House of Commons Hansard #153 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Budget Implementation Act, 1997
Government Orders

4:45 p.m.

Some hon. members

Agreed.

Budget Implementation Act, 1997
Government Orders

4:45 p.m.

The Speaker

I declare the motion carried.

(Motion agreed to.)

Budget Implementation Act, 1997
Government Orders

4:45 p.m.

The Speaker

It is my duty, pursuant to Standing Order 38, to inform the House that the question to be raised at the time of adjournment is as follows: the hon. member for Shefford-CORCAN.

The House proceeded to the consideration of Bill C-82, an act to amend certain laws relating to financial institutions, as reported (with amendments) from the committee.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

April 10th, 1997 / 4:45 p.m.

The Deputy Speaker

I have a ruling to make. Copies are available if members wish to have them.

Bill C-82 is an act to amend certain laws relating to financial institutions. There are six motions in amendment standing on the Notice Paper for the report stage of Bill C-82.

Motions Nos. 1, 3 and 5 will be grouped for debate, but voted on separately.

Motions Nos. 2, 4 and 6 will be grouped for debate, but voted on separately.

I will now put Motions Nos. 1, 3 and 5 to the House.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

4:45 p.m.

Bloc

Yvan Loubier Saint-Hyacinthe—Bagot, QC

moved:

Motion No. 1

That Bill C-82, in Clause 42, be amended by adding after line 35 on page 22 the following:

"(4) Where there is in force in a province a law that imposes terms and conditions in respect of financial services described in subparagraph 3( b )( i ) that are provided in that province, that law, as amended from time to time, shall apply to every bank located in that province.

(5) No regulation made under subparagraph 3( b )( i ) shall apply to any bank located in a province that has in force a law described in subsection (4).

(6) For greater certainty, in this section the term "in force" in reference to a provincial law includes a provincial law that comes into force on or after the coming into force of this section."

Motion No. 3

That Bill C-82, in Clause 55, be amended by a ) replacing line 29 on page 30 with the following:

"459. (1) The Governor in Council may make" b ) by adding after line 18 on page 31 the following:

"(2) Where there is in force in a province any law that deals with any of the matters referred to in paragraphs (1)( a ) to ( e ), that law, as amended from time to time, shall apply to every bank located in that province.

(3) No regulation made under subsection (1) regarding any matter referred to in paragraphs (1)(a) to (e) shall apply to any bank located in a province that has in force a law described in subsection (2) dealing with that matter.

(4) For greater certainty, in this section, the term "in force" in reference to a provincial law includes a provincial law that comes into force on or after the coming into force of this section."

Motion No. 5

That Bill C-82, in Clause 226, be amended by replacing lines 33 to 38 on page 136 with the following: a .1) transfer all or any portion of its policies to, or cause itself to be reinsured, on an indemnity basis, against all or any portion of the risks undertaken by it by any body corporate incorporated under the laws of a province that is authorized to transact the classes of insurance to be so transferred or reinsured.''

Mr. Speaker, I am pleased to address this important measure, Bill C-82, at report stage. The official opposition is basically proposing three amendments to the legislation before us today.

The first amendment concerns clause 42, in which the federal government seeks to regulate financial services. We propose that the government take into account the fact that financial services come under the exclusive jurisdiction of the provinces. This is the purpose of our first amendment.

The second amendment also relates to the federal government's intention to take action regarding tied selling and consumer protection. Again, in our second amendment, which deals with clause 55, we suggest to the federal government that, when provincial legislation applies to consumer protection, tied selling or other issues, such legislation should be complied with by financial institutions.

Our third amendment, which we feel is the most important one for Quebec and all Canadian provinces, concern clause 226. Clause 226 provides that it is not possible for a provincially chartered insurance company to purchase any portion of insurance policies or transactions from insurance companies operating under a federal charter.

For example, a Quebec insurance company such as l'Entraide, which is mentioned in today's edition of the daily Le Soleil , cannot, under federal legislation on financial institutions, make such purchases, since it has a provincial charter, and it cannot purchase a federally chartered company. By contrast, a federally chartered company can purchase any portion of insurance policies or transactions from another company that also operates under a federal charter.

There is no longer any justification for this barrier in the context of a free competitive market. This situation is unfair to Quebec insurance companies for two main reasons.

First of all, they cannot freely enter into transactions with another insurance company that is federally regulated, even to purchase a block of policies that are all held by Quebec policy holders. No one has control over his own affairs under this bill.

