Bill S-5 (Historical)

Financial System Review Act

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

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.

[Jeremy Rudin, Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

After Bill S-5 was passed, in discussions with some representatives of the industry, it was brought to our attention that some members of the industry were of the view that not all of the transactions the government intended to be covered by this provision would necessarily be covered by this provision. They contended that it would depend on how the transaction was structured. The government's position is that this needs to be clear and that this amendment will create that clarity.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you.

I think this is something that only officials can answer.

I understand that the intent of this section on foreign financial institutions is to tighten a perceived gap in the finance minister's authority that was established in Bill S-5. How was this gap in the minister's authority uncovered? How did we discover this gap?

[The Speaker, Conservative, Andrew Scheer]

I have the honour to inform the House that a communication has been received as follows:

Rideau Hall

Ottawa

March 29, 2012

Mr. Speaker:

I have the honour to inform you that the Right Honourable David Johnston, Governor General of Canada, signified royal assent by written declaration to the bills listed in the Schedule to this letter on the 29th day of March, 2012, at 2:06 p.m.

Yours sincerely,

Stephen Wallace,

Secretary to the Governor General

The bills assented to are: Bill C-34, An Act for granting to Her Majesty certain sums of money for the federal public administration for the financial year ending March 31, 2012; Bill C-35, An Act for granting to Her Majesty certain sums of money for the federal public administration for the financial year ending March 31, 2013; and Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters.

Financial System Review Act

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Mr. Speaker, I am rising today to speak on Bill S-5.

We have had some good debates today. At the finance committee, we had the chance to look at the bill. One of the first things that we realized was that we did not have much time to actually study the bill. As members know, the bill came from the Senate. Members know we are trying to abolish the Senate, but that is not the issue. The issue was the fact that the study was done very quickly. There were approximately 30 emails or briefs sent through the website. That was pretty much it.

We are talking about the bill, and how every five years we have to look at the financial institutions and banks. Within the last five years there was a global financial crisis. We have talked about sub-primes and paper-backed products. There was a crisis in the U.S. and there was a crisis here. There are some arguments about why we survived the crisis. As I mentioned, it was not because of the Conservatives. It was because of the previous government that had sound financial regulations.

My problem is that, within the last five years, we could have looked at what was happening in the U.S. and overseas, and at what is happening here. Instead, we have a small bill that looks at technical issues. However, there are issues that are taken care of, and that is why we will be supporting Bill S-5.

What we are saying is that we missed an opportunity. What we do not like in the bill, and this was raised in committee, is the fact that we are giving all the power for approving the purchase of foreign banks by Canadians banks to the minister. The Minister of State for Finance came to committee and explained the bill. The response was not good enough.

The way the system is working right now, the Office of the Superintendent of Financial Institutions looks at transactions and gives a recommendation on whether or not to approve the merger or acquisition. Now the minister will have the final say. Even in a case where the Office of the Superintendent of Financial Institutions says that it is not good for Canadian institutions, the minister can say, “We do not mind. Just go ahead and move forward with that transaction.”

That is of concern for us, especially knowing that a lot of the ministers, as we see with the Minister of Industry, have conflicts of interest. There may be a problem in terms of judgment. In this case, there may be some problems with the minister being too close to financial institutions. That is a big concern that we raised. Unfortunately the government did not answer it.

[Elizabeth May, Green, 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.

[Kevin Lamoureux, Liberal, 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.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Mr. Speaker, I am pleased to commence debate for the official opposition this afternoon on Bill S-5. Our finance critic will be participating in the debate later on.

At each stage of the bill it we have said that we will be supporting it. We tried to make some amendments at the committee stage. We thought they would make proper adjustments to the various changes that have been made. We thought they would add to the bill and would not in any way detract from it or cause any problems. We wanted to ensure that the scope of the minister's approval was properly reflected to represent the interests not just of the banking industry, but also took into consideration the concerns of the country's economy as a whole. Unfortunately, those amendments were not deemed to be acceptable and they were voted down.

Nonetheless, we recognize that this is an important process in respect of the Canadian financial system. Some would say it represents the strength of the financial system that we have built into the law a periodic review of the Bank Act every five years. The government will take time to go through this process and ensure that the people participating in financial services in the country are being properly represented and also ensure that the agents, the bankers, the operators, the financial institutions, are operating correctly.

There is no question of the strength of the Canadian banking system. Its ability to withstand the economic chaos which the United States, Iceland, Europe, and various countries within the global community experienced in 2008 was because of the fact that historically over generations this country has developed proper and standard regulation.

