It took Finance Minister Jim Flaherty the better part of a year to decide that Julie Dickson was up to running Canada's banking regulator. Now, it's taking him just as long to find someone good enough to replace her.
Ms. Dickson confirmed eight months ago that she planned to retire as head of the Office of the Superintendent of Financial Institutions, or OSFI, in July – the conclusion of her seven-year term. Mr. Flaherty had hoped to find a replacement by the end of 2013, an unofficial deadline that came and went without an announcement.
"The process is under way," said Marie Prentice, Mr. Flaherty's press secretary. "The process won't be dragged out unnecessarily, but we will take as long as we need to take."
Prime Minister Stephen Harper's government tends to take its time in making major appointments. Mr. Flaherty waited more than five months after Mark Carney announced that he was leaving the Bank of Canada to appoint Stephen Poloz as the new governor; and, Mr. Poloz's old job as the head of Export Development Canada remains unfilled.
Yet, the delay in hiring a new banking watchdog could reflect more than a tendency to procrastinate. Unlike recruiting someone to run a major central bank, the job of luring talent to a financial regulator is more difficult business. Some top-notch economists dream of becoming central bankers, but many of the best minds in finance are drawn to the private sector, where compensation is measured in seven and eight figures. Canada's superintendent of financial institutions is paid a salary that falls in the range of $260,600 to $305,800.
Ms. Dickson's replacement will be charged with keeping tabs on a banking system that has spent years doling out home loans to Canadian households, which now are carrying record levels of debt. The head of OSFI also plays a central role in Ottawa's oversight of the broader financial system as chair of a multiagency committee that includes the Finance Department, the Bank of Canada and Canada Deposit Insurance Corp.
The future also could bring major changes to the structure of Canada's financial system, as Mr. Flaherty is in the midst of a review of whether there is enough competition among the country's lenders.
"The issues facing the new superintendent will not be trivial," said Ian Lee, a former banker who now is an assistant professor of management at Carleton University's Sprott School of Business.
A superintendent must walk a fine line with the companies they oversee. Ms. Dickson demonstrated an ability to listen to, but also push back against, CEOs of banks and insurers in conversations that often became quite heated, according to sources that have dealt with her. She is also known to ask tough questions of directors on boards.
"I am worried about Julie Dickson leaving and getting a good replacement for her," Mr. Flaherty said in an October interview on the sidelines of an international gathering of finance officials in Washington. "It's a very difficult job and it's an unpopular job. It's probably worse than being finance minister."
Ms. Dickson is a lifelong public servant who began her career at the Finance Department in the 1980s. She contributed to the creation of OSFI in 1987 and went on to lead the regulator through its most challenging period – the global financial crash of 2008.
No Canadian bank failed. Yet she only got the job after no better candidate turned up. Mr. Flaherty left her as acting superintendent for eight months.
A superintendent must be able to understand not only how to regulate things like capital and leverage ratios, but to look beyond the numbers to assess where hidden risks might lie within a bank.
"It is impossible to avoid [a bank] failure by fine-tuning a simple leverage ratio – the practical meaning of a leverage ratio depends on the quality of the underlying assets and the risks embedded in that asset portfolio," said Finn Poschmann, vice-president of research at the C.D. Howe Institute. "Assessing that quality, like the decisions that go into building that portfolio, are matters of judgment, and the quality of that judgment depends crucially on who is doing it."
Mr. Flaherty may look inside OSFI for a successor. There currently are two deputy superintendents, an unusual arrangement that some in Ottawa say may reflect Ms. Dickson's aversion to being seen to favour either of her top two lieutenants as her successor.
Mark Zelmer, a former chief of the Bank of Canada's financial stability department, represents OSFI at the Basel Committee on Banking Supervision, the global club of financial regulators that sets world banking standards, and has been taking on an increasingly public role in recent months.
The other deputy is Andrew Kriegler, who joined OSFI in February, 2013, after more than two decades on Bay Street, most recently as treasurer at Canadian Imperial Bank of Commerce.
Another possibility is Robert Kelly, chairman of Canada Mortgage and Housing Corp. and the former chief executive of Wall Street bank BNY Mellon, although he would presumably have to step down from his relatively new post at CMHC because OSFI regulates it.
The choice has added significance because Ottawa's ranks of financial experts – a strength that helped Canada weather the financial crisis – are thinning quickly.
Ted Price, an OSFI veteran and Ms. Dickson's deputy during the crisis, retired last year, prompting the hiring of Mr. Kriegler. Mr. Carney, the former Bank of Canada governor, is now running the Bank of England. And Bank of Canada senior deputy governor Tiff Macklem, who developed a wide array of contacts in international banking as an associate deputy minister at Finance, will leave the central bank in the spring to become dean of the University of Toronto's Rotman School of Management. There are rumours in Ottawa that Michael Horgan, the deputy minister at Finance, also soon could retire. Finance spokesman Jack Aubry declined to comment.
"I miss Mark," Mr. Flaherty said in October. "He was very good. He and I were close. I'm going to miss Julie. I don't know how long my deputy minister is going to stay. So I am a little concerned."