Second, it is contrary to the spirit of NAFTA and of any agreement concerning international trade, as well as financial services. Treatment under this bill and under section 226 that is still in force today is more favourable to foreign insurance companies, which are, for the most part, federally chartered, than to provincially chartered Quebec and Canadian insurance companies. A French federally chartered insurance company, for example, could buy a block of insurance policies from a Canadian federally chartered company that decided to go out of business.

It would be the same for an insurance company from Brazil or the United States-name any country in the world-that was, and usually is, federally chartered. It could buy a block of insurance policies from a federally chartered insurance company operating in Quebec that decided to wind up its operations. A provincially chartered Quebec company cannot do the same, and this is completely unacceptable.

The federal government is using consumer protection as an excuse not to eliminate this discrimination. Why would consumers be better protected in a situation that allowed federally chartered

insurance companies to buy insurance policies from another federally chartered company, but consumer protection is no longer an issue when a provincial company decides to buy this same block of insurance policies?

We are not in a developing country when it comes to financial institutions or the insurance sector. We have institutions in place, in Quebec and elsewhere, and the Inspector General of Financial Institutions is responsible for the security and proper operation of financial markets.

There is also CompCorp-the Canadian Life and Health Insurance Compensation Corporation. This corporation requires a high degree of solvency of all insurance companies, whether under provincial or federal charter. They must be solvent and their solvency is verified annually. The corporation also requires these companies to keep reserves in the event of compensation, and is also responsible for the final payment of compensation if a company has the misfortune to go bankrupt.

Consumers have ample protection, whether we are talking about transactions involving an insurance company under a provincial or a federal charter. So the argument that the consumer must be protected does not hold water, especially since we have a situation that is discriminatory. As I said earlier, a Quebec company has fewer rights than a foreign company with respect to acquiring a block of insurance policies in order to expand and be able to deal with globalization and fierce competition in the insurance sector.

The Minister of Finance today, in response to one of my questions, was quite forthcoming when he said he would like to meet the official opposition critic and people from the industry, including representatives of the Entraide insurance company, to discuss ways to amend the legislation.

I commend the minister on his open minded approach, but I would appreciate it even more if he would accept the amendment we are proposing, which consists in allowing insurance companies under a provincial charter to acquire blocks of insurance policies or to acquire, in part or in whole, the business of an insurance company active in Quebec under a federal charter.

In fact we discussed all this with the Quebec Minister of Finance who is willing to make certain concessions so that the federal government could move on this amendment from the Bloc Quebecois. Mr. Landry, the Quebec Finance Minister, said that the Quebec legislation on trust companies and credit unions is in some ways discriminatory, but it is the reverse of the kind of discrimination we mentioned today, in other words, companies with a provincial charter may only acquire part of the business of other provincially regulated companies but not of a company operating under a federal charter. The Quebec Finance Minister is prepared to go part of the way toward amending the Quebec legislation, if the Minister of Finance accepts the amendment proposed by the Bloc Quebecois that would allow this type of transaction.

I think this is an interesting proposal, and I also think that this government, and especially the Minister of Finance, who call themselves apostles of free trade, should realize that on the eve of the 21st century, this kind of discrimination makes no sense at all, especially when we consider what we are losing as a result.

There are at least two provincially regulated insurance companies in Quebec which would be forced at this time to expand, to rationalize, to become more efficient, because of this type of discrimination in the Financial Institutions Act, and the challenges of globalization and rationalization that have been in place for the past ten years.

It is perhaps time for the other side to make a move and we are offering our full co-operation to the Minister of Finance so that we may get Bill C-82 through rapidly, if he will accept the amendments we are proposing to him, in particular the one allowing provincially regulated insurance companies to rationalize and have transactions with federally regulated companies.

It would be only logical to do so, and in my opinion the matter of consumer protection has been resolved. The consumer is protected by recognized institutions which are, let us keep in mind, within an area of jurisdiction that is exclusive to the provinces. All that is left to do is for the other side of this House to show some good will. Next week the Minister of Finance can, when the bill is passed on second reading, acknowledge the value of our arguments and claim to be a true defender of the economic interests of Quebec.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

4:55 p.m.

St. Paul's
Ontario

Liberal

Barry Campbell Parliamentary Secretary to Minister of Finance

Mr. Speaker, I am pleased to speak to this first group of motions which have been moved by the official opposition. I would like to speak to each of them in order.