In the 1990s under the Liberals, there was an attempt to deregulate the financial industry, to open up our financial institutions to foreign control, but Canadians spoke up and said that was not the way they wanted to go forward. I was glad to see that happen.

It causes me some concern when I hear members opposite in the Conservative Party and the Liberal Party take credit for the state of Canada's financial system. They want to take credit for the fact that it is in good shape. I would suggest it is not the Conservatives and the Liberals alone, it is not the people in this House alone who have made the wise decisions. In large part, it is Canadians, the people who send us to this place who let us know how they think their financial system should be regulated, that they want less speculation and more control and more conservative management of the system. That is a good thing. That is something we should acknowledge and respect.

While this review is an important strength of the banking system, we think that this time around in particular, the government missed an opportunity to make some changes that were sorely needed. We have talked about the measures to reinforce demutualization regulation to prevent predatory practices, measures that could enhance the co-operative credit movement as financial institutions that prioritize serving their communities, as opposed to short-sighted speculation and exorbitant executive bonuses, and more comprehensive consumer protection measures.

For example, we look at the problems that are facing consumers as a result of exorbitant ATM fees and hidden fees in a whole myriad of banking services. We would like to see full and complete disclosure of fees that are charged to Canadians who use the banks and other financial institutions in this country. Unfortunately, the government decided not to do that. When members opposite get to their feet and speak to this legislation, it is too bad that all they want to do is boast and take credit for the strength of the financial system. All Canadians should be proud of Canada's financial system.

We have to pay close attention to ensure we do not go down the wrong road, that we do not miss things, that we do not disrupt the rules and regulations that are in place in order to provide protection and sound governance.

In that regard, the member who spoke earlier suggested that there was wide consultation with Canadians across the country. That could not be further from the truth. There were requests for participation and consultation. It was by invitation only. I believe that 32 submissions were made and that was it. Even all of those were not made public. As I said in debate at report stage, members talk about this being a technical bill and that we need to recognize it is too detailed for Canadians. That shows a level of disrespect for Canadians which they do not deserve. In Dartmouth—Cole Harbour, for example, there are a lot of constituents whom I have talked with about the need for consumer protection and for greater protection against demutualization. Constituents of mine and Canadians in general know a great deal about these issues. These issues are not too technical for them.

This bill and any review of financial institutions, of the Bank Act, would benefit greatly from a comprehensive, exhaustive consultation with ordinary Canadians. Maybe then members opposite would have a greater appreciation for the challenges and concerns Canadians are facing, and not just the executives of banks and financial institutions. Banks are making tens of billions of dollars in profits every year, and executives are making millions of dollars in annual salaries and bonuses, while consumers whenever they have contact with a financial institution, are being nickel-and-dimed at every opportunity. That causes some concern.

I think that if we had an open process that provided Canadians with the opportunity to share their opinions, knowledge, and experience with the members opposite, it would be of considerable value.

It was in that regard that I raised a couple of questions with the member who spoke before me, and have talked about this before. I am concerned about the Ombudsman for Banking Services and Investments, a voluntary organization established in 2002 as a result of discussions among government, industry and consumer groups to improve consumer protection and financial services. It was established as a result of section 455 of the Bank Act, which provides all sorts of opportunities to establish dispute resolution processes.

However, these processes are in the complete control of the financial institutions. The whole idea of the Ombudsman for Banking Services and Investments was to have a voluntary organization that was independent. It was set up as an independent service for conflict resolution, with the condition that all banks participate. It was set up to establish procedures for dealing with complaints made by persons who had requested or received products or services in Canada from a bank.

Through the Bank Act each institution has the opportunity to have that kind of service. While that is all good, what the banks, government and consumer groups have recognized is that it is not good enough. That is why the service I referred to was set up. Again, it is not mandatory but voluntary and, unfortunately, two of Canada's largest banks, RBC and TD, left that service.

When I raised questions with the banking association representative at committee, he told me that it was okay because each bank had its own service and own individuals responsible for dealing with complaints. I am not suggesting for a second that he was engaging in any kind of misrepresentation. It was just the situation, and I appreciate the fact that that it is what he said and what the banks are doing. Good for them. Unfortunately, it was determined back in the early 2000s that it was not good enough: Consumers and government recognized that there had to be something more, that there had to be an independent body.

