“The Canadian banking industry is at the crossroads and financial institutions will need to meet a number of challenges post-haste,” said Laurentian Bank president and CEO Henri-Paul Rousseau in a speech to the Quebec MBA Association. According to Rousseau, it is essential that Canadian financial institutions be allowed to grow so that they may become more competitive on a world scale.

Rousseau said that the banking industry is faced with new realities that it must deal with rapidly in order to survive.

He noted that one of the effects of this evolution is a convergence within the industry that makes it possible to offer integrated banking, brokerage and portfolio management services. “Never has the consumer of financial services products enjoyed such choice to borrow, invest, seek advice and make payments”, declared Rousseau.

Rousseau drew attention to what he calls the Canadian dilemma. Canadian banks are at once too big for their domestic market and too small for international ones. He said Canada’s banks must take advantage of economies of scale n order to survive in the world market.

He noted that the survival of the Canadian financial system depends on banks, life insurance companies and mutual funds banding together regardless of the size of the institutions involved.

Rousseau used presented the example of a merger of a bank between a bank and an insurance company. He said such a merger would necessitate the pooling of two complementary distribution networks, thereby limiting the number of job losses and branch closures usually associated with mergers.

Rousseau said such a merger would reduce the risk of the monopolization of financial institutions, afford significant economies of scale, improve their competitiveness on the international markets, increase the market capitalization of the new financial companies, minimize job losses, and maintain access to financial services without further concentration within the industry.

“Recent amendments to the Bank Act allow this sort of union through the constitution of holding companies. The new Bank Act opens the door to a reshaping of the industry so that the Canadian financial system will finally be what we will want to make of it. It is not a question of innovating so much as having sufficient presence of mind to go where others already are, while ensuring that the financial system in the country remains at once Canadian, open to competition and competitive at the international level”, concluded Rousseau.