Now playing: Canada’s banking regulator says it is working on a set of rules for a new banking company that could give the country’s banking sector a green light to take over the countrys biggest banks.
The Canadian Bankers Association says it has been working with regulators in the U.S., Europe and China to create a set for the country, the first of its kind in the world.
The CBA says the rules will allow it to take ownership of the banks that currently operate in Canada and move them to new countries.
That could give Canada a better shot at competing for the $1.2 trillion that banks hold in foreign exchange reserves, which are needed to pay their bills and make investments.
“We think that this is a good idea that will help our banking system compete with countries that are emerging from the global financial crisis,” said Chris Morice, chief executive of the CBA.
The new bank will be created in a special type of company known as a special purpose vehicle, or SPV, and will have to apply to the CFTC and be approved by the bank’s board.
The new company will be able to borrow up to $1 billion from Canadian banks.
Canadian banks have been grappling with their inability to borrow against foreign currency and lack of regulatory oversight.
The new rules will likely open up more banking options for Canadians who have a large portfolio of mortgages, student loans, credit cards and other financial assets.
But they will also require the banks to meet stricter financial-disclosure requirements and will not give Canadian regulators the ability to audit their accounts.
“The banking sector is growing and evolving and the world is changing, and this is an important step to allow us to continue to adapt to the evolving financial climate,” Morice said in a statement.
The rules could also allow Canadian banks to be more transparent and better manage the growing risk they are taking from customers.
Canadian regulators have long been criticized for allowing a small number of banks to dominate the market, even as others are struggling.
A new bank could be more focused on making sure its products are safe and that its customers aren’t cheated.
The regulator says the CAB has not given the green light for a bank to operate in this country, and that the proposed rules are too broad.
The CFTC, meanwhile, is expected to issue a final rule on Friday, which will determine whether Canada can become a hub for the banking sector.
“We are looking forward to the final rules of the CFSC that will clarify the rules on a number of issues related to a new type of special purpose entity, which we believe is appropriate,” said Brian Smith, head of the regulatory compliance group for the CFA, in a prepared statement.
In the U, U.K., Ireland, France and Switzerland, the CFSA says the government has issued rules for this type of SPV entity.
Last year, the European Commission proposed new rules that would allow foreign banks to open branches in the European Union.
In the U-K., for example, the new rules would allow banks to create branches in London and other European cities.
While the new banks would be limited in what they could borrow from foreign banks, the rules would also allow the CFTA to require them to have a strong financial-management program that ensures their operations are safe.