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The California incubator EvoNexus is opening a 6,000-square-foot space with support from “founding sponsors” RBC and New York-based investment management firm Franklin Templeton. “We want to have a better understanding of how technology like 5G and IoT (internet of things) will evolve,” Eddy Ortiz, vice-president of innovation at RBC, told The San Diego-Union Tribune. The space can hold 15 startups with two to five employees each. (The Logic, San Diego-Union Tribune)

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Talking point: RBC operates a number of innovation labs around the world in Silicon Valley, London, Luxembourg, New York, Orlando and Toronto. The incubators allow the bank to monitor best practices, hire promising software engineers and occasionally acquire startups. In March, RBC CEO Dave McKay said the FAANGs were a threat, and this new fintech incubator is the bank’s latest counter-move. In June 2018, McKay announced a plan to spend $3.2 billion on technology, and in August 2018, RBC partnered with Espresso Capital, a fintech company, to provide loans and banking services focused on the tech industry.

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The central bank will research climate-related risks to Canada’s economy and financial system. The BoC has also joined the Central Banks’ and Supervisors’ Network for Greening the Financial System, an international association of central banks that studies finance for sustainability and environmental projects and produces risk management policies for dealing with climate and environmental issues. (National Observer)

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Talking point: Investors pay attention to the BoC’s warnings about vulnerabilities in the financial system and economy, so more may start to consider climate-related risks following this change. And, while the bank operates mostly independently of the government, Ottawa is increasingly focused on accounting for such risks, including through an Expert Panel on Sustainable Finance set up to advise the environment and finance ministers. The group’s interim report, released in October 2018, said Canada needs better climate data and financial analysis based on that information, as well as regular disclosures from companies about the climate-related financial risks they face. And, the panel shares some people with the BoC—former senior deputy governor Tiff Macklem is the chair, while its creation was inspired by a taskforce established by former governor Mark Carney, now governor of the Bank of England.

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Canada’s sixth-largest bank had $552 million in profit this year compared to $550 million in 2017. Earnings at its financial markets arm declined 17 per cent.  Meanwhile, Laurentian Bank will cut 10 per cent of its staff after profits dropped 33 per cent to $40.3 million in its first quarter. (Globe and Mail)

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Talking point: While the earnings of the big banks have been boosted by their presence in international markets—BMO and Scotiabank both reported growth overseas yesterday—the smaller financial institutions have been hurt by uncertain financial and capital markets.

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The country fell to 23rd in the 2020 edition of the annual index, down one place from the previous year. Canada was overtaken by Germany—which made its contract-complaint system digital—and Thailand, but it surpassed Iceland. (The Logic)

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Talking point: This is the second straight year Canada has dropped in the rankings—it was 18th in 2018—even though the country’s score has increased slightly every year. That means Canada hasn’t been getting worse for business, per the index—other countries have just improved faster. (The country has, however, fallen significantly since 2006, when it ranked fourth.) Ottawa ranks particularly well on one key indicator in the 2020 edition—it’s one of 33 countries that gets top marks because they’re in the top 15 per cent for the total tax and contribution rate mid-sized firms pay. After the U.S. cut corporate taxes in November 2017, business lobby groups argued that Canada’s rates are no longer competitive. In November 2018, the federal government allowed companies to write off equipment and technology purchases faster, but did not cut the overall rate.

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François-Philippe Champagne overruled a decision by an independent panel tasked with determining how much Pierre Lavallée should be paid. The effect of the minister’s intervention isn’t known—the government claims it is a cabinet confidence—but Lavallée’s maximum compensation was set at $1.5 million in year one, rising to $2.8 million in year five. The news came a few hours after Conservative leader Andrew Scheer called the bank a “boondoggle in waiting,” as part of a speech about cutting federal spending. (Globe and Mail, CBC)

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Talking point: The bank was given $35 billion and a mandate to build massive infrastructure projects across Canada, but it’s spent much of the past year talking about executive compensation and approving very few projects. It has so far announced just seven, totalling less than $4 billion in commitments. That falls far short of the initial grand ambitions for the bank. In August 2018, The Logic reported that a high-level government panel planned for it to bring in up to US$2.5 trillion in private-sector investments focused on projects with national scale, like doubling the flow of goods in Western Canada and slashing congestion in Canada’s biggest cities. Meanwhile, its 40 employees have an average annual salary of $392,000; at Investment Ontario, a similar organization at the provincial level, only four employees make more than $300,000 a year.

