Ottawa owes it to investors to manage systemic risks and criminal enforcement in capital markets — SkimNews
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- C.D. Howe Institute report by Paul Bourque and Douglas Hyndman recommends Ottawa focus on systemic risk management and criminal enforcement, citing U.S. tariffs and Middle East conflict as evidence of Canada's vulnerability to disruption
- Supreme Court of Canada affirmed in both 2011 and 2018 that Ottawa has authority to collect data and monitor systemic risks in financial markets — but the report says this unfinished reform still needs national legislation and a single point of political accountability
- Bank of Canada Governor Tiff Macklem said in March that surveillance of private credit must be enhanced so regulators can monitor how risks evolve as that market grows and behaves under stress
- Canada's $30-billion asset-backed commercial paper market froze in 2007 during the U.S. subprime crisis, leaving Canadian investors stuck with moribund notes for years — a key example cited of contagion reaching Canada
- Bre-X and Quadriga scandals illustrate what the report calls a 'universally regarded as weak' criminal deterrent against capital markets fraud, prompting the recommendation for a federal agency with a national mandate to prosecute securities offences
- Provincial turf wars continue to block a unified national securities regulator recommended by a Royal Commission in 1935, with the previous government scrapping a co-operative capital markets regulatory system five years ago
Why it matters: Canada is an outlier among industrialized countries for relying on a patchwork of provincial and federal regulators to monitor financial stability, and the 2023 U.S. regional banking crisis already forced Canada's banking regulator to start daily liquidity monitoring. Adopting the report's recommendations would give Ottawa a federal mandate to detect cross-market contagion and prosecute securities fraud, closing the enforcement gap exposed by the Bre-X and Quadriga scandals.
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