Manulife Exec: Don't Count on Increased Canadian Capital Regulation

Nov.24.09 | About: Manulife Financial (MFC)

By Tara Perkins

Regulators will require financial institutions to maintain higher capital levels in the future, but any changes that Canadian regulators make will likely be small in comparison to those elsewhere, says Manulife (NYSE:MFC) chief executive Don Guloien.

“I actually don’t expect dramatic changes to the capital standards here in Canada,” he says, noting that the country already has one of the most conservative approaches in the world.

Manulife announced last week that it is raising at least $2.5 billion in equity. The primary reason for that was to fund acquisitions, the second reason was downside risk in the economy, and the third reason was that rating agencies, regulators and governments will require insurers to hold more capital following the financial crisis, Mr. Guloien said in an interview Tuesday.

But he says that Europe and the United States are where the greatest potential changes, or the most uncertainty about future capital requirements, are coming.

Mr. Guloien is pleased that Canada’s regulator, the Office of the Superintendent of Financial Institutions, decided some time ago to undertake a thorough review of the capital requirements relating to the segregated funds business.

The rules caused large swings in the amount of reserves that Manulife had to set aside when stock markets rose and fell. In fact, they probably required that too much be set aside in bad times, and too little in good times, Mr. Guloien says.