Good luck or good management?

Welcome to my refreshed site, featuring my new book on Manulife. Yesterday’s excellent cover story in the ROB Magazine on Julie Dickson, head of the Office of the Superintendent of Financial Institutions (OSFI) poked fun at Ms. Dickson’s role versus her profile. The story, Nobody’s Saviour, also featured some detail on what writer Tara Perkins called the “lifeline” Dickson threw to Manulife last fall.

Indeed, OSFI did relax the capital rules a bit, thereby giving Manulife a $2.3 billion boost, but the response was nowhere near what Manulife CEO Dominic D’Alessandro sought. Nor was the relief anything like Dickson could have carried out without in any way weakening the system.

“This could have been solved with the stroke of a pen. The number of technical solutions to this are legion. But we dealt with a particularly entrenched regulator who was unwilling to make compromises that would have made life a little easier for us,” D’Alessandro told me during one of my many interviews with him for the book.

For reasons OSFI has not explained, the regulator treated pension funds far differently than insurance companies. “Our problem is not credit exposure to any of the instruments that are causing everybody else problems. Our problem is that we’ve sold people pension plans. The value of equities collapsed 50 percent in the space of two months. There’s a gap between the assets you gave us to manage for you and their value today. That’s where the problem lies. The reserving that has to be done with respect to that shortfall is astronomical. If it was a sponsored pension plan like IBM or DuPont with a funding deficit, we would have to set aside $660 million dollars. We have to set aside $11 billion,” said D’Alessandro.

Nor did the Globe story mention the role of the CICA, which represents 74,000 chartered accountants in Canada. The organization is still wrestling with the rules it made, six months after the crisis, and has a meeting scheduled later this month to see if changes should be invoked.

No lifelines there. Manulife share price sank as low as $9 before climbing back over $20 yesterday.

For all the talk about how much better the regulation of the Canadian financial services system is compared with what’s happened in other countries, was most of the benefit due to OSFI’s and CICA’s good management? Or just good luck?