Election outcome seen stalling bank mergersCanada election outcome seen stalling bank mergers
By Gilbert Le Gras
OTTAWA, June 29 (Reuters)- Establishing government policy on mergers among Canadian banks and insurers looked set to get stuck in another round of studies on Tuesday after Monday's election produced a minority Liberal government that is likely to require the backing of the left-leaning New Democratic Party to pass legislation.
Finance Department officials said they were reviewing whether the minority government would want to consult with the NDP before delivering the government's bank-merger policy paper, which was due June 30, but was delayed by Monday's election.
Preliminary results from Monday's election gave the Liberals 135 seats in the 308-seat House of Commons. The NDP took 19 seats.
NDP leader Jack Layton took a hard line on bank mergers on Tuesday.
"We have been very concerned about bank mergers. We believe that banks these days, particularly with credit cards, are profiteering at the expense of ordinary Canadians," Layton said.
"These mergers would make this kind of economic power in the marketplace just that much greater. So we would have grave concerns and certainly would be expressing those," he added.
Liberal Prime Minister Paul Martin, as Canada's finance minister in 1998, scuttled plans for two big bank mergers, one between Royal Bank of Canada and Bank of Montreal and another between Canadian Imperial Bank of Commerce and Toronto-Dominion Bank .
The NDP's election platform and policy statements have been consistently hostile to mergers among banks as well as mergers between banks and insurers, known as "cross-pillar" mergers.
"We were contemplating in the fall doing a special study on the cross pillar issue. I think now, rather than being tolerated, it would be actively encouraged," a person familiar with the parliamentary committee process said.
Another person close to the situation said bank mergers were "the furthest" issue from Martin's mind the morning after a hotly contested national election.
"For the first time since early 2000, we are reducing our recommendation on banking stocks to an underweight position," National Bank economist Clement Gignac said.
"Recent developments on the political front should put any merger discussion on the back burner for a while. It seems likely that Main Street, not Bay Street, will be driving Ottawa's agenda over the next 12 to 18 months," Gignac said.
Parliamentary committees that have studied the issue in the past year worked at cross purposes with a Liberal-dominated Senate panel, which recommended in December 2002 that Ottawa approve up to two bank mergers and remove lawmakers from the approval process.
A House of Commons committee handed back an inconclusive report, but placed many caveats on any union including assurances user fees do not exceed current levels and job losses are kept to a minimum.
(Additional reporting by David Ljunggren)