I also raised this question at committee with the parliamentary secretary. I was told that the minister intended to bring forward and set up some other kind of independent service. The government has been saying that now for upwards of a year. Even the banks are wondering what the government will do in this regard.

It is all about independence, consumer representation, fairness, and ensuring that consumers have appropriate representation when dealing with the banks.

As I said, the financial institutions in this country operate within a regulatory framework that provides them with a great deal of protection against competition and their services being challenged and so on. Unfortunately, this approach does not provide consumers with the same level of support, frankly, that my colleagues and I on this side would like to see.

I recognize that the government has gone some distance in fulfilling its responsibility to conduct this review, but the way it did so was to wait until this fall. The government knew that the review was coming forward but waited until the fall to bring forward Bill S-5. It did not introduce it here in the elected chamber for debate and discussion, but in the Senate. That is not to say that senators have not provided some valuable input, but this is the elected chamber. This is where legislation should at least begin. We have been imbued with the concerns, the wishes and the advice of our constituents, and we bring that to bear in debate. We did not have the opportunity to do so.

In short, the bill was discussed, debated and went through some process within the Senate. We did not see it until, I believe, early this year. We have not had much time to deal with it. We know that it has to pass here by April 20 in accordance with the regulations.

If there had been matters that were particularly egregious and we had put up a stink or had wanted to engaged in lengthy debate on them, we would have been accused of putting the whole process in jeopardy as the deadline would be missed. The pressure would have been on.

As a result of the way it was introduced and the timelines used, we did not have the opportunity to have a fulsome discussion with Canadians and in the House on the amendments that we wanted to introduce. That is unfortunate. I believe that very much underlines the way the government tends to view this chamber and the democratic process. We see that here and we see it in committee, as the government is in a hurry. While it was only elected by 39% of the population, it feels that every Canadian out there believes, accepts and agrees with everything it says. The government will not tolerate any conflict, any discussion or opposition. That is unfortunate.

As we know, 60% of Canadians did not vote for the Conservatives. In much of what they told Canadians in the election, Conservatives assured Canadians, for example, that they would not attack their pensions, and yet they are now doing that. The government made commitments not to attack public services, but has been doing that since. The budget is coming down tomorrow and Canadians are going to see firsthand that what the government said to them to get elected was completely to the contrary of what it would do.

That is another slap in the face of democracy and the kind of issue we have been dealing with.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Mr. Speaker, we have raised this issue before in debate on Bill S-5. The matter came up recently this week in the media regarding the Ombudsman for Banking Services and Investment, which is a voluntary dispute resolution organization that was set up back in 2002. Two of the big major banks have withdrawn from that organization and no longer participate in it. The ombudsman has said that has effectively made the organization almost useless.

Could the hon. member explain what the government will do to ensure there is the kind of independent analysis and dispute resolution for these matters that was normally provided by that organization?

[Ted Opitz, Conservative, Etobicoke Centre, ON]

No, absolutely not.

However, that is why we have our system. In fact, it is a long-standing tradition in Canada to conduct mandatory five-year reviews of Canada's financial sector legislation. I should point out that this most recent review process was officially launched in September 2010, when our Conservative government launched the public consultation process open to all Canadians.

I am sure most members of the House are familiar with the World Economic Forum, which has ranked Canada as having the soundest banks in the world for four years running. What is more, Canada's safe and secure financial system is the envy of the world.

I will quote from the United States Congressional Research Service report which explains how Canadian banks offer a model to the United States and other countries on how to avoid a future financial market crisis. It states:

Canada’s financial system, in particular, garnered attention, because it seemed to be more resistant to the failures and bailouts that have marked banks in the United States and Europe...

As my hon. colleagues are no doubt aware, Canada's credit unions offer important and valuable services as part of our banking sector. Indeed, more than five million Canadians and business owners are the grassroot shareholders of co-operative financial services in Canada and one in three Canadians is a member of a credit union or caisse populaire.

In recent years, our Conservative government has demonstrated its commitment to credit unions by supporting a federal credit union charter to accommodate growth and expansion of the Canadian credit union system. These actions will ensure that those credit unions, which choose to pursue business ventures out of the province, will not be constrained by outdated rules on provincial incorporation. Furthermore, this will also give credit unions a means of diversifying sources of funding and spreading their geographic risk exposure. Similarly, in order to provide federal credit unions with a greater leverage of the Canadian Payments Association, today's legislation would amend the Canadian Payments Act so that credit unions would be classified under the co-operative class in the act instead of the bank class.

