Canada Needs More of the World
The Empire Club of Canada Addresses (Toronto, Canada), 27 Oct 2005, p. 82-92
Waugh, Richard E., Speaker
Media Type
Item Type
Scotiabank as Canada's most international bank. Some illustratiave statistics. Ways in which Canada needs more of the world. The need to embrace internationalism. Factors changing the world's economic landscape. The need to recognize these trends and embrace the opportunity they present. A note of caution and the need to focus. The trends and what they mean to us. Globalization; Demographics; the re-emergence of consolidation - a discussion of each. Demonstrable evidence of what Canadian business has to do to grow and succeed globally, as well as to grow and enhance our productivity here at home.
Date of Original
27 Oct 2005
Language of Item
Copyright Statement
The speeches are free of charge but please note that the Empire Club of Canada retains copyright. Neither the speeches themselves nor any part of their content may be used for any purpose other than personal interest or research without the explicit permission of the Empire Club of Canada.
Empire Club of Canada
Agency street/mail address:

Fairmont Royal York Hotel

100 Front Street West, Floor H

Toronto, ON, M5J 1E3

Full Text
Richard E. Waugh
President and CEO, Scotiabank
Canada needs more of the world
Chairman: William G. Whittaker
President, The Empire Club of Canada
Head Table Guests

Bart J. Mindszenthy, APR, Fellow CPRS, Partner, Mindszenthy & Roberts Corp., and Immediate Past President, The Empire Club of Canada; Ira Bernstein, Grade 12 Student, North Toronto Collegiate Institute; Grant Kerr, Pastoral Staff, St. Paul's United Church, Brampton; Georgina Steinsky-Schwartz, President and CEO, Imagine Canada; The Hon. Barbara McDougall, Advisor, Aird & Berlis, and Former Cabinet Minister; William A. Mackinnon, CEO, KPMG; Rocco Rossi, CEO, Heart and Stroke Foundation of Ontario, and Director, The Empire Club of Canada; Douglas McCuaig, Senior Vice-President and General Manager, Greater Toronto Area and Atlantic Canada, CGI Canada; Helen Burstyn, Chair, Trillium Foundation; and Robert Courteau, President and Managing Director, SAP Canada Inc.

Introduction by William Whittaker

Mr Waugh is the fourth speaker in our "Bankers Speak" series sponsored by SAP Canada Inc. Our previous speakers spoke about Canadian banking from a Quebec perspective and a foreign bank perspective. Today, Mr. Waugh will speak about the impact of globalization on Canada and the Canadian banking system.

Before introducing Mr. Waugh, I would like to quote the following passage from Stephen Leacock's well known humorous essay on Canadian banks entitled "My Financial Career":

"When I go into a bank I get rattled. The clerks rattle me; the wickets rattle me; the sight of the money rattles me; everything rattles me...

So I shambled in and looked timidly around at the clerks. I had an idea that a person about to open an account needs to consult the manager.

I went up to a wicket marked 'Accountant'... 'Can I see the manager?'...

'Certainly,' said the accountant and fetched him.

'Are you the manager?' 'Yes,' he said.

'Can I see you,' I asked, 'alone?'

'Come in here,' he said, and led the way to a private room.

'I have come to open an account. I intend to keep all my money in this bank.'

'A large account, I suppose,' he said.

'Fairly large,' I whispered. 'I propose to deposit $56 now and $50 regularly.'

The manager got up and opened the door. He called the accountant.

'Mr. Montgomery,' he said unkindly loud, 'this gentleman is opening an account; he will deposit $56. Good morning.'"

The stereotypes of Leacock's day--the lordly bank manager, the compliant teller and the humble customer--no longer apply in present-day Canadian retail banking (although some may argue they still apply to business banking). Today, retail customers interface with their bank via the Internet or bank machine and rarely visit their branch in person. In addition, bank powers have expanded considerably since Stephen Leacock's time. In the 1960s, Canadian banks received the power to lend to individuals, which led to a broad expansion of their branch networks. In the 1980s and 1990s, the banks were given the right to purchase brokerage and trust companies, which has resulted in the full spectrum wealth management institutions we know today.

The Bank of Nova Scotia or to use its acronym, "Scotiabank" (acronyms are so de rigueur today!), predates Canada. It commenced operations in Halifax in 1832 to facilitate transatlantic trade between Britain, North America and the West Indies. Beginning in the 1880s, the bank expanded westward across Canada, resulting in a coast-to-coast branch network by the early 1900s.

