A taskforce in Ontario contends that lenders "continue to engage in these practices"
A proposal in Ontario to strengthen laws that prohibit financial institutions from tying commercial loans with their own investment underwriting and advisory services has earned the ire of Canada’s largest banks, according to a Globe and Mail report.
The practice, known as “tied selling,” is already restricted by the federal Bank Act and other security laws. However, Ontario’s Capital Markets Modernization Taskforce said in a report in July that “multiple presentations from dealers and issuers have advised that commercial lenders, through their affiliated broker dealers, continue to engage in these practices.”
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To address the issue, the taskforce recommended that a “senior officer of a specified firm registrant… would attest that no such prohibited conduct has occurred each time the registrant provides such capital markets services to a reporting issuer with whom it had a commercial banking relationship.”
According a Globe and Mail report, however, Big Six banks TD Bank, CIBC and BMO have sent the comments to the taskforce arguing that the proposal would lead to issuers looking to foreign banks for commercial loans.
They also argued that the practice is “both legal and advantageous to issuers as long as it is not done coercively and does not breach existing anti-competition rules,” according to the Globe and Mail report.
The taskforce will be submitting its final recommendations to the province’s Ministry of Finance in the coming weeks.