At the same time, credit unions will still employ the long-standing, well-understood and robust governance, liquidity, clearing and settlement frameworks in use today. While this may sound like nothing more than a technical change, it is nevertheless fundamentally important. This change would continue to promote a level playing field within the financial sector which would foster competition among players and would ensure a stronger, more stable overall system.

This is what the Credit Union Central of Canada, the national association for credit unions of Canada, had to say about this modification. It said:

—we want to note our support for the proposed amendments...Placing the federal credit union in the cooperatives class will preserve and strengthen the credit union system representation at the CPA. It will ensure that a federal credit union will be represented by a director, who speaks for the interests of cooperative financial institutions in CPA matters. A strong advocate at the CPA is important for the credit union system's ability to advocate on behalf of credit unions and to continue to operate payments facility efficiently and cost effectively, which has a direct impact on overall credit union system competitiveness.

I will remind everybody that CPA is the Canadian Payments Act.

I am certain all members of the House would be in agreement that a stronger credit union system can benefit all Canadians.

Finally, as I mentioned at the outset of my remarks, I would like to speak to a piece of the financial system review act that would make improvements to Canada's payments system, something Canadians deal with almost each and every day. Indeed, every year, Canadians make 24 billion payments, which in total are worth more than $44 trillion. These payments allow us to run our businesses, sustain our households and allow governments to fund essential programs.

Canadians use various payments instruments to purchase goods and services to make financial investments and to transfer funds from one person to another. These instruments include cash, cheques, debit and credit cards. With the exception of cash, payment instruments have typically necessitated a claim on a financial institution such as a bank, credit union or caisse populaire. Therefore, banks and credit unions must make arrangements to transfer funds among themselves, either on their own or on their customer's behalf.

A payments system is set on instruments, procedures and rules used to transfer these funds. In Canada our national systems for clearing and settlement of payments are run by the Canadian Payments Association, or the CPA, a not-for-profit organization of federally regulated financial institutions.

Our government knows that no modern economy can reliably function without a payments system that is sophisticated and secure. However, the payments landscape is changing. For example, experience in Canada and abroad since the 1990s demonstrates that clearing and settlement systems do not always include banks as direct participants. That is why Bill S-5 seeks to amend the Payment Clearing and Settlement Act to remove the requirement that there must be at least one bank involved in a payments transaction. These new rules will allow more flexibility in establishing systems to clear complex financial instruments like over the counter derivatives, or OTCs. This adjustment will permit the Bank of Canada to monitor payments that could pose systemic risks to the financial system.

Canada's leadership in reforming the global financial system through membership and international organizations, such as the G20, is well-known and a source of pride for Canadians. What Canadians may not know is that one important commitment we have made to our G20 partners is that all our OTCs will be cleared through central counter parties by 2012. This is an important step for the resilience and stability of our financial system.

To meet our G20 commitments, it is critical that Canadian prudential and market conduct regulators have the necessary authority, tools and information to regulate the Canadian OTC derivatives market on an ongoing basis. This means coordinating activities across current federal and provincial jurisdictions as well as with foreign regulators.

This is the kind of evolutionary change that demonstrates the importance of regular reviews in our legislative framework to maintain Canada's leadership in financial services. For these reasons, I urge the members to support passage of this largely technical but immensely important bill, which would help to ensure the continued functioning of Canada's payments system.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

Mr. Speaker, I am thankful to speak to the third reading stage of Bill S-5, financial system review act.

I thank the hon. Parliamentary Secretary to the Minister of Health for his comments, especially those on financial literacy. They are a cornerstone for all Canadians to understand their institutions. This would help the jobs and economy of our country to continue to grow.

The bill is significant legislation because, although it is purely technical, it would guarantee the long-standing strength and security of Canada's financial institutions. Our government will make a series of changes to various legislation that govern Canada's financial system, including the Canadian Payments Act, about which I will speak in greater detail in just a few moments.

First, I want to emphasize for members of the House, and Canadians watching at home, that the Financial System Review Act is a mandatory and routine legislation. Canada's financial system is the safest and most secure in the world, and that is a direct result of mandatory five-year reviews. That kind of vigilance has been absolutely critical to maintaining our economic strength in our financial institutions. As the hon. member before me pointed out, much of the world has lauded that, understands that and has given Canada credit for it. Thanks to the greatest finance minister on the planet, the hon.—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, I enjoyed the member's speech on Bill S-5. The concern we have had on this side of the House is how improvised the Bill S-5 process has been.

