Law Commons^™

A Regulatory Roadmap For Financial Innovation, Cristie Ford

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Private sector innovation – whether it is fintech, biotechnology, the platformisation of the economy, or other developments – is the single most profound challenge that regulators confront today. Financial innovations, which are intangible and fast-moving, are especially challenging. Financial regulators are at the operational front line of making sense of the promise and the risks associated with fintech, and helping to ensure it operates for public benefit.

Faced with such a changeable and fast-moving problem, how can regulators “future proof” themselves?

This chapter outlines a roadmap for financial regulators who confront fast-moving and profound change in their sectors. It argues …

Pension Fiduciaries And Climate Change: A Canadian Perspective, Maziar Peihani

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Climate change has emerged as a major issue of financial risk for Canadian pension funds when determining where to place investments. The author argues that while such pension funds recognize climate change as an issue that holds the potential for significant financial risk, the funds’ current approach to climate-related risks faces critical limitations. The author identifies the current practices of the five largest pension funds in Canada when faced with climate-related financial risks, then discusses the key shortcomings in current practices among the pension funds in three main areas.
First, the author examines organizational governance, which seeks to understand investment …

Bringing Rule Of Law And Fairness To The Dysfunctional World Of Sovereign Debt: A Role For Canada?, Maziar Peihani, Mark Jewett Qc

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Restructuring sovereign debt has long proved challenging: There is no formal regime for sovereign insolvencies similar to those that that govern domestic bankruptcy and insolvency and attempts to create one by international treaty have been met with political resistance. Currently, sovereign debt restructuring is governed by the debt contracts themselves along with the background law in the jurisdiction in which the debt is issued. Sovereign immunity also protects most state assets from seizure. These ad hoc restructuring processes are plagued by unpredictability, however, and there are incentives for individual creditors to “hold out,” demanding full repayment of their claims and …

A Multi-Jurisdictional Review Of Legislative And Regulatory Changes In Relation To The Banking/Commercial Separation Doctrine, And The Business Of Banking, Cristie Ford

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Banks have long provided essential services to the economy and to Canadians. In return, they have had access to special privileges, and been subject to special prohibitions. Across the world, there are boundaries around what we in Canada would call the “business of banking”. Such boundaries are important, because they set the conditions under which institutions may be recognized as “banks,” and may have access to those privileges and prohibitions. This report summarizes research undertaken across five jurisdictions – Australia, Japan, Singapore, the United Kingdom (UK), and the United States (US, federal level only) – with respect to a particular …

The Banking/Commercial Separation Doctrine In Comparative Perspective, Cristie Ford

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This report, prepared for the Department of Finance, Government of Canada, summarizes research undertaken across five jurisdictions – Australia, Japan, Singapore, the United Kingdom (UK), and the United States (US, federal level only) – with respect to a particular kind of boundary on the business of banking: the separation of banking business from commercial business. “Commercial” here means the provision of non-financial goods and services. This separation exists under what in the United States has long been referred to as the “banking/commercial separation doctrine”. The report considers the historical justifications for the doctrine in the context of the modern “business …

Regulating Systemic Risk In Canada, Anita Anand, Maziar Peihani

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This chapter is a contribution to an interdisciplinary book that drew on some of the world's leading experts on financial stability and regulation to examine and critique the progress made since 2008 in addressing systemic risk. The chapter contends that Canadian regulators’ ability to address systemic risk is limited by the structure of the regime, built on a sector-by-sector model, without any one institution responsible for comprehensively regulating the financial system. We also posit the proposal to establish a macroprudential regulator to monitor the financial system as a whole, as advocated by academic literature and international forums, is unlikely …

A Bridge Over Troubled Waters - Resolving Bank Financial Distress In Canada, Janis P. Sarra

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Effective June 2017, Canada formalized its new resolution regime for “domestic systemically important banks”. This article examines the new resolution regime in the context of the early intervention program by the financial services regulator. The system offers a complex but integrated set of mechanisms to monitor the financial health of financial institutions, to intervene at an early stage of financial distress, and to resolve the financially distressed bank in a timely manner. Resolution is the restructuring of a financially distressed or insolvent bank by a designated authority. To “resolve” a bank is to use a series of tools under banking …

The Historical Origins Of The Debt-Equity Distinction, Camden Hutchison

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The U.S. tax code favors corporate debt over corporate equity, a distinction long criticized by economists, legal scholars, and other tax commentators as both theoretically and practically unsound. For decades, academics and policymakers from a variety of disciplinary and political backgrounds have argued that this so-called “debt-equity distinction” distorts corporate financing decisions, encourages excess borrowing, and invites troublesome tax-avoidance behavior. Surprisingly, despite widespread critical attention, the origins of this policy remain a mystery. Primarily focused on its contemporary significance, scholars have disregarded the distinction’s past. This article uses historical evidence to trace the debt-equity distinction’s origins, development, and continuing evolution. …

Book Review: Theory And Practice Of Harmonisation, Mads Andenæs & Camilla B. Andersen (Eds), Toby S. Goldbach

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"Theory and Practice of Harmonisation" is an edited symposium publication which tackles the ambitious topic of legal harmonisation. Some common themes can be identified. First, several papers deal with the background to or reasons for harmonisation and consider whether harmonisation goals are being met.Second, several papers examine language-textual issues or problems with defining concepts. A third centralizing theme is the role of legal institutions, in particular courts, in facilitating harmonisation. Finally, a fourth theme is evident in those papers that look at the instruments, mechanisms or legal techniques that are used to implement harmonisation. As a whole, the text seems …

Prudential, Pragmatic And Prescient, Reform Of Bank Resolution Schemes, Janis P. Sarra

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The 2008-2009 global financial crisis highlighted the interdependency of financial institutions and markets worldwide. Globally, fiscal support packages totaling 3 trillion USD were introduced, placing enormous strain on the public finances of a number of countries. Even in jurisdictions such as Canada, with relatively well-managed banking systems, a generalized loss of confidence led to a sharp rise in funding costs. The largest negative effects of the financial crisis on the Canadian economy stemmed from crises originating in other countries, with adverse contagion effects on the Canadian banking system, making it very difficult for Canadian banks to fund themselves in foreign …

Risk Management, Responsive Regulation, And Oversight Of Structured Financial Product Markets, Janis P. Sarra

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Globally, regulators, supervisory authorities, and governments are grappling with what have now been identified as systemic risk factors that contributed to the recent global financial crisis. Internationally, the Basel Committee on Banking Supervision and other organizations are developing standards to identify and address systemic risk, suggesting that the extent of regulation or exemption from it can serve as a mechanism by which risk is transferred within the financial system. The Cross-border Bank Resolution Group of the Basel Committee has developed ten recommendations as a result of its stocktaking of lessons learned from the financial crisis.' The Financial Stability Board (FSB), …

Cachet Not Cash: Another Sort Of World Bank Group Borrowing, Natasha Affolder

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This article explores the extent to which the World Bank's Environmental and Social Guidelines now serve as standards of acceptable global environmental and social behavior for transnational corporations. Although the World Bank Standards were not created for the purpose of providing global rules for business on social and environmental issues, they are frequently cited as de facto global standards. This article reveals the unlikely rise in prominence of these standards and the widespread adoption of these rules by corporations, public and private financial institutions, governments, and export credit agencies. This example of private borrowing of public standards is intriguing not …