Bill C-38 (Historical)

An Act to amend the Air Canada Public Participation Act

Financial Consumer Agency Of Canada Act

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Madam Speaker, congratulations on your new appointment as Assistant Deputy Chairman of Committees of the Whole. I will be sharing my time with the hon. member for Richmond who is about to make his maiden speech.

I rise on behalf of the people of Surrey Central to participate in the debate on Bill C-8, an act to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions.

I am proud to do this because the financial services sector is the largest sector in the British Columbia economy. Our largest banks employ about 26,000 people in British Columbia. Banks in Canada employ about a quarter million people directly and contribute approximately $80 million a year to charities in Canada and about $4.5 billion annually in taxes to our provincial and federal governments.

Despite the contributions that the banks and other financial institutions make, they are a sound foundation as the backbone of our economy. Our banks, trust companies, credit unions, mutual funds, insurance companies and others are very important to our economy.

The bill proposes to address the calls to modernize Canada's financial services industry. Canadian consumers of financial services have demanded a more competitive environment while our banks have been seeking approval to merge and to have more flexibility in the way they structure their operations.

The bill is an attempt to catch up to other countries that have made changes long ago to their financial services industry. The Liberal government has been dragging its feet on this matter for about seven years. This is too bad because our financial institutions must have the ability to make long term plans for the future. Once it is passed into law, we hope the bill will give our banks the opportunity they need to perform long term planning. I doubt that will happen because of the five year sunset clause in the bill.

My colleague from Prince George—Bulkley Valley has a great deal of experience and has been of great assistance to the official opposition working on our financial services policy group. The official opposition wrote a banking report in November 1998 entitled “Competition: Choice You Can Bank On”. The report forms the backbone of our financial services policy. It is a very good and detailed report.

The bill addresses some of the changes we on this side of the House have been pressing the government to enact. The official opposition has been carrying the flashlight to show the Liberals their darkness. After ridiculing our policies they have been stealing them from time to time. We encourage them to steal more of our policies, but unfortunately they do not get them right.

I understand that my colleague on the Canadian Alliance financial services policy group will be pursuing the government with amendments to the bill at committee stage. We hope the government will show some respect for what we propose.

We recognize that a strong financial services industry is essential to Canada's economic well-being. This means we need strong banks, insurance companies and other financial institutions. We need to create an environment for our financial institutions to flourish domestically and have the ability to take advantage of opportunities in the global economy.

Canada has one of the safest financial services systems in the world. We urge the government to ensure that these consumer benefits continue and not be changed or lost.

Outside the House critics of the bill are saying that in the past five years there have been many changes to the world financial system. The bill has been left behind. The bill used to be Bill C-38 which died on the order paper. It does not go far enough to bring our banks up to date with what is going on in the world.

International changes since 1996 are not reflected in the bill that is largely the same as what the Liberals introduced in 1996 but allowed to die on the order paper. They have been trying to pass the bill for far too long. It is out of date in many ways.

There are some who say that the bill is too little too late for our banks and that it will not help to strengthen the performance and competitiveness of our banks at home and abroad. They have already lost ground and they will not be able to make up those lost yards.

Other countries are well ahead of Canada. The United States has allowed its banks to merge with insurance companies. The Liberals insist on leaving it to their finance minister to decide what mergers can go ahead and which cannot.

By lowering the amount of money required to open a bank, we hope that the legislation will allow more banks to be set up in rural areas of Canada. The smaller the capital the more encouragement for institutions to jump into it..

The bill should enhance consumer choice by allowing insurance companies and mutual fund firms to use bank cheque clearing systems. If the banks take over the auto leasing and insurance industries they may hurt our economy since a significant amount of jobs are created by small businesses like car dealerships and independent insurance companies. The further entry of banks into the insurance and auto leasing markets should only be allowed if major auto financing and insurance companies have access to the Canadian Payments Association which they have been requesting. Banks must not have a competitive advantage over auto leasing and insurance companies. There must be a level playing field for all competitors within a given market.

