Finance Committee on March 8th, 2012

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

I'd like to get back to you, Mr. Minister of State.

We know that in 2008, the United States had a financial crisis that triggered a global crisis. Fundamentally, derivative products were at its root cause. These products also exist in Canada, but they are not regulated. Through CMHC, Canada was forced to accept toxic products. You mentioned that there were some good loans, in fact, but CMHC was forced to take back, unless I am mistaken, up to $1.5 billion worth of toxic products.

At the time this bill was being drafted, five years had gone by since the last time we studied financial institutions. Would that not have been a good opportunity to regulate these derivative products?

[Ted Menzies, Conservative, Macleod, AB]

I don't think we're looking at regulating derivatives any more than we have been.

CMHC was not part of this review. I would argue that derivatives were certainly a part of it, but I would suggest that subprime mortgage was probably at the heart of what happened. Fortunately, we had very minimal exposure—any Canadian bank had very minimal exposure—to subprime mortgages.

Derivatives are an effective tool. I used to use derivatives to hedge my production. It's a very effective tool, when you're looking at forward pricing, to put in puts and calls to make sure that you protect your downside and you protect your upside risks. They can be a very effective tool. They do get abused; I understand that. But CMHC was not part of this review.

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

Thank you.

With respect to departmental approval, you say it is very important that banks remain Canadian. During the process, unless I am mistaken, this goes through the Office of the Superintendent of Financial Institutions, and following that, is subject to ministerial approval or consent. However, it would seem that if the minister has not granted approval within the 30-day period, it is automatically approved. Could you please explain to us why there is an automatic approval process, even though the Minister of Finance has not studied this aspect? Could this not lead to excesses?

[Ted Menzies, Conservative, Macleod, AB]

I'm not sure I have a technical answer for that. The 30-day rule is put in so that a transaction can't be stopped for indecision. Businesses need certainty. I'm sure that's why the 30% rule is in there.

I'm not sure, Mr. Rudin, whether you can give an answer to that question.

[Jeremy Rudin]

There are other aspects in the Bank Act that govern the superintendent's recommendation. The minister then makes his or her own decision and then grants approval or not within a 30-day period, otherwise the superintendent's recommendation is implemented. As the minister was saying, this provides the private sector with some assurance that the process will not go on forever.

That being said, should the minister require an extension, the minister may request one.

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

I would like to make sure of something. Let's take a case in which the Office of the Superintendent of Financial Institutions rejects the transaction, or rather suggests that this is not a good situation. In fact, the decision is not up to him; only the minister's authorization is necessary. Under the provisions, if the 30-day period is up, the request will automatically be granted. Is that correct?

[Jeremy Rudin]

Do you mean cases in which the superintendent is opposed to the transaction?

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

Perhaps I simply need a clarification.

Before, all that was required was the authorization of the Office of the Superintendent of Financial Institutions. Now with the change that you are proposing, only a ministerial authorization will be required. So, in cases where the transaction is not necessarily favourable, but in which the minister has not replied, the transaction will automatically be authorized. Is that correct?

[The Chair, Conservative, James Rajotte]

Please provide a very brief response.

[Jeremy Rudin]

Yes, that is correct.

That being said, we do not expect to be inundated by these requests. The 30-day period provides us with enough time to make our recommendation to the minister.

As to the fear that it escapes the minister's attention, we have not had such an experience with respect to the approval process.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

We'll go to Mr. Jean, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair.

Thank you to all of our witnesses today.

I was reading this bill the other night. I needed to get some sleep, so I thought I'd pull it out. Indeed, I thought what a great bill it is and that it should be renamed the Consumer Protection Banking Act, because it certainly speaks for Canadians. And it reminded me why we're here.

Some of the more appropriate amendments it makes to other legislation are moving the maximum fines to more than double, to $500,000; government cheque-cashing, of course, is going to be popular in my riding, where 23% of my constituents are aboriginal and have difficulty finding cheque-cashing for free, as of course do the unemployed and seniors as well; improving confidential information and operational efficiency, which will of course speak to consumers and customer service; new credit card rules, which I was very happy to see, as a small-business person; even consent for limit increases, which I think a lot of people have been asking for; full disclosure to customers; and a code of conduct for credit and debit cards. It goes on and on.

In fact, I was looking through all of the amendments—those involving proposed sections 446, 447, 450, 452.... It goes on and on, and even talks about foreign banking disclosures under proposed subsection 568(1).

I know the NDP are laughing, because they will probably want to nationalize banks, if they ever come into power.

I want to know, first of all, what—

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

Excuse me, Mr. Chairman. I don't know whether anybody is laughing at Mr. Jean—

[The Chair, Conservative, James Rajotte]

Is this a point of order, Mr. Chisholm?

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

It's a point of order. There is no need to say that.

[The Chair, Conservative, James Rajotte]

Okay, well this is a point of debate.

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

He's throwing that stuff out there.

[The Chair, Conservative, James Rajotte]

It's a point of—

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

We're just listening to him, and this is us.

[The Chair, Conservative, James Rajotte]

Mr. Chisholm, this is a point of debate.

We'll go back to Mr. Jean.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you.

We won't debate the issue of nationalization, because the agenda is clearly there.

I'm interested in what consumer groups have been saying about this—and that's my first question—and in how the Financial System Review Act builds on consumer protection, other than through what I've outlined.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

I would prescribe some sleeping pills to you, rather than reading this lengthy document.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

It's pretty exciting.

[Ted Menzies, Conservative, Macleod, AB]

It is pretty exciting.

But you're right. All joking aside, it is important. The protection of consumers has to be our ultimate goal in any of this legislation, and I would suggest that this is what we have in a lot of places. There's the fact that the Financial Consumer Agency of Canada actually expands the powers to make sure that they are protecting consumers; we think that's very important.

In fact, I made an announcement just this last weekend at FCAC on credit card cheques, which many people don't realize are issued to people unsolicited. Many of those people who are not terribly financially literate may think there is no cost to them. In fact, there is an immediate cost. They are charged from day one. And so—

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

That's why the disclosure is so important.