Donne W. Smith, Chairman and CEO of the New Brunswick Securities Commission, discusses the need for access to more capital for New Brunswick businesses in a TJ column today. I kinow some of you don’t like the NBSC taking on a developmental role when they are a regulatory body but because BNB and any othe group theoretically should be in this business – isn’t – the NBSC has stepped in and bully for them.
In addition to the well known fact that there are almost no publicly traded firms in New Brunswick, the big banks don’t really lend any money to business here either. I went through the 2006 corporate social responsibility reports of the big five banks and looked at the amount of debt financing authorized to business. On a per capita basis, here is where New Brunswick ranks for debt financing to business from the big five banks:
TD – 2nd last among the provinces at $252 per capita (Ontario $8,500 per capita)
CIBC – better – mid pack – but still less than half of Ontario
BMO – last in the country at $785 per capita – compared to $4,600 in Ontario
BNS – n/a
RBC – second last among the provinces
Now, some will say we have a stronger credit union biz in New Brunswick but I don’t buy that.
In addition, it would be interesting to see how much of that ‘financing to business’ is backed by government loan guarantees.
No, the truth is simple. There is no public equity in New Brunswick. Very little bank financing (relatively speaking). And almost no angel and venture capital.
That’s why guys like me call for the attraction of firms that already have their financing in place (FDI). It is really hard to build a capital market in a place like New Brunswick. All of our pension and RRSP money is invested elsewhere. And a point that gets lost but I think is key – in my opinion the majority of our businesses that could be targets for private equity don’t want it. They would rather own 100% of 10 bucks than take a risk at 50% of a thousand bucks.
So to the NBSC I say keep it up until such time as Business New Brunswick realizes that this should have been their role.