The Canadian Alliance supports the creation of a holding company structure where banks will be able to remove some of their non-banking operations, such as credit card businesses from bank regulations, by establishing separately regulated holding companies. This new structure would allow our banks to compete more effectively against foreign non-bank competitors.

We support increased access to the payments system so that life insurance companies, money market mutual funds and securities dealers will be allowed access to increases in consumer choice.

We support expanding the role of credit unions. I can say that because for about three years, before becoming a member of parliament, I was a director of the second largest credit union in Canada. I saw the environment from the inside. I know that the credit unions are not getting the same support as the financial institutions. They are not only consumer and community oriented, but they also have a good network of branches that help people at the community level.

We are disappointed that this measure is not included in Bill C-8 despite the recommendation in the MacKay report to allow for it. We believe that the government has failed consumers since this measure was seen to be a key point in increasing competition and benefiting consumers of retail banking, that is by the credit unions.

We are concerned about the measures in the bill that would regulate access to financial services. We are concerned about regulating branch closures. This kind of initiative by the Liberals is unnecessary red tape. The banking industry already considers it good business practice to properly justify any bank closures and to give fair warning to the communities or their customers.

The bill also proposes a financial consumer agency responsible to the finance minister. These bureaucratic positions would be filled with Liberal appointments, like Mr. Lou Sekora, just as many other failed Liberal candidates have been given patronage plum jobs by the Liberals. We would support an independent ombudsman selected by the House with penalty enforcement powers and the ability to make binding directives when necessary.

In conclusion, we hope the Liberals will pay considerable attention and take our amendments seriously. We hope they will listen to the witnesses who will be appearing before the committee. We will support the bill with amendments, particularly in the areas of credit unions establishing co-operatively held banks; the tremendous power given to the Minister of Finance; the bureaucracy created by the new commissioner of the FCAC; and the regulation that demands banks to provide money losing personal accounts.

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, as this is my first speech in this new parliament, I want to congratulate you on your appointment to the Chair. I also wish you the best of luck.

I would like to take this opportunity to thank all my constituents and assure them that I will always be available and proud to represent them in parliament.

On February 7, the Minister of Finance reintroduced his bill to reform the financial services industry in Canada. Last spring's Bill C-38, which died on the order paper when the fall election was called, therefore became Bill C-8. Today, we are resuming second reading of the bill where we left it off. This new legislation, which will henceforth govern the financial services industry, will probably be passed in June at the latest.

Bill C-8 introduces a number of new provisions, including one on bank ownership. First, under the proposed legislation, a single shareholder will be able to own up to 20% of voting shares in one of the five major Canadian banks. The ceiling is now 10%.

Second, single shareholders will be able to control smaller banks with assets between $1 billion and $5 billion, such as the National Bank and the Laurentian Bank in Quebec.

Third, businesses and individuals will also be able to create their own banking institution.

Fourth, the new bill leaves the door open for major banks to resort to mergers, something they have been doing for a very long time. But the bill provides for public hearings at which the institutions concerned would be required to defend the merits of transactions for the common good.

I am pleased to speak to Bill C-8, an important bill introduced in this new parliament. However, although I am in agreement with the spirit of Bill C-8, I am surprised to see that the changes we have been told about do not appear in the body of the supposedly amended bill. These changes consist of guidelines. This is where we have a problem.

Everyone is aware of the Bloc Quebecois' interest in amending the legislation governing financial institutions. We contributed to the debate by submitting a brief, because we believe in the need for a legislative environment which helps to increase the capacity of our financial institutions to deal with global competition.

Foreign incursions into Canadian financial services markets are already an undeniable reality. In recent years, a number of foreign banks have established a presence in certain areas, such as electronic banking, credit cards, bank investment services and discount trading. In this era of globalization, they are competing with Canadian banks on their own turf.

