Scotiabank warns of over-regulation of industry

Moira Baird
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Scotiabank CEO Rick Waugh told shareholders the bank's arrival in Newfoundland in 1894 was one of its first forays into international banking.

The bank held its first annual meeting in the province at a hotel in downtown St. John's.

"Newfoundland has been a part of our history since 1894, and that makes us the oldest active bank in the province," said Waugh.

Rick Waugh, chief executive officer of Scotiabank, in St. John's Thursday. - Photo by Keith Gosse/The Telegram

Scotiabank CEO Rick Waugh told shareholders the bank's arrival in Newfoundland in 1894 was one of its first forays into international banking.

The bank held its first annual meeting in the province at a hotel in downtown St. John's.

"Newfoundland has been a part of our history since 1894, and that makes us the oldest active bank in the province," said Waugh.

"We are the leading bank here, as measured by the most important measure of all - the number of customers we have on the island."

Scotiabank arrived shortly after two of Newfoundland's three banks failed in December 1894, following years of loans to already indebted fish merchants, some of whom were bank directors, and troubles in the fishery and an economy dependent on that industry.

These days, Waugh said crude oil is a core resource for both the Newfoundland and Canadian economies.

He attributes the strength of the Canadian dollar, which hit par with the U.S. dollar this week, to stronger prices for commodities such as oil.

"I think oil will have a long-term upper trend, but it's going to be volatile - there'll be ups and downs," Waugh told reporters.

That trend will depend on continued, although slow, growth in the global economy.

Asked what he thought of forecasts pegging the price of oil above $80 per barrel during the next year, Waugh said they are "very reasonable."

"Again, it'll move up and down."

Waugh told shareholders over-regulation of the global banking industry could create more problems than it solves -especially for Canadian banks that escaped the 2008 credit crunch relatively unscathed.

He said this could happen under proposed global banking reforms known as Basel III.

"There is a real danger that Canada will perhaps, inadvertently, be significantly weakened by these reforms."

He said Canadian banks chose not to invest in "heavily toxic assets like subprime mortgages and derivatives as so many others did."

Canadian banks fared better, he said, because of the country's unique mortgage market.

"This now may be in peril. Canadian banks could actually be forced to securitize and sell our mortgages - one of our best assets and a key factor that allowed us to manoeuvre through this crisis."

Waugh said the Canadian model has worked well and should not be damaged by reforms "as others try to cover the failures of their own financial sector."

Last year, Scotiabank reported profits of $3.5 billion on revenues of $14.7 billion. In 2008, the bank earned $3.1 billion from revenues of almost $11.9 billion.

Waugh said Scotiabank's performance last year "reflects the ongoing strength and the stability of our bank" despite difficult economic times.

Bank compensation

Scotiabank faced questions from some shareholders about executive compensation. Last year, Waugh earned $9.9 million in salary, bonuses and stock options - up from $6.4 million in 2008.

Robert Verdun, a shareholder from Kitchener, Ont., who regularly attends bank annual meetings, labelled Waugh "the $10-million man."

"No one is worth that kind of money just for showing up at work, period. You didn't invent the Blackberry."

Verdun also congratulated the bank on the election of David Dodge, the former governor of the Bank of Canada, to its board of directors.

The 62-year-old Waugh said he started with Scotiabank in 1970 as a teller in Winnipeg. He made $7,400 a year.

"I never ever dreamed I'd be earning this kind of salary," Waugh told reporters. "So I say to all our great Scotiabankers, if it can happen to me, it can happen to you."

He said the bank aims to be competitive with executive sala-ries.

"We want great talent in our banks, and our talent is so good it's in demand - not only here in Canada, but globally."

Louise Champoux-Paille of the Quebec-based shareholder rights advocacy group MEDAC, said the Waugh's compensation grew by 29 per cent, even though the total shareholder return grew by just one per cent on a three-year basis.

MEDAC, le Mouvement d'education et de defense des actionnaires, submitted two proposals to Scotiabank shareholders calling for:

more competition among directors to fill seats at the boardroom table;

disclosure of "fairness ratios" showing the difference in compensation paid to senior executives and average employees.

