It took 16 pages but when there was question that Manitoba was not in favour of a national securities regulator the content came through within the final paragraph.
“The existing regulatory scheme has capably met the requirements of investors, market participants and businesses in Manitoba by managing risks during the 2008 global financial crisis,” said Donald Murray, chair of the Manitoba Securities Commission.
Murray made those comments in an affidavit filed to the court of Benefit of Quebec. It was filed there because that province is preparing a constitutional challenge towards the draft federal legislation. Contained in Murray’s filing was a 127-page paper, titled Securities Regulation and Systemic Risk, prepared by Eric Spink, an Edmonton-based lawyer
In Murray’s view, because the 2008 crisis, the provincial securities regulators in co-operation with the CSA has placed “a renewed emphasis on identifying and managing potential systemic risk.” He points, for instance, towards the 2009 CSA decision to set up a Standing Committee on Systemic Risk, a group that identifies and monitors “systemic risk” in capital markets.
While the proposed federal regulations have yet to be drafted, what bothers Murray is that when they are, they will inevitably “replicate” exactly the same day-to-day regulation and control over risks within the securities industry. And that entry “is currently inside the ambit of the Commission along with other provincial securities regulators across Canada.”
With a hearing scheduled for November, Canada and British Columbia are scheduled to file their evidence by early May with factums due within the summer. By then you will see a large number of pages of documents.
THE RATE RESET RUSH
It’s been an area day – or more specifically an area couple weeks – for banks trying to raise non-viable contingent capital by means of five-year rate-reset preferred shares and for investors wanting to purchase them.
Since Jan 1, seven financial issuers have started to the marketplace and playing $2.95 billion in proceeds with many of the deals having being upsized. Here’s the roll call: National Bank ($400 million up from the planned $250 million); Royal Bank ($750 million up from $300 million); TD Bank ($700 million vs $300 million); Laurentian Bank ($100 million using the possibility of one more $50 million); and Bank of Nova Scotia ($500 million vs $300 million.) Another issuer is Manulife Financial which raised $400 million in contrast to an initial goal of $300 million.
Canadian Western Bank is the latest to boost capital in this form: on Thursday it came to the market seeking $100 million of five-year money at 6.25 per cent. That yield consists of a base rate (the five year Canada bond rate) plus a spread of 5.47 percent. If demand is sufficient the underwriters will sell another 600,000 pref shares and raise $15 million. This really is CWB’s third deal with its newest being in February 2014 if this raised $125 million at 4.4 percent along with a spread of 276 basis points.
So what’s the attraction of those securities?
First, the current form of rate resets differs from the sooner version: the brand new structure complies with the brand new rules laid down by global regulators and convert to common shares in a so-called trigger event. While such an event is recognized as unlikely, there is still a danger.
Second, the yields are attractive with spreads being in the 450 C 550 basis points range.
bcritchley@nationalpost.com
