Financial System Review Act

An Act to amend the law governing financial institutions and to provide for related and consequential matters

This bill was last introduced in the 41st Parliament, 1st Session, which ended in September 2013.

Status

This bill has received Royal Assent and is now law.

Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

This enactment amends a number of Acts governing financial institutions. It also amends legislation related to the regulation of financial institutions. Notable among the amendments are the following:

(a) amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act and the Trust and Loan Companies Act aimed at reinforcing stability and fine-tuning the consumer-protection framework; and

(b) technical amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Bank of Canada Act, the Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Winding-up and Restructuring Act, the Office of the Superintendent of Financial Institutions Act, the Payment Clearing and Settlement Act and the Financial Consumer Agency of Canada Act.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, provided by the Library of Parliament. You can also read the full text of the bill.

Votes

  • March 28, 2012 Passed That the Bill be now read a third time and do pass.
  • Feb. 14, 2012 Passed That, in relation to Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters, not more than one further sitting day shall be allotted to the consideration at second reading stage of the Bill; and That, 15 minutes before the expiry of the time provided for Government Orders on the day allotted to the consideration at second reading stage of the said Bill, any proceedings before the House shall be interrupted, if required for the purpose of this Order, and, in turn, every question necessary for the disposal of the said stage of the Bill shall be put forthwith and successively, without further debate or amendment.

Financial System Review Act
Government Orders

March 28th, 2012 / 4:30 p.m.
See context

NDP

Robert Chisholm Dartmouth—Cole Harbour, NS

Mr. Speaker, I appreciate the comment by the member for Malpeque. The point is that under a great deal of pressure from within and without, the government he refers to was forced to back off from that decision.

It was as a result of Canadians standing up and saying they did not want to go in that direction that the Liberal government finally came to its senses and recognized the right way to go. That is why I have concerns, whether it is the Liberals or the Conservatives who are trying to take credit for a system developed over generations as a result of Canadians saying we need to support these standards and ensure they stay in place.

Financial System Review Act
Government Orders

March 28th, 2012 / 4:35 p.m.
See context

NDP

Robert Aubin Trois-Rivières, QC

Mr. Speaker, I listened very carefully to the hon. member's speech, since his knowledge in this area far surpasses my own.

I agree with his criticism about the minimal amount of public consultation—the Conservatives could have easily done better than making a few telephone calls—and, after reading various documents, I would like to get his opinion.

I would like to make a comparison, even though sometimes comparisons can be clumsy. There was a time when the decision was made to separate church and state because these two entities should not sleep in the same bed. But, when I read that decisions on major foreign acquisitions will now be made based on ministerial approval rather than on approval by the Superintendent of Financial Institutions, it seems as though we are back to square one and that these two things should not sleep in the same bed either.

I would like the hon. member to clarify his position on that.

Financial System Review Act
Government Orders

March 28th, 2012 / 4:35 p.m.
See context

NDP

Robert Chisholm Dartmouth—Cole Harbour, NS

Mr. Speaker, the member is absolutely correct. It is a concern that my colleagues and I raised in committee and, likewise, in debate in the House. We told the minister, the parliamentary secretary and the members opposite that we were concerned with the level of involvement of the minister, that the final decision would be left with the minister with absolutely no constraints. We suggested, on a few occasions, that we needed to introduce, at the very least, more broad conditions that relate to the economy of this country and the circumstances facing Canadians that the minister would need to take into consideration when this decision was being made. Unfortunately, the government decided that the minister will be right and will have all the power in this respect.

Financial System Review Act
Government Orders

March 28th, 2012 / 4:35 p.m.
See context

Nepean—Carleton
Ontario

Conservative

Pierre Poilievre Parliamentary Secretary to the Minister of Transport

Mr. Speaker, we are speaking in the context of the aftermath of the U.S. financial crisis and, in order to avoid what happened there, we need to avoid doing what the Americans did. They turned their mortgage system into a social program over a 30 year period, during which the government first invented sub-prime mortgages, encouraged banks to offer them, ensured those mortgages through Freddie Mac and Fannie Mae and then, ultimately, compelled by force of law financial institutions to provide those sub-prime mortgages to literally millions of Americans who could never dream of repaying them. This represented a $4 trillion government invasion into the private sector that distorted the entire U.S. mortgage market and had the effect of lending millions of dollars to people, who could never repay the money, so they could live in homes they could never afford to buy.