Motion No. 1 deals with financial planning and the suggestion that the act be amended to provide that where there is any provincial regulation on the provision of financial planning services, that provincial regulations shall override the Bank Act.

I want to clarify first of all that the amendment is proposed in respect of section 410(3) which deals only with the right to make regulations in respect of new in house services, for instance provision of information processing services and specialized financing services.

The right to make regulations about the provision of financial planning services by banks was introduced in the 1992 Bank Act and is not being changed by Bill C-82. That being said, I think what underlies this motion is the suggestion that the federal government, federal regulators in the Bank Act, have no place whatsoever in the area of financial planning and regulations with respect to financial planning.

It would simply be untenable if the Bank Act and other financial institutions legislation which regulate financially chartered institutions were not to be able to control the scope of powers of those institutions. It is simply unacceptable to carve out certain powers and say you cannot deal with those powers with respect to a federal institution. Clearly concomitant with the right to regulate certain institutions is to regulate the scope of the powers of those institutions.

With respect to the second motion with respect to privacy and the proposal from the official opposition that where there is any provincial regulation on privacy it shall override the Bank Act, I also understand that but I think consumers understand that they are better off that this area of privacy and consumer protection is a matter of shared jurisdiction between the provinces and the federal government when it comes to financial institutions and consumers are the better for it.

The last motion that was just brought forward by the official opposition deals with the transfer of blocks of business between insurance companies. The proposal has been made that the act be amended to permit the Minister of Finance to allow transfers of blocks of insurance business from federally regulated companies to provincially regulated companies.

Again, I understand the motivation for the recommendation of this change. Indeed it is something that officials are looking at. Today in question period one of the hon. members from the official opposition asked the Minister of Finance if he could proceed and make this change at this time. The Minister of Finance indicated he was open to considering such a change but that officials still had work to do.

We have several concerns before we would agree to such a change. Among them is the protection of policy holders and the safety, soundness and prudence of the regulatory system. It is a complex matter. Under current law transfers of blocks of insurance policies that are purchased by one company from another are not permitted when one of those companies, the seller, the vendor, is a federally regulated company and the purchaser, for instance, is a provincially regulated company. The reason for that relates, as I said, to the protection of customers and solvency of federally regulated companies. It is essential in a transfer situation that the same supervisor continue monitoring not only the transferring company but the acquiring company.

If financial difficulties were to arise the superintendent would have the information to take effective action by ordering both

companies to take appropriate measures. This may not be able to be done if the acquiring company is not under the supervision of the superintendent.

I want to focus on some of the problems. That is not to say they are insurmountable. Indeed, as I said a moment ago, federal officials are looking at this suggestion and shortly, if the questions that we have about safety, soundness and consumer protection can be addressed, I could foresee a change along these lines being made, but we are not there yet.

I just want to end by saying that Bill C-82, the financial services legislation, contains many important changes for the financial services sector and in particular the insurance sector. We have been responsive to many of the proposals that were brought to this government before the preparation of the white paper and the consultations that took place after the white paper before the finance committee reflected, and these responses are reflected in this bill.

To be fair, this request for the federal Minister of Finance to grant the discretion to allow these transfers between federally regulated and provincially regulated companies was not something that was brought forward by the industry during these consultations as a priority for the changes it wanted to see in this round. It has been brought to our attention at the 11th hour by certain insurers in the industry and it is a valid suggestion that we should look at, but we must take the time to look at it so we can assure ourselves that prudence and consumer protection are addressed. We are going to do that.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

Reform

Werner Schmidt Okanagan Centre, BC

Mr. Speaker, I have a question of clarification. I wish to introduce amendments to Bill C-82. Is that appropriate now or do you have to do something to bring those motions forward?

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

The Acting Speaker (Mr. Milliken)

I assume the hon. member is referring to the other motions standing on the Order Paper in his name and that he wants to proceed with debate on those motions.

If that is so, is the House ready for the question on the group now before the House?

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

Some hon. members

Question.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

The Acting Speaker (Mr. Milliken)

The question is on Motion No. 1. Is it the pleasure of the House to adopt the motion?

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

Some hon. members

Agreed.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

Some hon. members

No.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

The Acting Speaker (Mr. Milliken)

All those in favour of the motion will please say yea.

An Act To Amend Certain Laws Relating To Financial Institutions
Government Orders

5:05 p.m.

Some hon. members

Yea.