Canada’s banking and regulatory environment retains a strong position among institutional investors, marked by its status as a robust and mature market, with high rankings for its stability and transparency, attractive risk profile, and status as one of the few remaining countries with an AAA sovereign debt rating. Central to this confidence is the continuing focus of Canadian market participants on a culture of prudent risk management, due diligence and technological innovation. Long known as a global safe harbour in turbulent markets, Canada’s market continues to uphold its fundamental ‘Canadian character’.
In global estimation, Canada shines brightly as a business destination, offering a diverse, highly-skilled population. Canada continues to be a leader on a global scale in the attainment of higher education. Among 37 of the Organisation of Economic Co-operation and Development (OECD) and G20 countries, Canada is recognised for its leading education attainment rates and ability to develop a skilled workforce. According to OECD data, more than 55 percent of Canada’s population between the ages of 25 to 64 hold a university or college degree.
Trade settlements
Market participants continue to take confidence from Canada’s robust market infrastructure and efficient settlement mechanisms. The adoption of shorter settlement cycles in various jurisdictions plays out simultaneously for both international and local markets.
Following the implementation of T+2 in European markets, US market authorities had announced their intention to move to T+2 from T+3 by Q3 2017. Given the close alignment of Canadian and US markets, with inter-listed securities and cross-border activities, Canadian market authorities were onside to meet the same targets.
Canada’s transition to a T+2 settlement cycle was implemented, in alignment with the US market, on 5 September 2017. The market-wide effort for T+2 trading was carefully coordinated among hundreds of stakeholders, market participants and financial institutions in Canada, the US and other markets. CIBC Mellon experienced a seamless transition to the T+2 settlement cycle for all clients, including clients that are domiciled globally.
Payment modernisation journey
Payments Canada, the organisation responsible for Canada’s payment clearing and settlement infrastructure, is currently on a journey to modernise its payment infrastructure with the intention of broadening access to Canada’s core payments system, while maintaining soundness and safety, balanced with prudent risk management. According to Payments Canada, the goal of its ambitious modernisation initiative is to encourage innovation and competition and to better meet the needs of end-users. This comes at a time when the payment ecosystem in Canada and globally is rapidly changing—businesses want richer payment data and operating environments that promote efficiencies, such as end-to-end straight-through processing.
Furthermore, Payments Canada is looking to adopt a global approach for modernisation and it notes that all of the countries that have modernised their payment systems have focused on faster payments that are near real-time and always available. Canada’s Department of Finance and the Bank of Canada, who oversee Payments Canada, have expressed strong support for this initiative for both the purposes of risk reduction and the promotion of public policy objectives.
Technological innovation and data complexity
While asset servicing providers continue to connect global and domestic market participants, our industry overall is contending with technology and data advancements, thereby transforming providers into leading-edge data enablers from traditional safe keepers and securities processors. While asset servicing providers must continue to deliver on the fundamental service of dependable operational execution, providers are now additionally looked to as a source for flexible access to data and powerful technology.
For example, clients are seeking to tap into a user-friendly online portal to pull tailored data in the format that they want anytime, for reports, transactions and reference materials to assist with their evidence-based decision-making. Clients want a clear view and greater transparency around account activities in order to support governance and risk management reporting that they are now being asked to provide to their stakeholders.
To assist clients with staying well-informed, market participants are turning to their providers to distil complex settlement and account information, in order to receive the confidence they need in the protection of their holdings. Simultaneously, institutional investors also expect their asset servicing providers to leverage new technology. In this environment, providers must take the time to thoughtfully explore new solutions and how they would be securely deployed.
People and technology
Overall in the Canadian market, we are experiencing rapid technological change, and CIBC Mellon is embracing opportunities for innovation. By using automation to drive efficiencies, certain repetitive tasks can be automated, allowing employees to focus on more value-added opportunities. Institutional investors look to their custodians’ service teams for local insights, a consultative service experience, and to proactively explore new solutions to help clients achieve their goals. Therefore, one of the most important investments in an organisation is into its people. Firms should build and reinforce an engaged employee culture that is collaborative and insightful and puts clients at the centre.
While up-to-date technology and products, a solid risk culture, and a great client service model are key foundations of our business, our people are central to CIBC Mellon. Our employees’ ability to listen to clients, champion client initiatives and understand client priorities, in the framework of the market and industry trends, is critical.
Working with a sub-custodian, having a local presence
Institutional investors should expect their local asset servicing provider to play an active role in industry associations and working groups, in an effort to help bolster and shape industry practices within the domestic market. Additionally, a strong provider should be expected to keep well appraised of global regulatory and industry changes as they relate to the local market. At CIBC Mellon, we have the on-the-ground expertise, coupled with in-depth knowledge of the Canadian market. In addition to providing outstanding service, dependable execution and knowledgeable insights to help clients navigate the complexities of the Canadian marketplace, we pride ourselves on having subject-matter-experts at all levels of the organisation, who actively participate with local associations and industry groups to represent the Canadian asset servicing industry, and champion our clients’ interests.
The Canadian market still retains the fundamental character that it is globally known for, anchored by strength, stability and a prudent regulatory environment. We very much look forward to discussing the Canadian opportunity with our valued clients and prospects at Sibos 2018. ?