With the deregulation of financial services in the late 1980s and '90s, the bank diversified through major acquisitions including the investment dealer McLeod Young Weir and trust companies, Montreal Trust and National Trust. The most international of Canada's major banks, the Bank of Nova Scotia, opened a branch in Kingston, Jamaica, in 1889 which has evolved into a network spanning 25 countries throughout the Caribbean and Central and South America, making Scotiabank the largest Canadian bank in this region. The bank also provides international commercial, corporate and trade finance banking services for its business customers.

Richard Waugh became Chief Executive Officer of the Bank of Nova Scotia in December 2003, having begun his career with the bank in Winnipeg in 1970. From 1985 to 1993, he was chief of the bank's U.S. operations and played a pivotal role in its development there. From 1993, Mr. Waugh had increasing responsibilities for the bank in corporate banking, international banking and wealth management. He is part of the Winnipeg mafia in Toronto and rose to prominence via the bank's banking operations and not its brokerage business, much to the relief of the bank's shareholders, given the recent experience of certain other Canadian banks.

Please note these last remarks are mine and are not included in Mr. Waugh's biography!

Ladies and gentlemen, please join me in welcoming Richard Waugh, President and Chief Executive Officer of the Bank of Nova Scotia.

Richard Waugh

Thank you very much, Bill. It's a pleasure to be here at the Empire Club today.

It's a particular pleasure for me to be here representing Scotiabank. While many people know us as the bank around the corner here in Canada, not as many know we're also a bank around the world. In fact, we're Canada's most international bank, with more than 50,000 employees serving 10 million customers in some 50 countries.

In the U.S., we focus on corporate and investment banking. We have long-standing relationships with many Fortune 1000 companies--built over the past 30 years--that are a solid base for future growth.

Importantly, we have a significant presence in Mexico, through Scotiabank Inverlat. Scotiabank is a major bank in Mexico, with more than 400 branches and almost 7,000 employees.

We're the leading and largest bank in the Caribbean and the oldest bank in the Dominican Republic, with more than 80 years in the country. Last year, we celebrated our 115th anniversary in Jamaica. We are the only large international bank with a presence in four of the seven countries in Central America: Panama, Costa Rica, Belize and El Salvador. In fact, we have a 17-per-cent market share in El Salvador.

In South America, Scotiabank has full operations in Chile through our subsidiary, Scotiabank Sud Americano, and we also have affiliates in Peru and Venezuela and a representative office in Brazil.

And we're in nine countries throughout Asia, including China and India, with a history of 25 to 30 years in most of these countries.

Again, what many people don't realize is that in most of the countries where we operate, we're not seen as a global bank, but rather as a local bank. We employ people from the surrounding area, invest in the local community and provide day-to-day banking products and services, such as mortgages and chequing and savings accounts.

I mention all this as a backdrop to the comments I really want to make today, and to acknowledge my bias, because my message for Canada and Canadian businesses is a simple one. I'm borrowing a point here that the Globe and Mail's Jeffrey Simpson made. That is, you may have heard the Chapters slogan: "The world needs more Canada." Well, what I want to talk about today is the other side of that same coin. Canada needs more of the world.

Never has it been more important for our country--our businesses and our government--to be embracing internationalism.

My first point is that key trends of globalization--the extraordinary growth of emerging markets, changing world demographics and global consolidation--are forever changing the world's economic landscape.

My second point is that we, as business leaders and as a country, need to recognize these trends and embrace the opportunity they present, or we--our country and our companies--risk being marginalized in our ability to compete and to enhance our productivity. And given the political realities in Ottawa, and the related lack of serious policy development, business is left on its own and must assume a leadership role and take the initiative.

My third point is one of caution and the need to focus. I very much support the view that globalization, which includes the enormous markets of China and India, is our future. But I believe the near-term opportunity for us, here in Canada, is closer to home, specifically in the Americas.

What I'd like to do this afternoon is discuss these trends and talk about what they mean for all of us. And as I said, my main conclusion is that Canada needs more of the world.

Let's start with globalization.

As the Pulitzer Prize winner and New York Times journalist Tom Friedman's latest book says, "The world has become flat, everyone is at the table as competitors, customers, suppliers, no matter where you call home."