The bank recommended shareholders vote against both proposals - and they did so by more than 90 per cent.

MEDAC has made similar proposals at shareholder meetings of other Canadian banks.

mbaird@thetelegram.com

Organizations: Scotiabank, MEDAC, Bank of Canada

Geographic location: Newfoundland, St. John's, Canada U.S. Kitchener Winnipeg

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Recent comments

  • Bjorn Button
    June 21, 2012 - 13:38

    This bank has offered greatmortgages for the last century to Newfoundland residence. I hope new regulations does not prevent them from offering the same great services they have offered to me and my extended family over the last half century.

  • Janie Graham
    October 27, 2011 - 12:58

    I think that our banks are trying the best they can to remedy what happened back in 2008. However, for the moment, it's perfect for people to go out and purchase foreclosure homes and try to do a good deed by selling them to people who really need them at a reduced price.

  • Polly
    July 02, 2010 - 13:27

    It has been been suggested that a branch of The Bank of Nova Scotia in Edmonton , has allegedly given The Minister of State for the Status of Women Helena Guergis , a mortgage for the full cost $880,000 of an Ottawa home without requiring a down payment . Is the Scotiabank a subsidiary of The Bank of Nova Scotia ?

  • James
    July 02, 2010 - 13:15

    Yes, Polly, they are one in the same. Several years ago Canadian banks, in an effort to shed their Canadian (provincial) images opted to re-brand themselves so they would be seen as more serious players on the world stage. Bank of Montreal became Mbanx; Toronto Dominion became TD; the Royal Bank of Canada, RBC; and the Bank of Nova Scotia, ScotiaBank.

  • Steve
    July 02, 2010 - 13:15

    I am much afraid that Mr.Waugh must be living in a fantasy land if he thinks people have the appetite to allow the banks to have more freedom.

    I think we have already witnessed first hand what happens when you allow the banking industry to basically - police - themselves.

  • Max
    July 02, 2010 - 13:14

    Rick is just another fat cat who doesn't want regulation of the banking industry for his own personal gain.

    Verdun is right, this guy is now writing his own pay cheque while sucking every last dollar out of consumers. His . . . it could happen to you is just a recycling of the old American Dream. The sooner banks, drug companies and insurance companies are legislated into good corporate citizens, the better off society will be . . .

  • Patrick
    July 02, 2010 - 13:11

    Excellent article. Hopefully whatever regulations are finalized will allow our banks to build on their strengths and keep our borrowing costs down.

  • Polly
    July 01, 2010 - 20:15

    It has been been suggested that a branch of The Bank of Nova Scotia in Edmonton , has allegedly given The Minister of State for the Status of Women Helena Guergis , a mortgage for the full cost $880,000 of an Ottawa home without requiring a down payment . Is the Scotiabank a subsidiary of The Bank of Nova Scotia ?

  • Steve
    July 01, 2010 - 19:55

    I am much afraid that Mr.Waugh must be living in a fantasy land if he thinks people have the appetite to allow the banks to have more freedom.

    I think we have already witnessed first hand what happens when you allow the banking industry to basically - police - themselves.

  • James
    July 01, 2010 - 19:55

    Yes, Polly, they are one in the same. Several years ago Canadian banks, in an effort to shed their Canadian (provincial) images opted to re-brand themselves so they would be seen as more serious players on the world stage. Bank of Montreal became Mbanx; Toronto Dominion became TD; the Royal Bank of Canada, RBC; and the Bank of Nova Scotia, ScotiaBank.

  • Max
    July 01, 2010 - 19:54

    Rick is just another fat cat who doesn't want regulation of the banking industry for his own personal gain.

    Verdun is right, this guy is now writing his own pay cheque while sucking every last dollar out of consumers. His . . . it could happen to you is just a recycling of the old American Dream. The sooner banks, drug companies and insurance companies are legislated into good corporate citizens, the better off society will be . . .

  • Patrick
    July 01, 2010 - 19:48

    Excellent article. Hopefully whatever regulations are finalized will allow our banks to build on their strengths and keep our borrowing costs down.