper. It ensures that there is not too much
money moving around the country compared to the current value of the country’s currency. The
process of controlling inflation is essential because it ensures that the citizens are not
overburdened by too high taxes and rates on services and commodities. However, banking
regulation also has its own drawbacks in the sense that the strict rules make it difficult for most
people to set up their own firms. This is why the shareholders are important stakeholders for
banks operating within the Canadian environment (Brean et al., 2011). Canadian Banking Industry Regulatory Environment Paper.
The regulation of banking activities by organizations such as OSFI and the Canadian
department of deposits ensure that these shareholders are treated in a manner that maintains
integrity, transparency as well as ethical conduct. This is very critical because shareholders are
often the main investors of most banks in Canada. In fact, they contribute a large percentage of
the money that is made available for lending as well as offering long-term savings for loyal
customers (Brean et al., 2011). Therefore, it is overly important that the regulatory bodies
operating under the arm of governance in Canada ensure that a high level of compliance is
maintained for all banks (Brean et al., 2011).
On some occasions, it is inevitable to have inherent conflicts among the regulatory bodies
and the various stakeholders. At the same time, these disagreements can occur among the
stakeholders themselves without any form of external interference. To begin with, most of the
stakeholders often end up in constant clashes because they do not approve or agree to the terms
and rules provided by the regulatory bodies in Canada. Canadian Banking Industry Regulatory Environment Paper. As a result, most of them will oppose to
their requirements and this creates tension between most parties. On other occasions, the
conflicts simply arise from the different stakeholders themselves who fail to agree on certain policies, decisions or mandates (Anand & Green, 2012). For instance, trustees, managers and
executives will often disagree when it comes to holding elections of the next fiscal year or
allocating more responsibilities to some of the members.
Likewise, shareholders can also create a hostile situation when the bank makes more
profit and they want to increase the amount of dividends so that those with many shares can
benefit immensely (Mrejen, 2013). At the same time, employees of Canadian banks are also
known to enter into serious conflicts at one time or the other. This happens if some employees
feel that they are overworked, underpaid or mistreated by the company. The existence of all
these inherent conflicts is an illustration that it is overly essential to regulate banking institutions
in Canada (Banking regulation, 2015). Apart from overseeing and supervising these bodies, the
monitoring of capital adequacy and its presence is another important function of the regulatory
bodies of Canada. Canadian Banking Industry Regulatory Environment Paper.
Capital requirement or adequacy is the amount of money that a bank should have at its
minimum level in accordance with the respective financial regulating body. This amount is often
expressed as a ratio such that it indicates the value of equity vis-à-vis the weighted risks and
liabilities (Canadian Banking Association, 2015). In Canada, capital requirement is an important
necessity that must be present for any bank to be allowed to operate. As such, regulatory bodies
like OSFI are required to ensure that banks fulfill these prerequisites so that they do not take any
excess leverage or control of its financial resources that may end up making the bank insolvent.
Moreover, this regulation is crucial because it ensures that banks do not operate through the use
of deposits or investments made by clients (Banking regulation, 2015).
Capital requirements in Canada are vital since they also determine the ratio of equity to
that of debts. This amount is often recorded on the balance sheet of the respective bank as an asset. The adherence to these rules is an important factor that can determine if a bank can be
allowed to operate or it will cease its activities in Canada. Canadian Banking Industry Regulatory Environment Paper.
Conclusion
The banking industry in Canada is one of the most celebrated in terms of its prestige and
exemplary service to its citizens. This sector forms the backbone of the country in the sense that
it deploys huge amounts of money to the public fund. At the same time, fiduciary capacity is also
enhanced through the provision of collateral-based financing. This success has been made
possible through the presence of regulatory bodies such as OSFI. The latter is a special
institution created by the government of Canada so that it can officiate all duties related to
banking. This ensures that the right amount of leverage is given to banks and other financial
institutions, so that they can positively contribute to the growth of the Canadian economy. Canadian Banking Industry Regulatory Environment Paper.
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Canadian Banking Industry Regulatory Environment Paper.