I wonder if the hon. member would agree that we need to be vigilant to ensure that CMHC and other arms of the Government of Canada never grow into the enormous interventionist beast that the American government became, which brought about the U.S. financial collapse.

Financial System Review Act
Government Orders

March 28th, 2012 / 4:35 p.m.
See context

NDP

Robert Chisholm Dartmouth—Cole Harbour, NS

Mr. Speaker, there are a couple of things I would say in this respect. One is that the government does not seem to want to ever acknowledge that it spent $75 billion buying suspect mortgages from CMHC. We need to remember that the government also waded in when there was trouble. It was not as bad as it was in the United States but there were troubles here and the government has not acknowledged it.

Number two is in regard to CMHC. CMHC is an organization that has an opportunity to play a major role in the development of desperately needed social and affordable housing in this country and the government has not properly supported that organization, continues to turn its back on it and on Canadians from one end of this country to the other who cannot afford a decent place to live, and that is a shame.

Financial System Review Act
Government Orders

March 28th, 2012 / 4:40 p.m.
See context

Liberal

Kevin Lamoureux Winnipeg North, MB

Mr. Speaker, I will begin by providing some clarity on what is a bit confusing at times, I am sure, for many.

Whether it is members from the Conservative Party proclaiming that we have the best Minister of Finance in the world, implying that is the current Minister of Finance. I hear a member applauding but he might want to hold his applause for a little while on that particular point. Then we have the New Democrats who believe they can rewrite history, not by saying it once or twice but even going beyond that. The other day we heard a New Democrat saying that it was the New Democrats who saved the banking industry in Canada. They may be a little more generous by implying that there might have been some Canadians also involved.

However, I do think it is important to get the record as clear as possible so members can be a little more forthright about what history actually was back in the 1990s. At the time, I was a member of the Manitoba legislature and I recall the debate on deregulations versus having a regulated banking industry. I had met with TD Bank representatives at a special event where there was a discussion on it. Therefore, I am somewhat familiar with the issue and, like many Canadians, have followed it.

It is important to recognize that there was a great deal of pressure being applied around the world by the financial industry which wanted to see deregulation and many countries succumbed to that.

In Canada, Jean Chrétien, the prime minister at the time; the minister of finance, Paul Martin; and the cabinet were able to resist the pressure that many governments caved in to. They recognized the value of having a regulated financial industry with respect to the banking industry specifically.

Because of the efforts and actions of those two individuals in the cabinet at the time, we have what has been classified as one of the greatest and healthiest banking industries in the world. It had nothing to do with the current Minister of Finance or the Prime Minister.

The first major policy announcement from the government related to the banking industry was that we would allow for 40 year mortgages. The current Prime Minister and the current Minister of Finance can take full credit for that. We all know that turned out to be a dud of an idea. Not one Conservative member will now stand in his or her place and say that the Conservatives brought out the 40 year mortgage. The simple reason is that they recognize now that it was a bad idea to do that.

We have a Minister of Finance and a Prime Minister who like to travel the globe and assume credit for the health of the banking industry in Canada. However, I would suggest that the real credit should be going to Jean Chrétien, Paul Martin, the member for Wascana and many other members who made up the cabinet back in the nineties and resisted the world pressure to deregulate.

What role did the New Democrats play in it? Some might argue that they played a bit of a role. I do not know what it is. I never detected any significant role. It was a Liberal majority government throughout that period and I believe there were 13 New Democratic members, although I could be wrong. However, I do not believe they played any role whatsoever in regard to protecting the banking industry, as much as they would like to claim that they did play a role.

Just the other day we heard New Democratic members of Parliament trying to take credit. However, that was the reality of history and I think it is important to accurately reflect why it is we have a relatively healthy banking industry, especially in comparison to other countries throughout the world.

This is not just something the Liberals recognize. Even the Conservatives, the New Democrats and, I would suggest, leaders around the world have recognized the valuable role that Canada has played in terms of demonstrating leadership on our financial industry as a whole. We should all be proud of that. There is no doubt whatsoever that through the process we have been able to generate the regulations because these ideas and needs of average Canadians come through our constituencies.

I would agree with one of the statements my colleague made, which is that Canadians as a whole understand and appreciate the importance of the industry.