This is something the government knew about years in advance, the revisions of the Bank Act. It did not make it public and did not call for real, sincere public input into Bill S-5. It was brought forward by the Senate first. It was brought into the House of Commons at a late date and the government did not allow the finance committee to do a thorough vetting.

Of course, consumer groups are very concerned because no issues were able to be raised in any fulsome manner with these revisions to the Bank Act. Now we are pressing for a deadline. We have to get this bill through in the next few days.

My question to the member is simply this: Why did the government botch this process? Why did it improvise all the way along, so we are now moving to rush the bill through Parliament to meet a deadline that the government knew about years in advance?

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Speaker, I welcome this opportunity to speak to Bill S-5, the financial system review act at third reading. This bill would reinforce stability in Canada's financial sector, fine-tune the consumer protection framework and adjust the regulatory framework to new developments.

Since the onset of the global financial crisis of 2008, our government has remained committed to strengthening the framework overseeing the financial sector. Our focus has been to provide the best consumer protection environment possible, one in which there is competition, information is disclosed and consumers are able to make informed choices. Bill S-5 does just that.

Bill S-5 proposes to improve the consumer protection framework by enhancing the supervisory powers of the Financial Consumer Agency of Canada, FCAC. FCAC is mandated with ensuring that federally regulated financial institutions adhere to the consumer provisions of the legislation set out to govern them. In addition, FCAC is the government's lead agency on financial education and literacy. It has moved forward with an array of excellent initiatives in recent years. FCAC has developed innovative tools to help Canadian consumers, such as a mortgage calculator that quickly determines mortgage payments and the potential savings resulting from early payments.

FCAC has also been instrumental in leveraging and coordinating private sector and voluntary sector initiatives on financial literacy already under way across Canada. Financial literacy among Canadians will pay dividends for future generations. That is why, in budget 2009, we established the task force on financial literacy, to make recommendations on a cohesive national strategy to improve financial literacy in Canada.

The task force had 13 members drawn from the business and education sectors, community organizations and academia. The task force delivered its final report, “Canadians and Their Money: Building a brighter financial future”, on February 9, 2011. It outlined 30 recommendations to improve the financial literacy of Canadians. I am pleased to note that the proposed financial literacy leader legislation before Parliament now responds to a key task force recommendation for the need for dedicated leadership. That legislation, as the name suggests, would provide the framework for the appointment of a financial literacy leader. This financial literacy leader would be mandated to work with stakeholders to support financial literacy initiatives and would continue the progress achieved by the Financial Consumer Agency of Canada.

Informed consumers are the very foundation of a solid financial system. Indeed, a country's prosperity is ultimately the sum of the financial successes and related decisions of all its households. However, we have done more.

In 2009, our government acted to protect Canadians who use credit cards. We want to ensure that Canadians understand their obligations in advance of signing up for and using these purchasing instruments. To that end, the measures we introduced, which are in effect today, mandated clear and simple information on credit card application forms and contracts, and clear and timely advance notice of changes in rates and fees. This initiative provides Canadian consumers with precisely the kind of improved financial information that leads to better decision making.

Also, to protect consumers, in August 2010, we put into effect the code of conduct for the credit and debit card industry. The code was developed in consultation with small business. Under the code, merchants will be provided with clear information regarding fees and rates, given advance notice of any new fees and fee increases, able to cancel contracts without penalty should fees rise or new fees be introduced, and given new tools to promote competition and in particular the freedom to accept credit payments from a particular network without the obligation to accept debit payments and vice versa.

This code has been widely applauded, especially among small business. I will quote at length what the Canadian Federation of Independent Business had to say. It stated:

The Code of Conduct's biggest achievement has been to protect Canada's low-cost flat-fee debit system.... the Code's other big accomplishment is providing merchants with some power in their relationship with credit card companies, banks and card processing companies.

Merchants have new powers under the Code that have helped them achieve tangible results in their dealings with the industry. This simply wouldn't have happened without the Code.

I encourage all members to take the time to review the code and discover how it will contribute to a better system for both merchants and consumers. Before I conclude, let me very quickly highlight some of the other measures in today's legislation which, I believe, other speakers will address in greater detail.

Bill S-5would update financial institution legislation to promote financial stability and ensure Canada's financial institutions continue to operate in a competitive, efficient and stable environment. It would improve the ability of regulators to share information officially with international counterparts. It would change the priority status of segregated fund policies in insolvency situations that would facilitate timely transfer, consistent with life and health insurance policies. It would clarify that Canadians are able to cash government cheques under $1,500 free of charge at any bank in Canada. It would promote competition and innovation by enabling co-operative credit associations to provide technology services to a broader market. It would amend the Payment Clearing and Settlement Act to remove the requirement that there must be at least one bank involved.

