If you thought Canada's "own the podium" mantra for the winter Olympics ran counter to the country's image as a haven of niceness and passivity, wait until you hear how they treat their banks.

Speaking in New York Tuesday, Julie Dickson, Canada's chief financial regulator, described a system in which troubled institutions are given a short leash while they try to work out their problems and corporate ambitions generally are forced to take a back seat to depositor protection. Investment banks answer to the same regulator as the holding companies that own them, and capital requirements and leverage restrictions are, as global standards go, rather robust.

These qualities helped keep the Canadian banking system shored up during the worst of the financial crisis, and they exist because regulators there have clear mandates, ample power and a strong sense that how they carry out their supervisory duties is at least a important as the specific rules they are meant to enforce, said Dickson, Canada's superintendent of financial institutions.

In a speech titled "Too Focused on the Rules: The Importance of Supervisory Oversight in Financial Regulation," Dickson drew a sports analogy, likening supervisory work to game officiating. Referees try to complement the rule books by talking with players and coaches about what is expected and by making calls regarding what is, and is not, acceptable behavior.

"The rules are important, but ultimately it is the referees who control the flow of the game," Dickson told the audience at the Samuel and Ronnie Heyman Center on Corporate Governance at Yeshiva University's Benjamin N. Cardozo School of Law.

Too few countries have clearly laid out the questions that supervisors should be asking of financial institutions, the specific work they should be doing when they are on site and the protocol for how quickly or how forcefully they should sound the alarm when they see trouble on the horizon, Dickson said. Instead, reform efforts to date seem more preoccupied with capital levels and activity restrictions and strategies for resolving the too-big-to-fail issue.

"I'm not saying that we should spend less time on the rules … , but equal attention should be paid to supervision," she said.

She was diplomatic in assessing this week's regulatory reform proposal from Senate Banking Committee Chairman Chris Dodd, saying it is difficult for her to comment on another country's approach and that the United States faces some challenges that Canada does not, such as deciding which regulators should oversee which banks. (In Canada, the Office of the Superintendent of Financial Institutions oversees all parts of all federally registered banks, insurance companies and pension plans.)

But she told the audience she is a "big fan" of having systemically important institutions prepare contingency plans for an orderly wind-down, a process that Dodd would make mandatory under his reform proposal. She passed no judgment on Dodd's controversial decision to put a new consumer financial protection agency within the Federal Reserve, noting that, though Canada has kept its consumer protection functions outside her agency, countries like the United Kingdom would argue that consumer protection and bank supervision should be handled under one roof.

"I'm happy to have it separate so I can focus on solvency," she said.

Dickson is a former consultant who spent 15 years in Canada's Department of Finance before joining the OSFI in 1999. She was appointed to a seven-year term as superintendent in July 2007, just as the financial crisis was unfolding. The Globe and Mail, Canada's largest national newspaper, last year dubbed her the most powerful woman in Canadian banking. She gave much of the credit for the Canadian system's performance through the crisis to the banks themselves, saying they generally managed risk well enough to ward off major trouble.

But she also credited the strong supervisory framework in Canada, which she said was bolstered after a rash of small-bank failures in the 1980s prompted officials to rethink their role in the system. "If your mindset is that a bank failure is a failure of supervision, then you might take your time" before closing weak banks, she said. Not so at the OSFI, which decided it must be "expeditious" in handling troubled companies, she said.

It is a stance that might be rooted in the language of Canada's constitution.

"We're based on peace, order and good government, as opposed to life, liberty and the pursuit of happiness," Dickson noted half-jokingly. "So it's a big difference."

Canadian banks' relative strength has given rise to speculation about their appetite for U.S. acquisitions. Dickson said her office would "neither encourage nor discourage" expansion in the United States, but she confirmed press reports from last month that the OSFI would want any big acquisitions financed through the issuance of new shares.

Between the lack of clarity on new capital requirements and continuing concerns about the economy, "we wouldn't like to see a decline in capital rates," Dickson said. "So we've said, 'If you want to do a material transaction, fund it in such a way that your capital (ratios) don't go down.'"

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