In doing a bit of research, it was interesting to find out that it was Michael Quinn, a Canadian member of Parliament back in 1897, who came up with the idea that we needed to do something to protect consumers. Ever since then, and possibly even before then, governments have recognized the valuable role they play when it comes to monetary policy and the financial industry in our country. That particular member of Parliament, who happened to be from the province of Quebec, highlighted the importance of interest rates. He felt at the time that interest rates were too excessive, that individuals were being charged not 100% but close to 1,000% in some situations. He felt that it was unrealistic to put people who were in relatively poor economic situations and exploit them through high interest rates.

There has always been a high level of interest in the House of Commons in terms of protecting the consumer and in terms of the financial market as a whole. I will spend a little bit of time speaking to that because it is an important issue.

We talk about tomorrow, which is our budget day. Members should not kid themselves. Many people within the financial institutions or the hierarchy throughout the world will be watching the government to hear the types of expenditures, the sorts of revenues that will be generated and what the potential is for Canada into the future. Many individuals and stakeholders throughout the country, everyone from the consumer in Labrador to B.C. to Winnipeg and in our territories are very much interested in what sort of budget we will see presented. It will have a very significant impact on our financial institutions.

Here we have a bill that is designed to protect the integrity of that financial system but I will talk about how government has a direct impact. One thing that needs to be talked about is the government's own debt situation. It was not that long ago, almost six years ago, when the Prime Minister took office and he had some $13 billion-plus in surplus.

If we fast-forward six years, we find that the government has now exceeded $150 billion in terms of new debt. When a government takes that sort of action, many vested stakeholders throughout will stand up and take note, and it will have an impact.

On the macro scale, it does have an impact in the overall debt that we have as a nation. It is something of which we have to be aware. However, the government has not really done a good job on this, and the numbers speak for themselves.

There are other things that we look to the government to demonstrate leadership on because they have a direct impact in regard to our financial institutions. I will give a specific example. We talk about the retrofit program. In a retrofit program where government sees the value of getting people to invest in their homes, quite often that means government support goes toward it and also financial institutions will get directly involved in those types of programs. I bring this up because it is important for us to recognize that the role the government plays in our financial institutions is significant.

It is very important that when we have legislation such as this, we provide the opportunity for members of Parliament to have good thorough debate and provide the opportunity for a bill such as this to go to committee. Actually, this is the type of legislation in which we should be encouraging Canadians to directly get involved in because it affects each and every one of us. It affects our pocket. Therefore, Canadians have a vested interest.

We have to look at the process. What has the process been like for the Conservative government on Bill S-5? Members will notice it is called Bill S-5, as opposed to Bill C-5, meaning it had to go through the Senate. This is something the Prime Minister wanted to do. If it were Bill C-5, that would have implied it would come through the House of Commons.

Ever since the Prime Minister has been given a majority government, he feels he has the authority and mandate to ride roughshod over anything that happens inside the House. He has acquired, in the very short time since he had a majority government, record high introductions of time allocation to prevent members of Parliament from engaging in debate on legislation. The attitude or disregard for this fine and wonderful institution is amazing.

Through this institution, Canadians are afforded the opportunity to voice their concerns through their elected officials. However, day in and day out the Prime Minister seems to ignore the rights and what is important for members to truly engage on legislation that is brought forward and which we are asked to pass. The Prime Minister, for whatever reasons, and he will have to explain them at some point, chose to go through the Senate.

Then we have the issue of the Prime Minister being fully aware months ago of the need pass the bill by April 20. The Prime Minister, as he has done with other legislation, seems to drag his feet. After all, he believes that, through his majority government, he can push things through. Now we are in a situation in which there are some serious time concerns. As a result of those concerns, we will be unable to have the type of debate that is important.

In principle, the Liberal Party supports the bill and we have been very clear on that. We recognize the value of it, but many Canadians have issues about which they want their members of Parliament to speak. This would have been a wonderful opportunity to hear many of those contributions to debate.

As an example, it is estimated that the average Canadian now spends well over $120 or $130 annually on banking fees. There is a great deal of concern over whether there is anything the government can do to watch the whole ordeal, to have take some kind of action or have a plan to provide assurance to Canadians that it truly cares about that issue, that it wants to move toward more transparency on the whole issue of banking fees. What about issues such as interest rates?

Another important issue in my riding has been that of bank closures. In Winnipeg North, a number of banks have closed over the last number of years. It has had a very significant impact. For seniors who live on McGregor or on Selkirk in Winnipeg's north end and have had banks in their community close down, there is a real impact. Many of our senior population do not have Internet. They are not going to do banking on the Internet. They want to go to their local bank. It is great in many ways where we have had credit unions. Recently, Assiniboine Credit Union opened up, I believe on McGregor, to try to meet the demand that was created because of banks leaving.