As I have said, the Bloc Quebecois wholly subscribes to the spirit of the new legislation and to a number of its provisions. That said, certain problems we found during the last legislature are still present in the new bill. Even if we note a considerable change as far as the demands of the Bloc Quebecois and Mr. Landry are concerned, the four points are not incorporated into the bill but into the guidelines on the reclassification of former schedule 1 banks with assets of under $5 billion.

I would like to tell the hon. members what the applicable criteria are. These are: the safety and solidarity of the bank, direct or indirect employment, location of the bank's decision-making and administrative centre, consumer requirements, the bank's business and activities, and the bank's future prospects in a global context. These are the elements set out in the guidelines, but not in the bill itself, which concerns us somewhat.

Examination of the bill in its entirety also shows the frequency of loopholes such as “the minister may, if he sees fit” or “provisions of the act cease to apply if the minister should so decide”.

There is too much room for discretionary powers for a single man, namely the Minister of Finance. Wherever there are provisions on banks, insurance companies, trust companies, and the financial sector as a whole, the minister reserves the right to alone decide, from criteria known to him alone, whether an operation is unacceptable or not. He defines certain concepts, such as low-cost deposit accounts. It is unacceptable that this discretionary power has such sway, more even than the law itself.

In general terms, we would have preferred greater clarity in the decision making process and greater detail on certain concepts, such as low-cost deposits for the disadvantaged.

As regards consumer protection, the Minister of Finance remains vague and expresses more wish than real policy. The bill contains a number of provisions intended to protect and empower consumers of financial services. However, most of the groups heard in committee feel that these provisions are vague and will complicate the agency protection mechanisms.

Among others, there are provisions that intersect or overlap provisions of Quebec's consumer protection legislation. We oppose this. Consumer protection is exclusively a provincial matter.

However, protection specific to the banks can be a federal matter. But when we talk about consumer protection or the protection of personal information, this is a provincial matter, exclusively.

This bill talks of new intrusion by the federal government in areas of Quebec's jurisdiction. The Government of Quebec is, however, well covered by an array of laws. They include the consumer protection act, the personal information protection act, the insurance act, the trust companies act, the Quebec savings companies act and the credit and securities act.

All of these acts contain elements of consumer protection. How then will consumers know which legislation applies? Will the Quebec consumer protection act apply in a specific case? Quebecers might wonder when they look at the federal legislation and the laws we have in Quebec. How is one expected to know which act shall prevail? Will it be the Quebec consumer protection act or the new federal legislation? It is really not clear. Let us not forget that legislation respecting consumer protection is provincial legislation.

Consumer protection also concerns another group, namely the poor. The bill provides a definition of “low-fee retail deposit account”. Can anyone tell me what is meant by a “low-fee retail deposit account”?

According to the Minister of Finance, these so-called low-fee retail deposit accounts will ensure accessibility to financial services for low income people. Even though I got a Bachelor of Arts degree, I still cannot figure this one out.

No one knows who will be entitled to such an account, except the minister. No one knows if that account will be accessible everywhere, except the minister. Why? Because all these issues will be covered by regulations. One must really have confidence, or else ignore what is going on. We cannot understand, because the bill does not provide explanations.

The government is saying “Trust us. This will be covered in the regulations”.

This is all we have to go on for now, but it is not an assurance that consumers will be better protected under the new legislation.

When a branch closes and there is a reduction in services available to consumers, all the bill requires the bank to do is give six months' notice. Whether the bank is being closed in one, two, three or four months, it is still being closed. What good is this provision?

How can the minister say that such a weak provision ensures increased accessibility to financial services? The Minister of Finance is the only one who thinks so.

Let us imagine the case where a bank in a given region decides to close its doors because it is not doing enough business. We say that there is nothing in the bill guaranteeing the community that the bank must provide services. The bill says that the bank must give six months' notice before closing.

Is this good enough for the community served by this bank, when it was the community's savings that improved the bank's bottom line? One day, if business is down, the owners say: “We will restructure it, move it to a larger centre. You folks can find somewhere else to bank. We gave you the required notice and now we are closing”. This is unacceptable and it is not looking out for consumers.

