CIBC Mellon
Shane Kuros of CIBC Mellon discusses what sets Canada apart from the US
Canada is famed for its ‘no surprises’ philosophy when it comes to the financial industry. How has this kept it ahead of the game?
Perhaps the most important area where Canadian market participants benefit from a ‘no surprises’ philosophy is in the regulatory space. Canada’s financial services regulators take a collaborative approach to the industry, where the norm is releasing proposed regulatory instruments in advance, soliciting comments from affected stakeholders and taking their input into account when developing new regulations.
Regulators in Canada also take an active role in communicating their goals and expectations to market stakeholders. These practices allow market stakeholders to better understand and prepare for change, as well as to flag areas where additional assessment may be in order before proceeding—for example, instances where rules may have potentially unforeseen impacts.
Financial services players recognise that Canada’s strong regulatory environment is a key advantage, helping deliver strength and confidence that supports stronger credit ratings and lower borrowing costs, and helping to attract global investment. Canadian players have a reputation for prudent business practices and careful attention to risk management, which are attributes that have served us very well as risk and governance issues have gained significant focus in the minds of institutional and retail investors alike. So, it’s no surprise that Canada remains a healthy and stable marketplace.
The asset management industry is thriving. Is it safe to say we are returning to post-financial crisis levels?
A variety of indicators are showing strength. For example, Canada’s Toronto Stock Exchange index has surpassed its 2008 highs. The latest analysis from CIBC economics suggests that long-term positives are in place for a gradually improving economic environment, with US growth looking to turn a corner after some recent disappointments in some areas, both Canada and Europe expected to fare better in the latter half of this year, and signs of stabilisation in China, too.
Even with a return of growth, some changes are with us to stay: market stakeholders across the spectrum have moved to give risk management, transparency and reporting much greater attention. New regulatory instruments as well as expanded demands from end investors and plan sponsors can consume substantial time and energy, even as asset managers look to new strategies to generate growth for their clients in an increasingly complex space. As a result, many asset managers are increasingly relying on their asset servicing providers to roll out new solutions to support their changing needs in these areas.
There is a strong link between Canada and the US. What are the benefits for asset managers that invest in Canada?
Canada and the US share the world’s largest bilateral trading relationship, which encompasses more than $2 billion of commerce daily. Canada is the largest foreign supplier of energy to the US and the third largest foreign investor into the US. Canada and the US have a very close investment relationship, and many securities are cross-listed between Canadian and US exchanges.
Cross-border investment occurs across diverse segments, including natural resources, manufacturing, finance and services, presenting a variety of opportunities to tap into the businesses that drive these investments. Under the North American Free Trade Act, Canadian goods can even qualify under ‘Buy American’ provisions for state and local procurement under the American Recovery and Reinvestment Act. Canada’s close partnerships with and access to the world’s largest market can deliver a variety of advantages for asset managers depending on their investment strategies.
Is Canada receiving more interest from asset managers from an onshore or offshore perspective?
Canada’s status as a stable, attractive investment environment can give it a valuable role in the portfolio of any global investor—domestic or international. For example, Canada’s triple-A rated government bonds are increasingly sought around the globe as a rare source of high-quality collateral, while Canada’s sophisticated financial services sector continues to draw both domestic and international interest.
How are custodians and CSDs accommodating building interest from global investors?
First and foremost, asset servicing providers are deploying tremendous ongoing investment into the technology powering products and services that clients demand. Here at CIBC Mellon, we are working to leverage the scale and expertise of our two parent companies, CIBC and BNY Mellon, to deliver sophisticated solutions with local expertise.
Canada is a desirable investment destination, but it is also a complex environment, with a unique array of industry and regulatory bodies that work to drive stability and best practices in our marketplace. With our strong local presence and close working relationships with key Canadian market stakeholders, we are able to help our clients navigate this environment.
Canada’s strength, stability and healthy fundamentals make it attractive to both domestic and global investors, and we are working to support our clients as they tap into Canada to achieve their investment goals.
