In a speech to the Calgary branch of the Canadian Club on Tuesday, Canadian Bankers Association President Ray Protti argued for clarity in the bank merger process and greater regulatory efficiency as a means to keep Canada competitive with North America.

Protti suggested that Canada is stuck with a legacy of regulatory policies that “are increasingly out of place — indeed, counterproductive – in today’s environment.” He pointed out that ownership restrictions, constraints on foreign entrants, limitations on corporate structures, barriers to consolidation, price regulation, and other measures limit competition.

“The result is that these critical sectors of our economy are caught in the policy equivalent of no-man’s land. On the one hand, they are urged by policy-makers to be world class, to be innovative, and to compete against the best. But at the same time, they are also told that governments will retain the right to decide which tools, structures and powers they can use to meet these objectives,” he said.

Protti said that it is critical that Canada move away from this environment toward a system of smart, efficient regulation. He argued, if Canada could match Australia’s regulatory efficiency in financial services, the savings to institutions and consumers would be approximately $180-million per year. If Canada’s efficiency matched the U.K., the savings would be $297 million per year.

As part of this move to a more efficient system, Protti suggested that governments and industry must consider what regulatory system makes sense across North America. “Regulatory duplication within Canada is bad enough, but regulatory duplication across North America only compounds the problem. I believe the time has come to consider whether an integrated North American economy necessitates some form of integrated North American regulatory system.”

Protti cited the European Community as an example of a trans-national system, “and in my view it is timely for governments, industry, think tanks, and other stakeholders to begin the thinking and the discussion needed to address this reality.” He suggested that such an initiative could be part of NAFTA.

Also, Protti argued that banks need to be big to compete. “Quite simply, size is essential to success in the 21st century,” he said. “Financial services are process intensive, requiring huge fixed investments and costs.”

He insisted that this isn’t simply an argument for bank mergers. “There is a range of possible options: internal growth, acquisitions, partnerships, alliances — and yes, mergers. What is important here is the ability to act.”

He noted that the government is seeking to clarify elements of the merger review process for large banks, saying, “We think this is a useful step. Indeed, in our view, in an area as important as this, as much clarity as possible is critical.”

Protti also argued that governments need to eliminate capital taxes.

“It is critical that we launch a great national debate on what Canada needs to do to compete successfully in the North American economic space. Debating whether North American integration is good or bad for Canada is futile. Integration is already upon us. Canadians must embrace the North American reality and take advantage of our unique geographic position to achieve competitive excellence,” he concluded.