When it comes to the real social and community role of banks, we would have liked the Minister of Finance to have paid attention to the proposals submitted by the Bloc Quebecois member for Hochelaga—Maisonneuve concerning reinvestment by banks in the community. I know that my colleague will be speaking to Bill C-8. We will have an opportunity to hear him.

In addition to the problems for consumers, there is a major problem in this bill with respect to ownership of major banks and financial institutions in Canada.

At this point, I should mention the bill's flexibility in allowing financial institutions to pursue their activities, and to deal with competition and globalization.

However there is a difference between the flexibility found in some aspects of the bill and the fact that some of our financial and banking institutions could be literally turned over to one investor who could gain total or near total control over these institutions or their management.

What we do not understand, and there lies the rub, is that in the case of the largest bank in Canada, the Royal Bank, one individual could own 20% of the shares? It used to be 10%. Now the percentage has climbed to 20%.

The reason given by the minister for not allowing more than 20% is that, in his view, it could be dangerous if one shareholder owned more than 20% because he could take control. One individual could take control of a major bank, a foreign investor could take control of the Royal Bank.

But in the case of the largest bank in Quebec, the National Bank, which is a medium size bank, one individual could own 65% of voting shares.

Why such a difference? Why such discrimination?

Why should it be more dangerous in this case? The minister says it cannot be raised to 30%, 40% or 50% for the largest bank, the Royal Bank, because it could be dangerous.

But in Quebec, the National Bank, which holds the business assets of Quebecers, could be bought by one individual who could own up to 65% of shares. In this case, it is no longer dangerous?

Why allow one individual so much control over the savings of Quebecers? This does not make any sense.

In some of the clauses I have read, they say it is not serious, that the National Bank has got to about $4 billion and will be governed by the rules for the major banks, where a shareholder could not hold more than 20% of voting shares.

Before this could happen, the Minister of Finance reserves the right to examine the entire situation and it could take up to three years before the bank could be allowed to come under the 20% rule.

During those three years, what is there to stop a foreigner from coming here and making use of the 65% rule to acquire all the power and then transferring the head office and all specialized jobs? The bank would be subject to foreign interests or a foreign business.

Why is this dangerous in one instance and not dangerous for the National Bank? We still wonder, why take the risk? Why two different measures, one for the big banks and one for the medium size ones? In this case, the risks are the same.

We have other criteria to add to this bill, and will do so via amendments.

Reference has been made to the guidelines. These are not part of the bill, but rather an aside, and the Minister of Finance reserves the right to apply them or not, as he sees fit. It is not reassuring to us that they are not an integral part of the bill.

The Minister of Finance of Quebec had sent a letter to the Minister of Finance of Canada calling for him to take these provisions into account, in order to reassure the consumers of Quebec and the people with savings. In his letter he wrote:

To ensure that a merger of the major banks is in the public interest, there is provision that such a merger will subject to a process of examination and that approval for the amalgamation will be subject to certain predetermined criteria. If this approach is necessary in the case of a bank merger, a similar approach is all the more justifiable when an individual is allowed to hold more than 20% of the voting shares of a low or moderately capitalized banks.

Public interest should be defined, in the present instance, according to the following criteria:

—The effect of the change on the activities of the banks, including available services.

—The effect of the change on employment at head office and in the branches and including professional jobs or those requiring particular expertise.

—The effect of the change on the regional economy and on the region's technological development.

These are the criteria we want to see and this is why we will be making amendments. I hope the government will support them.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, I am delighted to be able to enter into the debate on Bill C-8, which will establish a new organization of government, the financial consumer agency of Canada. It also involves the amendments of a number of acts.

I am aware that we cannot use props so I cannot show the people of Canada the size of the bill without actually reading from it. I will just open it at random here and read one of its sections:

That subsection (6) does not apply in respect of a particular transaction if the bank is acquiring control of an entity whose business includes an activity referred to in paragraph 2(b), other than a specialized financing entity.

