Financial Engineering: Building Global Cities

Tara Perkins

From Wednesday's Globe and Mail Published on Wednesday, Nov. 18, 2009 12:00AM EST Last updated on Thursday, Nov. 19, 2009 2:47AM EST

One month after he released Ontario's 2008 budget, Finance Minister Dwight Duncan met with chief executives from the country's major banks, insurers and pension plans at the Toronto Club.

He told them he was concerned about job losses in Ontario's manufacturing industry, and wanted to help offset the pain by strengthening Toronto's financial sector.

The fruits of that discussion are being released Wednesday, at a time when Bay Street leaders say Canada has a brief window of opportunity to capitalize on its new reputation as a relative haven for banks and financial stability.

The so-called Toronto Financial Services Working Group – which was struck after the meeting and is led by Janet Ecker, president of the Toronto Financial Services Alliance, and Don Drummond, chief economist at Toronto-Dominion Bank – had asked Boston Consulting Group (BGC) to come up with a strategy.

The resulting report, to be made public Wednesday, makes a series of recommendations that BCG says could create up to 40,000 jobs and add $5-billion in annual gross domestic product over five years.

The goal, the report says, is to transform Toronto into one of the two most important financial centres in North America and one of the top 10 globally by 2015. The city currently ranks 13th.

“This is the time,” Ms. Ecker said in an interview. “We need good-quality jobs, and this is a good way to get them. Secondly, we have global attention.”

The report focuses on four priorities: creating a global Toronto-based institute for risk management; entrenching Canada's position as the leading hub for mining, metals, and energy financing and trading; becoming a global leader in retirement finance; and building skilled financial services activity clusters.

The working group is already seeking to dampen possible criticism that the recommendations are beneficial to banks and the country's most populous city at the expense of other sectors and regions.

“This economic impact will be a net benefit to Canada – this is not about shifting jobs between provinces,” the report notes.

Between 2003 and 2008, it says, manufacturing employment in the Toronto region fell 3.5 per cent a year, while financial services jobs grew 4.3 per cent. The sector now employs 220,000 people directly, and a total of 350,000 indirectly, making up more than 12 per cent of the jobs in the region.

That growth generated a gain of $6.2-billion in GDP over five years, more than compensating for the $3.8-billion lost from manufacturing, the report says.

Many of the factors that caused Ontario to become an industrial power have shifted away, Mr. Drummond noted. But Toronto is home to two of the top 10 global life insurers and three of the world's 25 biggest banks.

A key recommendation of the report sees the establishment of a global risk management institute that would serve as a think tank and an educational centre, potentially offering academic degrees in risk management.

Another would see Toronto beef up its position when it comes to financing the resources sector. About 7,000 Canadians, including investment bankers, research analysts and traders, are employed in this sector.

The report sets a goal of grabbing 70 per cent of the world's market share when it comes to energy, mining and metals listings. Canada's stock exchanges currently have 43 per cent of energy listings and 55 per cent of mining listings.


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BCG is a leading business and image consulting group with offices in over 60 countries around the world.

Janet Ecker WAS the Education Minister and Minister of Finance under Mike Harris and Ernie Eaves respectively. She is currently the president of Toronto Financial Services Alliance.

What are the social, economic and cognitive pathways that establish the GLOBAL REPUTATION of a city, how is this measured? How concrete or speculative is this?

What are activity clusters? What happens at the TORONTO CLUB, and why isn't we present at their meetings?