Canada's economy is 'going to get whacked just as hard'

[marmar]

Canada can't lead global recovery: Clark
Economy 'going to get whacked just as hard'

Alia McMullen, Financial Post
Published: Tuesday, April 07, 2009


The Canadian banking system is entering a challenging period defined by two "mega trends" of reintermediation and deglobalization that will result in a more concentrated and less competitive bank environment faced with a dramatic increase in demand for domestic funding, the head of TD Bank FinancialGroup said yesterday.

Ed Clark, president and chief executive of TD Bank, said in a speech to the Richard Ivey School of Business and the Lawrence National Centre for Policy and Management in Toronto yesterday the global financial crisis, while now out of the panic phase, would take on a new dimension because of the large amount of government intervention in the world's banking system, namely in the United States, the United Kingdom and in parts of Europe.

He said the first mega trend was a decline in securitization, in which financial assets are bundled up and sold to investors. He said this was causing a reintermediation within the industry, by which Canadian banks would need to fund loans, such as auto financing, that would have previously been financed through the securitization on the capital markets. Second, government intervention in the banking system was leading to deglobalization in the industry, with governments encouraging the banks they have been bailing out to lend within their domestic economy, causing those institutions to retreat from foreign markets such as Canada.

"There will be dramatically more of the financing of Canada that comes on to the balance sheets of the banks," Mr. Clark said. "For Canadian banks, this is a serious issue because it means that we are now not only replacing the capital market activity that used to go on, but we are also having to replace the foreign bank activity that used to go on, and the single main concentration issues that we have in banking are looming larger and larger as a result of that." .........(more)

The complete piece is at: http://www.nationalpost.com/todays-paper/story.html?id=1471122