In recent years, globalization has been driven by the warp speed of technological change, driven by the Internet and the digital world, particularly the effect of telecommunications, its rapidly falling cost and its availability to everyone--small and large countries, big companies and small companies, and now to individuals almost anywhere. All of this requires an unprecedented degree of co-operation to capitalize on the flow of trade and investments and, importantly, information. An unprecedented degree of collaboration among countries, companies and individuals is needed to succeed.

Consider that between 1995 and 2003 global cross-border capital flows more than tripled to $4 trillion annually. Foreign holdings of financial assets are increasing almost everywhere. International issues of corporate debt are growing more than three times as fast as domestic issues. Global liquidity is crossing almost all boundaries.

The emergence of rapidly developing countries on the world economic stage is a tremendous phenomenon. The firm Mercer Oliver Wyman estimates that the economies of Brazil, Russia, India and China could be half of the size of the G-6 by 2025, versus just 15 per cent today.

Countries that were largely closed are now embracing the global economy and increasingly have the means to do so. This is not only led by government policy or direction, but by individuals acting independently, accessing the available technology as I mentioned--the Internet and other telecommunications--and interacting with the world.

Overall price trends are being shaped more and more by what is happening on a global context in terms of both supply and demand. More and more production of goods and tradable services is gravitating to low-cost regions, forcing structural changes in economies far away, like Canada's.

One obvious example of emerging market influence is the growth of outsourcing and offshoring.

In financial services, for example, an increasing number of firms are taking advantage of this new reality by shifting and redirecting many of their costs and services offshore. Some estimates indicate that up to 20 per cent of financial services' global cost base will shift offshore by the close of this decade.

Another key trend besides globalization that will propel businesses towards markets outside Canada--especially emerging markets--is demographics. The world population is undergoing a massive demographic shift. Not only is population growth slowing, but the age structure of the population is changing. The story quite simply is about an aging population and aging work force in the developed world--a Baby Bust--and a younger population entering the work force in developing markets.

In countries such as ours population aging is well under way, whereas in Latin America, for example, the transition is less advanced and the working age population will continue to grow. Let's turn to Mexico as an example. It has by far the most youthful population in North America, with a median age of just 22, compared with 35 in the United States and 38 in Canada.

What does all this mean? It means there is a good chance we will see significant changes in saving and investment balances, with younger populations tending to consume and borrow more and save less.

Obviously, this development can have a tremendous impact on capital flows and wealth and business opportunities for all of us. For countries with increasing working age populations and consumption, it will lead to stronger per-capita GDP growth in these regions, in essence, a rebalancing of growth to countries with younger populations.

This demographic reality is also part of the underlying rationale for businesses looking to expand in emerging markets. Young people, as they enter the economic sector, consume. They will buy technology products and appliances--stoves and fridges--then cars and finally homes. As such, economies with young populations are very appealing. This is a key factor in the overall attractiveness of the Americas.

The third major trend I want to touch on, really a reaction to globalization, is the re-emergence of consolidation. Global merger and acquisition activity is on the rise. The value of worldwide mergers and acquisitions increased by almost 50 per cent in the first three quarters of 2005, compared to the same period in 2004.

In the global banking industry, mergers and acquisitions more than doubled from 2002 to 2004, reaching more than $230 billion in terms of the value of the deals. And consolidation today is shaping up differently. The global merger boom of the late 1990s was largely the result of domestic, in-market mergers.

Now, more businesses are looking to international expansion in the pursuit of growth and many, such as Scotiabank, with a particular emphasis on acquisitions in emerging markets.

The need for scale to compete internationally is a key factor in driving consolidation. Turning to banks again--and I can't help myself here--a recent Bank of Canada report confirms that Canadian banks could find significant economies through consolidation. They also found that larger banks were more efficient than smaller banks over and above the benefits of scale. Other efficiencies from size result from management skills and the speed of adopting new technologies.

How important to Canada is it that we ensure we turn around what has now been established as declining relative productivity? It's essential if we want to succeed in a global world.

So globalization is positive in supporting strong trade flows and generating wealth, creating great opportunity. But let me turn to my final point, which is one of caution. While globalization is an ongoing process, we're seeing an increasing degree of regionalism. In my view, this is in reaction to the difficulties in negotiating a multilateral agreement on world scale, or more precisely, the absolute lack of momentum with the Doha Round of world trade talks.