These are real issues that affect Canadians. Whether the government is allowing for adequate and proper debate in the House or providing the opportunity in committee, we need to have this type of discussion so we can share some of the details of the issues that face us. We know there are explanations of how banks will try to justify the narrowing of the gap in interest rates between loans and deposits. That is one of the primary reasons why banks will say that they have to rely more on banking fees in order to cover costs. We are very much aware of that issue. However, I am also aware that banking profits are at all-time record highs and Canadians are aware of that fact. The government needs to develop a plan that ultimately will deal with the wide variety of issues within our financial markets.

Direct banking is one of them. We could talk about the financial institutions of our insurance companies. There is a wide spectrum of issues that are of critical importance. If we do not do it properly, then people are right to be concerned. Not long ago we witnessed the crashes that happened in the United States, in particular. A number of people virtually walked away from their homes. This crisis took place because banks closed down in countries throughout the world.

It is of the utmost importance that we have ongoing reviews. That is why the Liberal Party supports the principle of Bill S-5. We recognize the value of monitoring our financial markets and ensuring we have good, sound regulations. However, we also recognize the importance of Canadians and consumers and we want to see a government do more to address these issues. Whether it is credit card interest rates or the amount of banking fees, consumers want us to be talking about it this.

Financial System Review Act
Government Orders

March 28th, 2012 / 5 p.m.
See context

NDP

Dany Morin Chicoutimi—Le Fjord, QC

Mr. Speaker, the Governor of the Bank of Canada, Mark Carney, has said that household debt, which has reached a record high, is the biggest threat to our financial institutions. Consumer debt has reached a record level of 151% of disposable income. The NDP is very concerned about the lending practices of banks and other lending institutions when it comes to mortgages and home equity lines of credit. These practices are becoming increasingly risky.

Is the Liberal member also concerned about the Conservative government's lack of vision in this bill governing financial institutions? When it comes right down to it, Canadian and Quebec families are sinking further and further into debt.

Financial System Review Act
Government Orders

March 28th, 2012 / 5 p.m.
See context

Liberal

Kevin Lamoureux Winnipeg North, MB

Mr. Speaker, we, too, share the concern with the level of debt. The leader of the Liberal Party started off the session last fall by saying that the important issue for our party was jobs, jobs, jobs.

Over the last number of years, a number of full-time jobs have been lost and that has impacted our economy, which has added to a lot of the debt we have today. Individuals are unable to maintain the types of loans they have because it is difficult to get the same kind of quality jobs. That is one of the reasons why it is important for us to fight for those good quality jobs.

We know what is taking place with Aveos in the province of Quebec. These are jobs that Canada, as a whole, cannot afford to lose. They are worth fighting for. We look to the government to take Air Canada to court on it to protect those jobs because that does have an impact on the amount of money people borrow and on their ability to even pay for loans.

Financial System Review Act
Government Orders

March 28th, 2012 / 5 p.m.
See context

Green

Elizabeth May Saanich—Gulf Islands, BC

Mr. Speaker, I enjoyed the debate on the bill. It is one that I support. Bill S-5 would modernize a number of elements. It could have gone further.

However, I have enjoyed the “me-firstism” of every party. The Conservative Party wants to take credit for the fact our banking system withheld the recession so well. The New Democrats, apparently, feel they are responsible. I would like to add, as leader of the Green Party of Canada, we had absolutely nothing to do with protecting our banking system.

We all owe a thanks to previous Liberal finance minister, Paul Martin.

Financial System Review Act
Government Orders

March 28th, 2012 / 5 p.m.
See context

Liberal

Kevin Lamoureux Winnipeg North, MB

Mr. Speaker, I guess I might have spent a bit too much time at the beginning of my comments trying to clarify the record. I genuinely believe that, in reviewing and listening to a lot of the debate of the bill, individuals like Paul Martin, the former minister of finance, and Jean Chrétien did protect the industry by ensuring we had those regulations in place.

My concern was not as much as trying to assume credit for those two individuals, but rather that we do not try to rewrite history when others members stand and try to assume the credit when it is not true.