That is only one of three parts of section 390(7) on page 480 of the massive bill. We obviously see that the task of the opposition in bringing a critique to the bill is mammoth indeed. For us to go through and decipher the meaning of even one paragraph almost stretches the brain to capacity.

I will not be able to go through it entirely. Nor is that the purpose. However I want to go on record by saying that I agree with the bill in principle. We should send it to the finance committee forthwith, so that we can do some detailed study, along with our researchers, and listen to the witnesses that come before it.

I had the privilege of being on the finance committee in the previous parliament. We spent quite a bit of time on what was then Bill C-38, which was essentially the same bill. We heard from many different interest groups. Some were very much in favour of the particular legislation going forward. Others came to us with very specific concerns.

In fast summary I could mention three of the groups had great concerns. Those who ran automobile dealerships and automobile leasing companies were very concerned that we should not, in amending the way banks operate, give them the ability to become involved directly in automobile leasing. I have not read every word in the 900 page document, but as far as I know that prohibition is still maintained and we will not have the problem of having banks in automobile leasing.

The second group was the insurance people. They do not want banks to sell over the counter insurance because it would be deemed very unfair in the competitive field. I am not saying I agree with it but that was their argument. They made us a very strong presentation. I believe it is upheld in the legislation as well.

The third group that was very significant in its impact statements to the committee represented the down and outers in society, the people who do not have large financial holdings and in many cases no holdings at all.

They require basic banking services. They were concerned with monopolization and the concentration of the finance industry in fewer and fewer holding companies that they would be even more disadvantaged. They gave presentations to the committee. I believe the bill addresses their concerns to some degree. I have some philosophical questions about the way it does, but it is an interesting concept.

I will talk very briefly about different parts of the bill, the financial consumer agency of Canada act. It is appropriate to commend the Secretary of State for International Financial Institutions for the openness that is apparent on that side of the House in listening to the debates and incorporating into the legislation the various concerns we as a party and Canadians are bringing to the debate.

I also commend the member for Prince George—Bulkley Valley, one of our members in the Canadian Alliance, who has worked very hard in bringing forward ideas, concepts and principles that should be incorporated in the way our financial institutions are run. He has done commendable work. It is interesting that many of the things that he first came up with in his report are incorporated in the legislation.

To all the people out there listening in radio land I say that the work of a good, effective opposition is useful in parliament. We think we could do better if we were on the government side, but we on the opposition side are influencing the government. We should debate each other in a respectful manner, not the way we were forced to debate in the last election campaign. We should debate issues forthrightly and talk about the different options. Then debate is useful. An effective opposition is very important.

I also emphasize that we need a very strong financial sector. Sometimes the in thing to do is to bash banks. Many of us receive complaints from our ridings about the way people are treated in banks. We have to respond to them. Usually we try to get them in contact with the right people so their problems can be solved. Many of the complaints we hear about banks are specific.

Having strong banking and financial sectors is absolutely critical. We ought not to get into a malaise of complaining about them all the time, although it is appropriate through legislation and other presentations for us to put forward the wishes of our constituents and the fact that they deserve good service from banks.

Consequently I appeal to the banks to make sure they run their businesses properly. They should do this so that legislators do not have to come up with too many 900 page documents to regulate and control how they do their business. My first choice would be for them to make their decisions in an honourable fashion so that the public does not have reason for complaints or to come to us as legislators with a cry to bring in regulations and laws to control and restrict the behaviour of banks.

In a very real way banks have to exercise a serious social conscience. They have to make sure that they are treating their customers fairly. They have to make sure that all depositors and all people who have invested in banks are giving their money in trust to organizations that are credible and solid. The last thing we want is a financial organization that is tenuous and cannot be depended upon. It is very important for the banks to do this work. It is also very important for the government to bring in regulations and a framework for financial institutions which permit that to happen.

I will comment on some specifics with respect to the Bank Act. There is a change in the way banks are governed. One important point is that the ownership of banks is now more flexible.

