Scotiabank chief executive Rick Waugh says financial policymakers need to work closer with the world’s biggest banks to ensure that new regulations don’t stifle economic growth.
Waugh says in order for banks to help the global economy, they need to take on “a certain level” of risk.
“It’s how those risks are managed that makes all the difference,” he said. “Those who get risk management right, thrive. Those who don’t, falter.”
Waugh tackled the banking regulation debate during a speech Thursday to the Economic Club of Canada.
Capital levels at Canadian banks are widely considered to be stronger than most of their international peers, under the new Basel III rules which set out key measures of a bank’s health and ability to endure future economic downturns.
Waugh said that regulations are having a “transformational effect” on the industry that eclipses any of the existing market forces because some institutions are being forced to sell off assets they can’t handle or exit some countries.
Scotiabank has benefitted from this shift by acquiring companies like E*Trade, Dundee Wealth, ING Direct and businesses at other international financial institutions, he said.
The regulatory changes also come at a price for the international financial community, he added.
“As banks decide to exit markets, it means less choice, reduced competition, less liquidity and higher funding costs for businesses and consumers,” he said.
Waugh plans to retire in November, and will be replaced by Brian Porter, currently the bank’s president.