Around the world, many of the largest financial services companies have come under severe pressure in recent months. What is the current situation in Canada?

The problems of the credit crunch have not been felt as harshly in Canada, compared with other countries. Unlike the US, the real estate market has not taken so much of a battering here.

As a result, the Canadian financial services market has remained more resilient, generally. And, while the Canadian government is offering its financial institutions assistance, we haven’t seen any massive financial institution bailouts, as happened in the US, for example, with AIG.

Does that mean there is less pressure on Canada's financial services regulator to reform how it operates?

Yes, Canada’s financial services regulator – the Office of the Superintendent of Financial Institutions (OSFI) – has been recognised around the world as being a model for financial services regulation. For the OSFI, the pressure is on for it to maintain its status during the coming years. Overall, the OSFI takes a very prudent, risk-based, approach to financial services regulation. If a financial institution is taking big risks, it will be expected to allocate more capital to protect itself.

Canadian financial institutions are aware that the OSFI has been a lot more enquiring in recent months – its likes to go through institutions’ policies, procedures and records with a fine toothcomb.

If there’s an unexpected occurrence in the market, the OSFI will call up the institutions it regulates, and ask them to explain their exposure to it. And, if an institution is exposed, the regulator will want to know how it is dealing with the problem. Last year, the market for asset-backed securities in Canada all-but died. The OSFI asked for regular reports from the financial service institutions regulated by it on how they were dealing with the crisis.

To what extent has this increase in supervision affected the work of your company's legal department?

By and large, it hasn’t affected our institution’s legal department very much. In general, everyone is just more aware of the OSFI’s presence – and its ability to step in at any time.

In our institution, our chief executive officer is the normal point of contact for dealing with OSFI. We think it’s better that our institution has just one person, offering just one view, when dealing with the regulator – and that person should be our CEO.

It’s only when the regulator needs specific details from functional heads that other people get involved – whether it’s the financial controller on issues of capital ratios, myself in relation to corporate governance, or the compliance department in relation to money laundering issues.

Besides the credit crunch, what are the current 'hot topics' in the Canadian financial services industry?

For more than 15 years there has been a debate about whether Canada needs a single securities regulator. At present, banks and insurance companies are regulated by the OSFI, but securities regulations are handled by individual provinces and territories. That means, even if a financial institution wants to make a public offering in one province, they have to ask permission of each local regulator, and also file a prospectus in each province or territory. The problem is that Canada’s provinces and territories are reluctant to give up their regulatory authority to a new federal regulator – and they’d also lose a source of revenue, from the fees they currently charge.

The Canadian federal government recently appointed a new commission to look at this issue, hopefully once and for all. Because both the International Monetary Fund and the World Bank have already indicated that Canada needs a single financial services regulator, I expect one will be created in the next two to three years.

Another “hot topic” currently affecting the financial services sector in Canada relates to the credit and debt card markets. Our federal finance minister, Jim Flaherty, has given himself powers to bring down interest rates charged on credit cards issued by federally-regulated financial institutions. His department is currently consulting on proposed new regulations. The industry is concerned about these proposals, not only because it will mean they will have to alter the way in which they charge interest, but also because they will have to reengineer their customers’ application forms. There are also on-going discussions on “interchange fees”, which may result in some regulation on that part of the credit card business. Interchange fees are the fees charged by system operators – such as VISA or MasterCard. They are included in the fees charged by a bank to its merchant customer, for processing a transaction between the holder of a credit card and that merchant.