Montreal’s financial sector tested by the black-hole pull of Toronto

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The 2,250 delegates from 80 countries who arrived in Montreal for this week's Global Public Transport Summit landed at an airport plagued by logistical bottlenecks. They took cabs along an expressway so decrepit it is literally crumbling. Once downtown, they navigated an obstacle course of orange pylons testifying to an aging infrastructure in a chronic state of disrepair.

For a city that wants to become a centre of excellence in infrastructure design and financing, Montreal sure doesn't present a pretty face. But behind those God-awful pylons, there is actually a critical mass of expertise, starting with the Caisse de dépôt et placement du Québec and Canada's two largest engineering firms, that the city aims to leverage to realize this goal of becoming an infrastructure hub.

Still, Montreal can use all the help it can get if it is to save what's left of its once-dominant financial sector.

That's why the federal government's decision last week to locate the new Canada Infrastructure Bank (CIB) in Toronto felt like such a punch in the gut among Montreal's business leaders. Coupled with Ottawa's refusal to abandon plans to create a pan-Canadian securities regulator, despite a Quebec Court of Appeal decision last week striking down the plan, there is a palpable sense in Montreal business circles that the Department of Finance has a Toronto bias.

That is especially true now that Prime Minister Justin Trudeau's Liberals are in power. With no Quebec heavyweights in his cabinet or inner circle, and his refusal to designate a Quebec lieutenant to look out for the province's interests, Mr. Trudeau is seen as lacking Quebec antennae. Though he represents a Montreal riding, the Prime Minister is surrounded by big guns, such as Finance Minister Bill Morneau and top adviser Gerry Butts, rooted in Toronto.

Last fall, a group of Montreal business leaders – including Transcontinental's Isabelle Marcoux, Quebecor's Pierre Dion and Metro's Éric Richer La Flèche – wrote to Mr. Morneau to ask him to drop his plan for a Co-operative Capital Markets Authority, arguing the new entity would be "less national than the current system" of regulatory harmonization among the provinces. Not only was their plea ignored, Ottawa just rubbed salt in the wound with the CIB decision.

"So who in Ottawa is defending Montreal?" Montreal Board of Trade president Michel Leblanc asked after Infrastructure Minister Amarjeet Sohi announced the CIB will set up shop in Toronto.

Even the strongly federalist La Presse decried the move, declaring in an editorial that, "if the Trudeau government keeps up the momentum, it could transform Toronto into a force that sucks up [all of] Montreal's financial expertise – into a financial black hole."

That great sucking sound from Toronto is also a concern to Calgary Mayor Naheed Nenshi, whose city was also a contender for the CIB. "I think it's going to be difficult for the infrastructure bank to be creative and innovative when it's surrounded by traditional Bay Street thinking," he told the Calgary Herald.

For the rest of the county, Quebec's refusal to cede or share its jurisdiction over securities regulation might seem contrary to the national interest. And its bid to make Montreal home to the new CIB, an independent Crown corporation that will oversee tens of billions of dollars worth of infrastructure investments in the next decade, might have seemed like wishful thinking.

But from Montreal's perspective, it's not in the national interest to have so much concentration of financial power in Toronto. While a pan-Canadian securities regulator might promise to operate on a consensual basis, it would inevitably become an Ontario Securities Commission by another name. Similarly, locating the CIB in Toronto will put it under Bay Street's spell, giving local financial institutions and executives an inside track on future projects and job offers. That is, after all, how networks operate and why Bay Street restaurants do such a brisk business.

It's not all doom and gloom in Montreal's financial sector, of course. Despite losing its independence in its 2008 takeover by TMX Group, the Montreal Exchange remains the locus of the merged group's derivatives operations. Last year, it hired former HSBC Bank Canada executive Luc Fortin as its CEO, ensuring top management remains in francophone hands. TMX is also consolidating all of its Montreal operations in the new Deloitte Tower, signalling a commitment to maintaining a stable, if not growing, presence in the city.

Meanwhile, local stalwarts National Bank and Desjardins Group are holding their own against the Toronto-based Big Five in the hotly contested retail banking market. The federal Business Development Bank, which specializes in small-business lending, remains headquartered in Montreal. And the Caisse, under Michael Sabia, remains an indefatigable Montreal booster.

Still, without strong defenders in Ottawa, Team Montreal is short-handed a few players.

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