MEXICO CITY: The head of Bank of Nova Scotia suggested on Friday that Canada's third largest bank should be exempt from tougher global regulations that will eventually be imposed on banks considered "systemically important" domestically.
Chief Executive Rick Waugh cited his company's heavy reliance on operations outside Canada as a feature that set it apart in the handful of banks that dominate in Canada, and could make it exempt from extra regulatory scrutiny.
Leaders from the Group of 20 advanced and emerging countries have already agreed to impose a capital surcharge on the world's biggest banks, as part of a broader regulatory push aimed at preventing global financial crises and taxpayer-funded bailouts.
Now they are turning their sights to so-called domestic SIFIs, or systemically important financial institutions, banks deemed big enough to cause harm to their country's financial system should they run into trouble.
The Financial Stability Board, the G20's regulatory task force, has said it would complete work on this framework by the end of this year.
Although no criteria have been set for deciding which banks would be targeted, Waugh said Canada's big banks should not all be treated the same.
"I think we have to be very careful on that because the business models are different and that's a healthy thing. That's what you should want. You don't want everbody the same because then we all become systemic," Waugh told Reuters on the sidelines of a meeting of the International Institute of Finance in Mexico City.
Scotiabank, as the bank is commonly known, has long billed itself as Canada's most international bank, with operations in more than 50 countries, particularly in Latin America and Asia. It has said it wants to continue to increase its foreign business, targeting assets shaken loose from banks that have been hit by the fallout of the European debt crisis.
"Every business model is different. Now half of our earnings are outside Canada. Another bank who is 80 percent Canada is a different model. So yes, one size does not fit all," he said.
"We're very unique, without international subsidiaries which are stand-alone. Other banks are in Canada and the US and that is different. We're one of the smaller Canada banks," he said.
The other top Canadian banks are the Royal Bank of Canada , Toronto-Dominion Bank, Bank of Montreal , Canadian Imperial Bank of Commerce and National Bank of Canada.
Waugh said it was too early to know how any eventual rules for domestic SIFIs would be decided or implemented.
Canada's banks emerged from the global financial crisis in relatively good shape and none needed bailouts. But analysts believe at least some of the country's top five or six banks are candidates as domestic SIFIs.
Waugh and other bankers who gathered in Mexico pushed back against tougher global financial regulations, arguing the uncertainty they had created in the banking sector had crimped lending and was hurting economic growth and jobs.
The FSB has also completed work on new capital and liquidity rules from 2013 for banks, known as Basel III.
agr?3n ?????e G20 about the need to increase eventually the IMF's firepower and that would likely be reflected in a communique at the end of the weekend's meetings, diplomats said.
GERMANY HITS BACK
Germany has come under pressure with critics saying it could do more to help its struggling European partners and that its insistence on fiscal belt-tightening risks plunging Greece even deeper into crisis.
Weidmann hit back on Friday, saying Germany was already financing a "disproportionately large share" of rescue efforts to date and that its insistence on budgetary discipline was aimed at ensuring a stable monetary union.
He said there was a popular misconception that Germany had managed to "dodge the flames of the current crisis ... (and) ... is now selfishly refusing to come to the aid of the stricken countries by acting as chief firefighter."
Mark McCormick, a currency strategist at Brown Brothers Harriman in New York, said the long-term answer to Europe's problems would require further progress on a common approach to running national budgets.
"Money from the G20 via the IMF buys them a bit more time," he said.
Some member countries will push the G20 this weekend to at least outline the mechanisms it would use to help.
"Since we might not be able to finalize any numbers, money pledges by individual countries, we should not waste the opportunity to move forward," said Paulo Nogueira Batista, Brazil's representative at the IMF.
While policy makers squabbled over whether and how to boost the IMF's firepower, a group of international bankers joined calls for the G20 to work harder to boost growth, warning that the euro zone crisis threatens to hit the global economy.
Governments should also take a slower approach on tough new financial rules, the Institute of International Finance said on the eve of the G20 meeting here.
The IIF welcomed the progress Europe has made in addressing its sovereign debt problems through an emergency bailout fund, central bank liquidity, and toughened fiscal rules. But it cautioned that budget cutbacks in weaker countries like Greece and Spain could severely damage long-term growth prospects.
"While necessary, fiscal austerity will in the short term weigh on already sub-par growth," it said. "Mitigating the impact of fiscal austerity is key."
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