Economic pressure mounts as bank CEOs push Ottawa to rethink tax and regulatory policies
The leaders of Canada’s largest banks are urging the federal government to eliminate internal trade barriers, review tax policies, and reduce regulatory burdens, warning that rising tariff risks and trade uncertainty weigh heavily on the country’s economic outlook.
While Canada’s big six banks (Royal Bank of Canada, TD Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and National Bank of Canada) posted stronger-than-expected first-quarter profits, they are bracing for potential fallout from trade disruptions.
While banks are preparing for a more challenging lending environment, they haven’t significantly increased their provisions for loan losses yet, a move that some analysts say could pose risks if the tariffs lead to an economic downturn.
The lack of additional buffers is due to uncertainty over how severe the tariff impact will be. However, some experts warn that a recession is a real possibility, especially if trade disruptions slow business activity and drive up costs for Canadian companies.
In a series of earnings calls, bank CEOs emphasized that the Canadian economy needs urgent structural improvements to withstand potential shocks from trade tensions.
"The bank CEOs have a voice ... (They) are opportunistically pushing for, principally, a reduction in regulatory burden," said Kevin Burkett, portfolio manager at Burkett Asset Management, which holds shares in Bank of Montreal, Royal Bank of Canada, and TD Bank.
TD Bank CEO Raymond Chun highlighted the need for greater economic efficiency.
"The current situation is also a clear signal that Canadian governments and businesses must pull together to remove the obstacles that hold back national productivity and strengthen our competitiveness," said Chun.
Royal Bank of Canada CEO Dave McKay echoed that sentiment, pointing to the potential for long-term economic growth if Ottawa makes the right policy moves.
"This is the chance for Canada to make structural improvements to the country's economic productivity and competitiveness,” McKay said. “This can drive future growth opportunities with significant benefits to Canadians amidst this uncertainty."
Meanwhile, National Bank of Canada CEO Laurent Ferreira suggested the government appoint a “head of deregulation” to cut through red tape and eliminate barriers that make it harder for businesses to expand.
Read more: National Bank CEO urges Ottawa to appoint deregulation official
As trade uncertainty lingers, Canada’s banks have been expanding beyond the domestic market to hedge against economic volatility.
Several banks have deepened their presence in US retail banking, while Bank of Nova Scotia has shifted its focus away from South America, choosing instead to invest in US regional lender KeyCorp as part of its growth strategy.
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