Financial System Review Act
Government Orders

March 28th, 2012 / 5 p.m.
See context

Liberal

Geoff Regan Halifax West, NS

Mr. Speaker, I appreciate my hon. colleague's speech today. I also appreciate the intervention by the hon. member for Saanich—Gulf Islands in relation to Mr. Martin, who certainly played a very important role in maintaining the independence of our banks and maintaining banking regulation. I was a member of Parliament at that time. I can tell her that in fact Liberal MPs were overwhelmingly against the idea, and I want my hon. colleague from Dartmouth—Cole Harbour to hear this, of deregulation of banks or of mergers of banks.

It concerns me because the New Democrats came to Ottawa after last May, saying that they were going be different, with a different approach to Parliament. The NDP put on that coat, or perhaps the new beard, but it is the same old face sometimes. Those members are trying to carry on with this myth that there is no difference between the Conservatives and the Liberals.

On this issue, it would be more reasonable and more in keeping with the coat they are trying to put on if the New Democrats would actually give credit where it is due and admit that on this issue there is a huge difference with the Liberal government. Liberal MPs overwhelmingly insisted that we maintain independent banks, maintain non-merged banks and regulation of banks and that the 40-year mortgage, for example, which the Conservatives brought in, was a disaster.

However, I am going to give the NDP credit for participating with the Liberals during the minority governments, ensuring the Conservative government did not deregulate, as it would have liked to have done.

Financial System Review Act
Government Orders

March 28th, 2012 / 5:05 p.m.
See context

Liberal

Kevin Lamoureux Winnipeg North, MB

Mr. Speaker, it is nice that we have virtually unanimous support that the regulations in place during the 1990s are in essence what saved our banking industry, to the degree that it is now the envy of the world. All members recognize that, although it might have taken some a little longer to accept.

At the end of the day, we will have some issues which we will all agree on, and some not. There will be some issues the Liberals will not support, such as increasing the number of members of Parliament from 308 to 338. The NDP is in agreement with the Conservatives in wanting to increase the size of the House of Commons. Sometimes there is a crazy mixture of agreement. This time around, it is nice to see that all of us support a regulated banking industry.

Financial System Review Act
Government Orders

March 28th, 2012 / 5:05 p.m.
See context

NDP

Hoang Mai Brossard—La Prairie, QC

Mr. Speaker, one thing I will not try to do is rewrite history. I will agree the reason we have a sound financial system is not because of the Conservatives and because of the regulations that were put in place by the previous government.

One thing was of interest to me. My colleague mentioned he supports consumers in terms of banking, and mentioned credit cards. I wonder if he agrees with the NDP proposal, that was part of our campaign, to cap the credit card rate?

Financial System Review Act
Government Orders

March 28th, 2012 / 5:05 p.m.
See context

Liberal

Kevin Lamoureux Winnipeg North, MB

Mr. Speaker, I do not want to proclaim that I know all the answers. However, I do know a lot of the issues. One of the issues that I believe many Canadians, including myself, share, is a concern about the amount of banking fees and the level of interest rates. I believe Canadians want us to deal with these.

I can assure the member that all political parties will at some point make it very clear what they would like to do. I would like to think that I am with my constituents, the consumers, on the issue. I want to wait and see what ultimately happens. However, something needs to be taking place.

Financial System Review Act
Government Orders

March 28th, 2012 / 5:05 p.m.
See context

NDP

Don Davies Vancouver Kingsway, BC

Mr. Speaker, I want to share my colleague's comments that it is really a stretch to watch the Conservative government stand in the House and claim credit for the banking industry's strength over the last recession. It was the Conservative Party members in the 1990s who pushed for deregulation, bank mergers and the ability of banks to sell other financial products. It was resistance to those pushes that caused our banking system to be strong today.

I must say to the Liberal Party though, that the fact there was a debate at all in the 1990s reflects the schizophrenic quality of the Liberal Party. We never really know where it stands. People in the Liberal Party were pushing for those same things. I will give the Liberal Party credit at the end of the day. It resisted those urges, but there were many members, including John Manley and other famous Liberals, who were pushing just as hard as the Conservatives.

That is why the Liberal Party has gone from 172 seats in 2001 to 135 seats to 77 seats to 34 seats over the last 10 years. Canadians never really know where the Liberal Party stands on an issue. It said it would bring in a national child care program. It did not. It said it would bring in a national housing program. It did not. It is this schizophrenic quality that has Canadians quite rightly concerned about the Liberal Party.

Maybe my friend could address the fact that Canadians do not seem to know whether Liberals are on the right side or the left side of the spectrum and that is why it finds itself with 34 seats today.