Derek Burney and Fen Hampson at IPolitics write:
Two recent developments threaten to undermine Canada’s hard-earned credibility as a prudent financial center.
The first is our apparent readiness to go along with the with ex-post facto fad of new banking regulations without due consideration being given to why such reforms are actually needed
As former Bank of Canada Governor, David Dodge, recently observed in a meeting with the Calgary School of Public Policy (Feb. 11 Financial Post), many of these changes will impose costly new rules on the Canadian banking sector for a problem that was not of our own making and are directed primarily at punishing miscreants in Europe and the US rather than providing greater stability to global financing.
Canadians will ultimately bear the brunt of these reforms in higher banking fees and charges. The prevailing conventional wisdom is that the financial crisis of 2007–09 stemmed from the absence of a sensible regulatory framework and specifically from the failures of banks, notably those in the U.S. and Europe, to follow prudent banking practices. Any remedy should therefore ensure that the cost of future failures falls on those institutions that neglected fundamental principles of prudence. It should certainly not penalize further taxpayers who were obliged to support expensive bailouts. In any event, ‘one-size-fits-all’ prescriptions are not the best antidote to such problems.
The second deeply troubling development is the “U.S. Tax Compliance Act (FACTA)”. As of July 1, Canadian banks will be obliged to scrutinize all accounts exceeding $50,000 to determine if they are “U.S. reportable”.
This new requirement is a blatant example of extra-territorial application of US law by the IRS, an agency of the U.S. government that is hardly a beacon of ethical propriety these days. The sheer power of the United States may be sufficient to oblige compliance – ‘going along in order to get along’ – but one is left to wonder why our government should reward the U.S. government on the backs of Canadians. Isn’t it enough that we pay billions to build a bridge, including the land on which U.S. Customs facilities will be built, connecting Windsor to Detroit or that we also contemplate the purchase of hugely expensive, U.S. fighter jets without any practical, bilateral dividend in return. Perhaps we should propose a similar form of scrutiny on U.S. financial institutions. Sauce for the goose no less.