In all, the measures proposed by the bill would further strengthen our system by reinforcing stability in the financial sector, fine-tuning the consumer protection framework and adjusting the regulatory framework to adapt to new developments.

Canadians should be justifiably proud of our financial services sector. It employs over 750,000 in good, well-paying jobs. It represents about 7% of Canada's GDP. It is a world leader in the use of information technology.

Over the past four years, the World Economic Forum has ranked our banking system as the soundest in the world. Forbes magazine has ranked Canada number one in its annual review of the best countries to do business. Five Canadian financial institutions were named to Bloomberg's most recent list of the world's strongest banks, more than any other country.

Recently, a Financial Stability Board peer review praised the government's response to the global financial crisis. It highlighted the resilience of Canada's financial system, calling it a model for other countries. The FSB review said that “the strength of Canada's economy and its financial system meant that no Canadian financial institution failed or required government support in the form of a capital injection or debt guarantees during the global financial crisis.”

By updating the financial legislation framework, we would continue to ensure that Canada's financial institutions operate in a competitive, efficient and stable environment that would help Canada maintain its well-earned reputation as a global leader in financial services.

Mr. Speaker, thank you for the time I was given to participate in today's debate and to recommend the timely passage of Bill S-5.

[Peter Van Loan, Conservative, York—Simcoe, ON]

moved that Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the third time and passed.

[Libby Davies, NDP, Vancouver East, BC]

Mr. Speaker, I am pleased to rise in the House today to speak to Bill S-5. I have been listening to the debate this afternoon and the comments of my colleagues. Although the NDP has been supporting the bill, we find that it has a very limited form and it misses a big opportunity to address a whole array of consumer issues and consumer protection for Canadians, which is unfortunate. However, that, unfortunately, is what we have come to know of the government.

It is rather surprising to know that the bill originated in the Senate. We would be interested to know why it started in the other place that is unelected. As members of the House of Commons are directly elected, it seems to us that it would only be legitimate that a bill would begin in the House of Commons, go to committee and follow the usual process. It is very concerning that the bill began in the Senate. We would have thought the government would have given respect to the House of Commons and given the bill first reading and second reading here.

The bill is being portrayed as a very technical bill and would change the Bank Act and 12 other acts, which is all the more reason to go through it carefully because often the devil is in the details. When we look at amending a large number of acts, some significant changes can take place. I have noted that when the bill went to committee, the committee only had three sessions, which was a very limited time review and very few witnesses were called.

I would put this in the context of a larger pattern that is emerging with the government, which is that if bills are introduced here on the floor of the House of Commons they are rushed through. We have seen time allocations, gag orders and closure to limit debate. Now we are seeing bills being introduced and debated in the Senate as opposed to the House of Commons and then dealt with in a very perfunctory and rapid manner at committee.

I would say that is not a good sign, especially for a bill of this nature. It reminds me of a budget bill where, because of the enormous amount of technical details, it is easy for important details to be overlooked.

The NDP has paid an enormous amount of attention to consumer protection. Jack Layton, our former leader, pressed this, and our consumer affairs critic, the member for Sudbury, has done an enormous amount of work in bringing forward in the House of Commons the issue of consumer protection and how people are being gouged and ripped off by financial institutions.

For example, last year the bank profits were a whopping $25.5 billion, which is astounding. The financial sector industry is not only healthy but incredibly profitable while, at the same time, many people are getting laid off.

This afternoon my colleague from Nanaimo—Cowichan did a brilliant job of pointing out how fewer and fewer people now qualify for employment insurance. I think she said that only 39% qualify. While the need for EI goes up and the qualification period goes down, the length of the waiting time is also going up to about four months.

I wanted to say that because it is part of the growing income inequality that we are seeing in our country. We are seeing more and more people working in part-time jobs, minimum wage jobs or getting laid off. They cannot qualify for EI because of the government's incredibly onerous limitations and restrictions. On the other side of the coin, so to speak, we see major financial institutions making an exorbitant amount of money. It does create a society where there is a widening gap between wealth and poverty. There is a growing gap in income inequality.

When we put into that picture the corporate tax cuts that have been granted, the billions of dollars that we have lost in public revenue that could be providing for public services, when we look at the budget that we know is coming on Thursday and our fears about that budget and its impact on ordinary people and their ability to access needed government services, it is a picture that is very disturbing. We look at Bill S-5 in that context.

