The Regulation of Financial Institutions: A Reflective but Selective Retrospective

The explosion of innovative financial instruments and processes that began in the 1970s has forced market participants and regulators carefully to rethink the role of traditional financial institutions and the regulation of those institutions. Following the recent financial crisis, the threats posed by new financial products and processes to traditional financial institutions have subsided for the time being, and Canada’s banks have emerged from the crisis as among the world’s strongest. However, it would be a serious error to mistake this temporary reprieve for a permanent realignment of the financial architecture. As the American and European economies recover, their financial institutions will grow stronger and Canadian financial institutions and financial regulators will need once again to carefully consider how best to ensure that Canada’s regulatory environment helps facilitate a vibrant and competitive financial industry.