[Gary Lunn, Canadian Alliance, Saanich—Gulf Islands, BC]

Mr. Speaker, I am pleased to stand on behalf of all people of Saanich—Gulf Islands to speak to the bill. We saw it in the last parliament as Bill C-38; it is now Bill C-8. It died on the order paper when the election was called.

We owe a huge thanks to the member for Prince George—Bulkley Valley who just spoke. He wrote a very detailed, in depth report titled “Competion: Choice You Can Bank On” back in November 1998. I had been elected for just over a year at that time and remember receiving a copy of the report. It was very detailed and very long.

He went into every possible detail of financial institutions and banking and how we could improve it for consumers and give them more choices. There was broad consultation with the industry. I was impressed by how much work went into the report and by how much knowledge he had on the subject.

A few years later we in the opposition see exactly what work we have done. Actually the government adopted a lot of it and of course never gave any credit for it.

I applaud the member for Prince George—Bulkley Valley. He has done a phenomenal amount of work in the financial services sector over the last few years. He can be proud when he sees the government actually adopting a number of his measures.

Let us talk about what the bill will do. As we have seen in the last few years, a number of major banks wanted to merge. They put forward proposals to do so which were all quashed by the government.

I am pleased to see that the government has finally come out with a formal merger process so that at least financial institutions know where they stand. They literally invested millions and millions of dollars to go through the process, only to be stopped in the end. Some would argue it may have been for political reasons, that the Minister of Finance was annoyed because he did not get advance notice. That is not the right reason to stop mergers.

Our interest has to be consumers, to ensure that their savings and investments will be secure in these institutions. We should also allow the institutions to compete more in the global economy and offer more choices for consumers. I am pleased to say, as my colleague has stated, we believe that will happen.

There are a couple of very positive aspects to the bill. We are pleased to see that the government left out the auto leasing and insurance sectors at this time. I agree with my colleague. I do not think it is appropriate to bring them in at this point in time. There was a lot of lobbying by financial institutions that wanted to get into the market. They recognized that they had huge lists of people to whom they could market and offer package services, from auto leasing to insurance to banking services.

The insurance and auto leasing sectors right now do a very good job and are very competitive. As the hon. member pointed out, it is inevitable that there will be changes in the years to come. We should prepare for them, but it is the right decision at this point in time not to go down that road.

I do have some concerns with the creation of a financial consumer agency of Canada. The agency will report directly to the Minister of Finance. We have seen over the last few weeks what happens when the government makes appointments based on politics, appointments which report to a minister as opposed to parliament where there is complete openness and transparency.

Even when in opposition the Liberals recognized that the ethics counsellor should report directly to parliament. In their very first campaign book in 1993, the Liberals stated that the ethics counsellor should report directly to parliament so that there is openness, transparency and a level of trust for the Canadian people. There have been decisions in recent months that have raised many concerns, yet members of parliament have no access to the reports.

The same concern is raised here with the financial consumer agency. It would report directly to the Minister of Finance, the same minister who I believe will be responsible for appointments to these agencies or boards, which may become a political dumping ground for defeated candidates or large donors to the government.

Some would say that is a bit biased, but the facts speak for themselves. We have seen that so much in the past. It does not end.

Let me read a recent press release. This is enough to make anybody throw up. On Friday, February 8, it stated: “The Minister of Citizenship and Immigration today announced the appointment of Lou Sekora of Coquitlam, B.C. as a part time citizenship judge”.

We all know that Mr. Sekora was defeated in the riding of Port Moody—Coquitlam—Port Coquitlam in the last election. When I phoned a few of my colleagues on the other side, Liberal members of parliament who are good friends, to tell them about the appointment, they started to laugh. They thought it was absolutely hilarious. It was pure, blatant partisanship.

Again, our concern is when there is not openness and transparency. I have a lot of respect for the Minister of Finance but when this type of legislation is introduced it lends itself to abuse. We tend to question whether appointments are based on politics or on the real needs of Canadians. That can happen down the road. I believe the finance committee should be given the opportunity to scrutinize and re-look at these appointments.

