Banks will face increasing demands on resources resulting from the significant legislative and regulatory reform impacting public companies, according to a PricewaterhouseCoopers report released today, Canadian Banks 2002: Perspectives on the Canadian Banking Industry.

The Canadian Banks 2002 report provides an analysis of major issues impacting the banking industry and an evaluation summary of the 2002 financial results of the six major Canadian banks: Bank of Montreal; Bank of Nova Scotia; Canadian Imperial Bank of Commerce; National Bank of Canada; Royal Bank of Canada; and Toronto-Dominion Bank.

The year 2002 saw changes to legislation, regulatory requirements and accounting practices, all of which had major implications for banks in Canada and the role they will play in influencing corporate governance reform.

“There’s no question that expectations have been heightened with respect to financial and non-financial disclosures and the need for greater transparency in what is being reported,” said Jerry Whelan, partner and Canadian Banking Practice leader for PricewaterhouseCoopers. “The question that banks will face in 2003 is how to deal with the numerous requirements coming out of the changing regulatory environment.”

As outlined in the PwC, the majority of the change comes out of the Sarbanes-Oxley Act, which was introduced and ratified by the U.S. Securities and Exchange Commission following a number of major corporate and accounting scandals in the U.S.

The intent of Sarbanes-Oxley is to create a framework of corporate governance requirements that will restore trust in the information on which investors base their investment decisions. Because Sarbanes-Oxley is U.S. legislation, it will affect only those public companies that are registered with the SEC and traded on U.S. stock exchanges. However, Canadian bodies are already beginning to introduce similar requirements, which will quickly spread this burden to all Canadian public companies.

According to PwC, Canadian banks are in a unique position as they are not only the country’s senior issuers, relying heavily on the public markets for capital, but also active investors and providers of capital, and as a result heavily reliant on the veracity of controls and information of other issuers. As Sarbanes-Oxley is further clarified and implemented, banks will play an active role in influencing the direction of corporate governance.

In addition to providing a synopsis and action plan for meeting Sarbanes-Oxley requirements, the Canadian Banks 2002 report also offers concise summaries of:

  • future trends in corporate reporting;
  • the status of bank mergers;
  • recent accounting developments; and Canadian economic trends.