National Bank of Canada NA-T chief executive officer Laurent Ferreira is calling on Ottawa to remove regulatory barriers crimping productivity and straining quality of life for Canadians.
During the bank’s annual shareholder meeting Friday, Mr. Ferreira said the federal government must incentivize investment within Canada’s borders. He added that the capital-gains tax increase announced in the federal budget earlier this week threatens to further drag on investment, innovation and wealth creation in the country.
“Starting up a business, you’re going to think twice about where you’re going to set yourself up. … It’s not positive for investments in Canada and that goes back to productivity,” Mr. Ferreira said in an interview. “We need to reduce tax burdens for small and medium enterprise in Canada. The most important thing is to provide the right environment to attract talent and capital.”
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In the budget, the federal government outlined new rules on capital gains, requiring some businesses and individuals to pay tax on two-thirds of their capital-gains earnings, climbing from one-half, when they sell assets, including stocks and property. The change would dampen profits while Canadians are already dealing with higher borrowing costs and expenses.
In March, Mr. Ferreira and more than 90 Canadian business leaders signed an open letter to Finance Minister Chrystia Freeland and provincial governments, asking them to adjust investment rules to encourage pension funds to invest in Canada.
A few weeks later, the Bank of Canada warned that the country’s weak labour productivity and low business investment levels pose an emergency that makes it more difficult to ease inflation, which could worsen living standards.
Coupled with high interest rates, Canadian households and businesses are reeling from rising debt and mounting strain on their wallets.
Mr. Ferreira said that by the end of this year, 60 per cent of National Bank’s mortgage clients will have been hit with significantly higher interest rates upon renewal.
“The path of interest rates is going to have an impact,” he said. “It’s going to take another two years before we understand the full impact that it will have on the economy.”
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The budget also included several proposals targeting customer fees in the banking sector.
The federal government plans to limit non-sufficient funds (NSF) fees to $10, slashing the cost from the $35 to $50 range that lenders currently charge when a customer does not have enough money in a bank account to cover a withdrawal or payment. The Financial Consumer Agency of Canada is also negotiating enhanced agreements with banks to update their low-cost bank accounts, including expanding eligibility.
While Canadian banks do not disclose the revenue they garner from NSF and account fees, National Bank analyst Gabriel Dechaine said in a note to clients that an “educated guess” would peg the charges at about 1 per cent or less of total bank revenues.
Mr. Ferreira said that it’s still too soon to understand the full impact of the proposals, but that he does not expect the changes to pose a meaningful hit to the bank’s earnings.
Stefanie Marotta