Now I fully support the concept of multilateralism at the broadest level and the World Trade Organization. But it's pretty hard to get 130 people to agree to something as complex as trade issues, let alone the 130 countries involved in this round of the WTO talks.

The reality is that this makes regional level agreements that much more appealing. Why should a country like El Salvador wait for a global agreement that may never come? Why should it wait when it can sign CAFTA--the Central American Free Trade Agreement--with other Central American countries as well as the U.S.?

More and more countries are turning to regional trade deals to secure access to markets. You can understand why when you look at the success of our own. The North American Free Trade Agreement was a watershed for Canada, the U.S. and Mexico, and a great example of this. Since the agreement came into force in 1994, trade among the three countries has more than doubled to over US$650 billion a year.

Regionalism is why we're seeing cross-border trade expand. In fact, cross-border trade has been expanding at a faster pace than Gross Domestic Product in recent decades. And its direction is largely north and south.

Trade within the various regions--the Americas, the Euro zone and Asia--will continue to be the driving force of global economic activity.

Over the last decade, we've seen the European countries significantly align themselves regionally in the European Union. CAFTA, which I mentioned, is another regional trade agreement that was recently signed in Central America. As we speak, the Asian economies are looking and acting upon how they can better integrate to establish themselves on a more regional basis.

This is not to suggest globalization--and the incredible potential of China, India and other markets--should be ignored. Quite the opposite; ignore these markets at your peril. But the real growth opportunities today for Canadian business exist in the Americas. These other markets are still a few years away in terms of significant, sustainable returns for foreign investors.

And more important, regardless of whether the WTO falters or not, Canada had better have a strong position to compete against these new regional forces. Our Canadian position should focus on this hemisphere as our first priority, given NAFTA, and our greater potential for influence in the Americas with the relatively large size of our economy in the region. We need to better align ourselves within our hemisphere.

We need to have clear priorities. Canada has talked about diversifying trade away from the U.S. for decades, such as the "Third Option" proposal put together by Mitchell Sharp in the early 1970s. But we haven't been successful, in part, in my view, because we've not had the focus necessary to achieve more or to take advantage of opportunities elsewhere.

So while there is a need to build on our relationship with our largest trading partner, there is a need to expand our regional trade ties. And that focus should be the Americas.

We need policy that is committed to ensuring we have world-class and world-size companies to compete and grow. There are clear areas of advantage we have as a country, such as energy, transportation and financial services, which should be supported in terms of their ability to grow in key international markets. Good policy makes good politics, so I hope our government leaders take notice.

Our bank is playing a part by supporting growth of businesses into new markets, in particular Mexico, a key market for us and a real opportunity for Canadian business.

In September this year, we realigned our Mexican wholesale banking operations, bringing them under the Scotia Capital banner. No other financial institution in Canada or indeed internationally can provide the depth of service to large corporate, government and investor clients that we now have under one roof across the NAFTA region.

This month, we also launched our Global Transaction Banking unit, which provides comprehensive, integrated business solutions to multinational importers and exporters, again in the NAFTA region. And we plan to expand to other regions in the future.

This probably sounds like a self-serving advertisement and shameless self-promotion, and it is! But I also use it as concrete and demonstrable evidence of what Canadian business has to do to grow and succeed globally, as well as to grow and enhance our productivity here at home.

As I said at the outset, Canada needs more of the world. Scotiabank has a strong international focus. We see and believe in the tremendous opportunities for growth in international markets. But there's a need for more Canadian businesses to seek growth in international markets. Today, the Americas offer the greatest opportunity for immediate success.

I'm hopeful that as Canadians we will do just that; that we will recognize and seize the opportunities because not only does the world need more Canada, we need more of the world. Thank you.

The appreciation of the meeting was expressed by Rocco Rossi, CEO, Heart and Stroke Foundation of Ontario, and Director, The Empire Club of Canada.

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Canada Needs More of the World

Scotiabank as Canada's most international bank. Some illustratiave statistics. Ways in which Canada needs more of the world. The need to embrace internationalism. Factors changing the world's economic landscape. The need to recognize these trends and embrace the opportunity they present. A note of caution and the need to focus. The trends and what they mean to us. Globalization; Demographics; the re-emergence of consolidation - a discussion of each. Demonstrable evidence of what Canadian business has to do to grow and succeed globally, as well as to grow and enhance our productivity here at home.