I am very proud that we in the NDP stand on a principle and priority of protecting people, of protecting consumers and people's jobs, in saying that we do have to have an economic plan, a jobs plan, a financial plan, and fair and progressive taxation. This bill, which presents itself as a technical bill and brings forward some changes that I think are useful, is a massive lost opportunity overall to provide much better protection for consumers.

I know that most consumers feel completely powerless when it comes to dealing with financial institutions. I speak to people who have made complaints. They come to my riding office and we write letters to the banks on their behalf. We often will write to the ombudsperson of a bank or the banking system overall and put forward a person's complaint that in the overall scope of things is not massive, but for that individual the fact that they feel they have been ripped off or gouged or not listened to by the banking institution is something that I think really plays into the feeling of cynicism they have about the people who run financial institutions and make very powerful decisions.

I am very proud that we in the NDP have always made it a priority to stand up for consumer rights and protections. We do know that Canadians get gouged by service charges, user fees and abusive credit card rates. Again, this is something that the hon. member for Sudbury has raised so many times in this House.

The idea that there are voluntary systems in place is almost laughable. We have seen that with the drug shortages that we have been debating in this House. We had an emergency debate on those shortages two weeks ago. It is the same thing. When we have a very serious systemic problem, whether it is drug shortages because the marketplace is controlling what is going on or now when we see people being gouged by financial institutions, the response by the government has been to let the parties get together and to see what they will do on a voluntary level. That is just not good enough. Therefore, as a piecemeal approach, I do feel that the bill falls far short of what we actually need to do with consumer protection in this country.

This worries me. Just from reading the background on the bill, it is very clear that there was very little consultation done. I think there were about 30 submissions and they were mostly from associations or from a technical point of view. We have to ask why there was very little consultation done on this bill. Is it because the government knew that if it actually did engage in an adequate public consultation, it would be opening up a Pandora's box and getting a whole mass of feelings and complaints and frustrations from Canadians in response? It is very unfortunate there was not proper consultation done for this bill.

In wrapping up I would say that we support this bill for the limited progress it makes, but it is very disappointing that yet again the government has missed the mark and failed to take into account adequate protections for consumers in this case.

People will still be out there, left out in the marketplace, feeling like they do not have a voice. I hope they know that they do have a voice in the NDP and that we will continue raising these issues in Parliament to ensure there is proper regulation and protection and that the rights of consumers will be upheld.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, we are at this point today because we have to be, since the legislation requires a review every five years. That last time the financial system was reviewed was in 2007, so it is very appropriate that the members of the House are looking at this issue now.

Like most of my colleagues, the NDP will support this bill at second reading, partly because we would like the Standing Committee on Finance to examine the bill in detail, and partly because we do not have much choice. Indeed, we have very little time, because the bill must pass in April.

That said, this does not mean that we do not have some serious concerns about this bill. One concern is the government's haste to pass this bill so quickly. We believe that the process has been rushed. There was less than a month's notice and consultation was very quick. About 30 submissions were received, most of which were not even signed. Thus, public consultation was very limited.

It is too bad, because this bill, although a necessary part of the review of the financial system, also affects the wallets of Quebeckers and Canadians. We truly regret the government's haste. This is a serious process that should have been taken seriously. As far as we can tell, that has not been the case.

Another one of our concerns is the fact that this bill comes from the Senate. Why? Consultations and consideration could just as easily have begun here in the House of Commons, with a much more in-depth process. We would have had more time, instead of ending up in a situation where the bill is coming from the Senate and was studied there. This House is practically being asked to ratify a decision that was made in the Senate.

There is a big difference between the other place and here. We are elected parliamentarians with a mandate from the people, the same people whose wallets are affected by the proposed changes in this bill. Nonetheless, we, the elected parliamentarians, simply have to comment on a more thorough study that was initiated in the Senate.

This bill is important and it is really sad to see that the process has been taken so lightly.

A third concern is the government's right to veto substantial foreign acquisitions. Some of my colleagues raised this matter. There are two conditions: first, the acquiring bank must have equity of $2 billion or more; second, the value of the foreign entity’s consolidated assets, in combination with the value of the consolidated assets of the bank’s other foreign control acquisitions in the past 12 months, must exceed 10% of the value of the bank’s consolidated assets.

