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We are all Canadians now
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The one bit of new policy content in the Brian Cowen Ard Fheis speech was the announced intention to restructure financial sector regulation along the in vogue Canadian model, and an implied hint that the new hirees into the central bank and financial regulator head positions will be Canadian. Is General de Chastelain available?
Anyway, one would like to think the Canada fixation reflects months of in-depth research in which the key differences between Ireland and Canada have been taken into account, not least that Canada still has an independent exchange rate policy. As legend has it that John A. Costello decided to declare the Free State to be a Republic following a row over a toast to the King at a dinner in Canada, we must indeed grant that glorious things can spring from decisions made under Canadian influence.
But the truth is more prosaic. The Canada influence may well reflect that Ireland is in Canada’s constituency at the IMF and World Bank, meaning that the Dept of Finance and Central Bank have people who did Washington stints in the Canadian directors’ offices and therefore have at least a water-cooler acquaintance with how things are done in the counterpart institutions in our once fellow dominion. If they were looking more widely for examples, you’d think there might be some mention of the Bank of Spain, which like Ireland had to manage a property boom in the Eurozone, and did a much better job of it (in particular, by raising capital requirements as the boom picked up steam).
But what the Canada comparison does bring out is Ireland’s lack of sophistication. An important aspect of Canada’s system is that it doesn’t try to have one or even two organisations do everything. Instead a small number of organisations are given clear mandates, and a Financial Institutions Supervisory Committee meets at the top of the pyramid, when needed, to sort big issues out. Beneath the committee, the Bank of Canada takes care of monetary policy, the Office of the Superintendent of Financial Institutions regulates anything that resembles a bank or insurance company, and the Canadian Deposit Insurance Corporation (CDIC) deals with bank resolution i.e. failed banks. There is a separate agency for the consumer side, the Financial Consumer Agency of Canada.
What Ireland had a central bank with a mandate to monitor the overall system, but no enforcement powers, and a financial services authority with a mishmash of mandates that ended up getting captured, as they say in regulation theory, by the institutions it was supposed to regulate. Worst of all, there was no IDIC — one gets the sense that the government nationalised Anglo because it didn’t know what else to do with it. In Canada, Anglo would be a “resolved” bank, or maybe would never have been a bank at all (more on that in a future post).
So good luck to our Canadian overlords, they have plenty to do. There is a more disturbing Canada precedent for Ireland though. A small island off the coast of a larger neighbour, where people speak Irish, in effect goes bankrupt and has to be absorbed by the larger neighbour as a new province.
UPDATE: Thanks to the commenters and especially those resident in Canada who brought a litte local knowledge to the debate. See also this thread and this one on Irish Economy.
Once this Cowen masterplan swings into action, we’ll have the perfect international financial set-up…a Canadian-stlye regulatory sytem looking after our Icelandic-style economy.
IMO, no matter what model they use the fact that Cowan said they would continue with the Central Bank / Financial Regulator modus means nothing much will change.
Have we forgotten how long it took to resolve the turf battle that led to the CB being given the FR?? In reality the CB has no role, except printing notes and attending meetings in Frankfurt. That was realised after the € and the whole battle on the regulation was resolved to give the CB something to do. As a sop to the opposition to the CB the Corporate Enforcement was set up. We’ve seen their effectiveness in the Anglo stuff…..
No, I’m afraid that even if they bring in some Canadians or whatever, the old guard in the CB will slow it all down, like English rugby forwards…..
Excellent point. As an Irishman living in Atlantic Canada (Halifax), it is rare to see relationships established between here and there. I have often thought that the Maritimes could benefit as much from a connection with Ireland and Europe as we do with our bigger neighbours: “Upper” Canada and the US. The historical analogy with Newfoundland is a good one although I don’t think Gaelic speakers were ever really established there. You might have been think of Cape Breton where Scots Gallic is still a living language. As far as I know it was once also independent but was merged into Nova Scotia after falling on hard times…
Really enjoy this blog. Great to have an independent voice in these crazy times.
Virtually *everything* is done better in Canada than Ireland. Want to work out how to do something in Government here? Just copy what they do in Canada. Nine times out of ten, it’ll work better than our current policy (copy what they do in the UK).
Here’s another Canadian institution which lends stability to the economy here – the Canada Mortgage and Housing Corporation. Essentially, every mortgage under 20pc (it used to be 25) downpayment has to pay a mortgage default insurance premium. I don’t think it’s an actual legal requirement but more that the banks want it to offer the loan. There are one or two private providers but the CMHC provides the vast majority of insurances to mortgages.
Not only does that extend the range of default insurance through the riskiest part of the market, but it allows the Government of Canada to intervene by buying up non-performing loans from the banks – which it has just done to the tune of 1.25 billion Canadian dollars. After all, it’s not a bailout when you’re on the hook for the default anyway, but the banks are relieved of the bad loans which were made according to CHMC guidance.
Now if only we could get a Federal Securities Regulatory we’d be grand – well, that and a California climate. I think the second one will be an easier get…