Canadian Bank Mergers Decision 1998

Dateline: 12/14/98

It's official. Canadian Finance Minister Paul Martin has rejected the proposed mergers of the Royal Bank with the Bank of Montreal and CIBC with the Toronto-Dominion Bank.

The reasons for the bank mergers decision are no surprise. The Finance Minister concluded that the mergers are not in the public interest as they would result in too much concentration of economic power in Canada in the hands of too few financial institutionsa reduction in competition in the Canadian financial services sectora reduction in the Canadian government's flexibility to address future concerns.

The last round of reports delivered to the Minister of Finance last week appear to have sealed the decision.

Canada's Competition Bureau concluded that the proposed bank mergers would substantially lessen competition, would result in bank branches being closed, and mean that Canadians would have to pay more for less. The Competition Bureau's conclusions on each of the mergers are provided separately in letters to the bank presidents for the Bank of Montreal and Royal Bank merger and the CIBC and TD Bank merger.

The Office of the Superintendent of Financial Institutions (OSFI) also weighed in with concerns. A summary letter to the Minister of Finance raised issues about the impact of mergers on the Canadian financial system as a whole. It noted that if one of the merged banks were to run into trouble, the policy options for government would be severely reduced. For example, the possibility of a sale to a domestic competitor would be less, since it would result in further reducing competition. And a sale to a competitor from outside Canada would have a negative impact on Canadian ownership and control.

On the political side, both the House of Commons Finance Committee and the Senate Banking, Trade and Commerce Committee tabled their reports on the financial sector.

The four banks have been using the line "the status quo is not acceptable" to push their case for mergers. Martin has turned that around to say the status quo must be changed before bank mergers are considered.

To that end, the government plans to develop a new policy framework for the financial sector in Canada. It will probably take at least a year. The new framework is expected to include a new review process for major bank merger proposals. It is likely the new process will require merger proposals to meet the same conditions though.

View the original article here

Greek bailout loan decision pushed to October

Greece's international rescue partners will delay until October their decision on paying out a batch of bailout loans needed to keep Athens from a disastrous bankruptcy, the head of the eurozone finance ministers' group said Friday.

The announcement at the meeting in Wroclaw, Poland, was yet another example of Europe's halting effort over almost two years to solve its crisis over too much government debt in some countries.

U.S. Treasury Secretary Timothy Geithner had joined the meeting -- a first for the U.S. finance chief -- in a sign of how the U.S. is getting increasingly concerned over the global impact of the eurozone debt crisis.

But the participants appeared unable to make progress on any front.

The European finance chiefs ruled out providing more fiscal stimulus to get their lackluster economies growing again, saying high debts left no space for extra spending. Another sticking point in the aid for Greece, a Finnish demand for collateral for a second bailout now being put together, was not solved either.

The next€8 billion ($11 billion) installment of Greece's first bailout package depends on a review of the country's finances. The payout was originally scheduled for end-September and the Greek government has said that without the new loan it will run out of money next month, forcing it to stop paying public-sector salaries and eventually default on its massive debts.

But officials from the eurozone and the International Monetary Fund have delayed their assessment until Greece has laid out a clear plan on how it will cut its deficits to targets agreed in its bailout program, said Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the regular meetings of eurozone finance ministers.

Juncker said officials welcomed "the renewed, firm commitment of Greece" to its austerity program and said they "would decide in October on the next tranche."

A delegation from the eurozone, the IMF and the European Central Bank unexpectedly left Athens on Sept. 2, delaying the much-awaited confirmation that Greece was meeting the terms of its euro110 billion ($152 billion) bailout agreed in May, 2010.

The country's struggle to keep a lid on its spending and raise enough revenue has also increased uncertainty about a second euro109 billion aid package agreed in July, when it became clear that the first batch of money would not be enough.

Fears that Greece might not get more rescue money and default have made Greek bond prices plummet, weighed on the euro's exchange rate with the dollar and roiled stock markets.

Austria's Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was "very optimistic that the next tranche can be paid out to Greece."

She warned against a Greek default, which she said would be "very costly." Yet she did not rule it out as a possibility in the future.

"Should a situation arise, where this way (of providing rescue loans) suddenly becomes more expensive than the alternative, we will have to think about the alternative," Fekter said. "But at the moment this is not yet the case."

Friday's announcement fell short of a complete assurance Greece will get the money and hopes for tangible progress on another obstacle were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said there was still no solution to her country's demand for guarantees to back its contribution to the second rescue package.

The small Nordic country's demand has triggered similar requests from several other states, including Austria and the Netherlands.

Fulfilling all the requests for collateral could shave off hundreds of millions of euros from the overall bailout sum, hurting Greece's prospects of recovery and angering other eurozone nations who would have to fund the guarantees.

"If collateral will be provided, this will be done at an appropriate price," Juncker said, without giving further details on where discussions were headed.

Friday's meeting comes after several turbulent weeks on global financial markets, triggered by fears over the impact of a potential Greek default as well as mounting evidence of a slowdown of the world economy. Some eurozone banks have been facing difficulties to obtain short-term funding in U.S. dollars as other lenders worry about their exposure of the debt of struggling countries like Greece, Spain or Italy.

Those funding issues pushed the European Central Bank, the U.S. Federal Reserve and three other major central banks to give banks easier access to dollars on Thursday, in the hope they can stop credit from seizing up like it did after the collapse of U.S. investment bank Lehman Brothers three years ago.

Accessibility Links

View the original article here