This process is officially a ministerial guarantee that Canada's banking and financial system will continue to be stable, even though some banks and institutions have a strong desire to expand their activities abroad. The rationale is that this requirement will prevent the purchase of an entity that does not have the same aversion to risk and that could jeopardize the stability of the system in the event of another crisis.

Some uncharitable souls might say that this government is trying to take credit for Canada's strong performance. What concerns me more is the provision whereby the government has 30 days to review a foreign acquisition and, if the time expires, the transaction is deemed to have been approved by the minister.

At the Standing Committee on Finance hearing on Bill S-5, my NDP colleagues tried to get answers about this provision, and the minister of state did not provide any reassurance. When asked by my colleague for Brossard—La Prairie, as well as the Liberal member for Kings—Hants, if the application would automatically be approved if the Office of the Superintendent of Financial Institutions indicated that the proposed transaction was not to Canada's benefit and the 30 days elapsed, the deputy minister replied that that was correct.

Therein lies the loophole. If the minister wants to take credit for Canada's sound financial position, he must also guarantee that significant transactions abroad will benefit our country.

As my time is limited, I will now turn to what is missing from the bill. It is unfortunate, because we would have had the time to study the bill if the consultation process and the review here in the House had not been rushed. We would have liked to have seen some important items, which are not in the bill.

When this bill was announced the Minister of State for Finance said:

The most important thing to us is making sure that we protect ordinary Canadians, that their savings are protected, that there's credit available to them, that we have strong and stable banks. When Canadians need to borrow money, we have to have strong institutions for them. It is overall oversight, the final oversight, that is in the right place in the hands of the finance minister.

The problem is that the government is engaging in doublespeak. On one hand, it is doing a very good thing by expanding and enhancing the powers of the Financial Consumer Agency of Canada. However, on the other hand, the government does not seem to understand the importance of proper regulation to ensure that financial institutions take their share of responsibility for debt and financial literacy.

Credit must be given where credit is due: this government is doing a good thing for consumers by extending the definition of consumer protection provisions. A wider range of organizations will thus be subject to these provisions, including banking representatives and intermediaries.

However, the government is completely missing the mark when it comes to the more specific provisions on consumer rights. How can the government advocate for greater financial literacy—a task force, a motion and a bill—and then turn around and say something like this about personal and household debt:

I'm not the first one to make this statement and I won't be the last: interest rates have only one way to go, and that's up. Canadians need to recognize that whatever debt you take on now, please plan on the cost of carrying that debt increasing at some point. It may stay low for a long time; we don't know that. But the downside is much less than the upside possibilities.

It is important to understand that banking and financial regulation must serve two purposes: the expansion and development of the system and public protection. That is why rules must be implemented by a neutral and impartial third party.

In my opinion, there is a very good example of this problem, and that is the fact that the big banks are not required to participate in the system of the Ombudsman for Banking Services and Investments, the OBSI.

Only last year, the Toronto Dominion and Royal banks pulled out of OBSI system and chose to go with their own ombudsman system. Terry Campbell, president of the Canadian Bankers Association, stated on behalf of the association that this was a change in provider.

While revising the legislation, could the government not have taken advantage of the opportunity to develop a better system and require large federally regulated financial institutions to be governed by that system?

That question is worth asking. Instead of doing that, the minister told the committee that there will soon be regulations governing internal and external dispute resolution mechanisms.

The OBSI's 2011 annual report was released last week and received significant media coverage because of those two pullouts.

The report said that the move by TD Bank and Royal Bank to opt out of the process and instead hire their own independent firms to handle customer complaints lacks credibility:

The dispute-resolution process that consumers access needs to be credible, independent, and impartial—not beholden to any one stakeholder group.... Allowing banks to choose a dispute resolution provider gives all the power to the financial institution and none to the consumer.

This bill fails to address some crucial issues. I think that consumer rights is one of those issues, and this bill would have provided a perfect way to resolve consumer rights issues and remedy the excesses that were in large part responsible for the crisis in 2007, 2008 and 2009.

But that is not in this bill because the process was not taken seriously and was bungled. The process began in the other place, but it should have started here. Parliamentarians have been given very little time for discussion because the deadline to pass this bill and renew the Bank Act provisions is April 20.

We will therefore be supporting this bill on second reading, simply because we have no choice. We are living in a time of economic uncertainty, but that does not relieve the government of its responsibilities. The government should have used this process, which comes around every five years, to do a thorough review of financial legislation in order to protect consumers but also to protect the future of the economy. Unfortunately, there are many things missing.