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The American bank, part of global financial services firm JPMorgan Chase, has stopped collecting debt payments owed on its Amazon and Marriott Visa cards in Canada after cancelling the rewards programs in the country in March 2018. The company has not said how many Canadians used the cards or how much debt was outstanding. (CBC)

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Talking point: Patrick Sojka, founder of Rewards Canada, which tracks credit-card rewards programs, said it was likely cheaper for Chase to forgive the debt than to continue paying taxes on—and accountants to deal with—the payments. Still, the bank could have sold the debt to a third-party collector, which would have let Chase recoup some of the funds. A Chase spokesperson said forgiving the debt was “a better decision for all parties, particularly our customers.” The bank’s parent company, meanwhile, is ramping up its presence in Canada: on Wednesday, Toronto-based FreshBooks announced its biggest fundraise to date, led by JPMorgan.

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Nicholas Hann joined the Crown corporation in October 2018. The agency was set up in 2017 to spend $35 billion in government funding and attract institutional investors to major projects. The executive reviewed potential projects and recruited staff. Hann did not explain why he was leaving, but said he would be willing to return if unspecified circumstances changed. (Globe and Mail)

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Talking point: Infrastructure executives reportedly complained to bank officials at an industry conference earlier in July that the agency was too slow to review and approve projects. The bank has announced $3.33 billion in funding so far, including a $1.28-billion loan for an already in-progress electric rail line in Montreal. That’s despite Ottawa prioritizing swift approvals and quick results. In 2017, the government set up an advisory group of civil servants to evaluate potential Infrastructure Bank projects and recommend financing options to the cabinet, before the agency had officially launched or hired a chief executive. In a December 2017 letter, then-infrastructure minister Amarjeet Sohi wrote that he hoped it “can make some early investments to clearly demonstrate the value of its model.” And, as my colleague Zane reported in August 2018, the bank was meant to encourage private-sector investment by de-risking large projects by paying for upfront costs like technical drawings, risk assessments and permits.

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TD reported that its earnings from Canadian retail rose just 0.9 per cent, while the bank’s U.S. retail division increased by 29 per cent. CIBC’s U.S. commercial banking and wealth management division saw 18 per cent growth, while its personal and small business banking division fell 2.4 per cent to $570 million. Scotiabank and BMO report their results next week. (Bloomberg)

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Talking point: Other recent quarterly banking reports have also pointed to markets outside Canada as a key growth opportunity. In early February, BMO and Scotiabank said their earnings got a boost from international markets. At the time, Scotiabank said its Canadian banking unit was down three per cent, while its international banking earnings grew by 17 per cent, helped by acquisitions in Latin America. BMO CEO Darryl White said the U.S. was a “key strategic focus: “Gross domestic product in the U.S. is expected to grow 2.6 per cent this year, compared to Canada’s 1.5 per cent, making the former a much larger market than at home.

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Seventy offshore shell companies were used to move about $6 billion from Russia to the west, according a leak of 1.3 million banking records. The leaks also show that companies—particularly those working with the now-defunct Lithuanian bank Ūkio bankas—appear to be using Canadian addresses to launder money. (Globe and Mail, The Guardian)

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Talking point: Previous leaks, including the Panama Papers, showed that many wealthy Canadians use shell companies and are rarely successfully pursued by the Canada Revenue Agency for any owed taxes. These leaks seem to show that money launderers have caught on to the lack of regulatory oversight in Canada. Part of the problem is that Canada lacks a national company registry, and many provincial registries charge significant fees and their records can’t be directly accessed online. Canada’s growing role as a shell-company base brings in a tiny amount of money via registration fees, but the real cash remains offshore.