Those are some concerns we have in the official opposition. Again, I only speak from the record. We also see the massive problems with the ethics counsellor. We will be voting on that tomorrow night on the Canadian Alliance opposition supply day motion, where members of the government will have an opportunity to correct the very same wrong they have put into this legislation. They will have the opportunity to vote on a motion to have the ethics counsellor actually report to parliament and not to the Prime Minister.

I am sure my colleague from Prince George—Bulkley Valley, who is quarterbacking the legislation for the Canadian Alliance, will submit proposals to the bill when it goes to committee. However, there are a lot of positives in the bill that we are pleased with. It will give consumers more options and the financial institutions the environment where they will be able to compete globally, and we are going to a global economy. Those are some areas with which we are quite pleased.

The government member who first spoke on the bill talked about how it would help people on social assistance. It is an incredible stretch to suggest that lower service fees on bank accounts will help people on social assistance. It borderlines on preposterous to even suggest that.

The former premier of British Columbia, Mr. Glen Clark, came up with an idea somewhat similar to that by opening a credit union in one of the poorer neighbourhoods. He thought it would help those people. If the government really wants to help the people who are struggling to find jobs and get back on their feet, it should adopt some of the tax cut proposals put forward by the member for Medicine Hat over the last three years when he was the finance critic. We were pleased to see that the government, almost wholeheartedly, adopted a lot of the proposals contained in the member's 1998 report entitled “Competition: Choice You Can Bank On”, but we would have liked some things to have gone further.

If the government really wants to help people on social assistance who are struggling, who do need tax cuts and who do need a stronger economy where the business community can thrive, it would create economic opportunities for meaningful, long-lasting jobs. That would really help them. We will continue to push these ideas forward.

Under the new U.S. administration of President Bush, our neighbours to the south have embarked on a massive tax cut in the neighbourhood of $1.6 trillion. It believes that the economy is beginning to slow down in the United States. I agree with President Bush that those tax cuts will likely create more government revenues and create more meaningful and lasting jobs. It is the private sector that invests money into the businesses which creates opportunities for employment.

I do not believe the government can create lasting jobs. It can create short term jobs and do all types of funding, but at the end of the day it does not really create any kind of security for people.

I am pleased to speak to the bill and look forward to it going to committee. I am absolutely confident that we will be putting forward some amendments that will strengthen the bill. This is a time for all of us to support the bill, send it off to committee where the experts from the industry can scrutinize it and give us their input and then put forward some positive solutions to the bill.

[Dick Harris, Canadian Alliance, Prince George—Bulkley Valley, BC]

Mr. Speaker, Bill C-8 is a bill to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions. While we in the Canadian Alliance are very supportive of the bill in most respects, we maintain that the government has been very slow in modernizing the regulations in the acts that govern banking and financial institutions.

The government has been in power since 1993. This is the first major piece of banking legislation, or legislation covering the other types of institutions outlined in the bill, that the government has brought in. As a result of it being so slow to react to global conditions, the global economy and what has been happening in industry in other countries around the world, we have seen ourselves, our banks, our institutions, our securities companies and our life insurance companies being left considerably behind other countries that have been more forward thinking in modernizing the financial institutions in their country.

Canada should have played a more leading role in setting an example for other countries to follow. As parliamentarians know, we have one of the safest and finest banking financial services industry in the world. We have been for the most part very prudent in setting regulations and ensuring that Canadians had a good financial services system to serve them. At the same time, until 1993 we were quite forward thinking in providing the tools for our domestic banks to compete in global opportunities.

We had all the reasons to set Canada up as a standard throughout the world for other countries to follow. Unfortunately the Liberal government did not take that initiative. It has played the role of a follower rather than a leader. For all the talk about how much good the government has done and how much attention it has paid to this sector of our economy, it has not been the leader that it should have been.

That being said, I may now have some nice things to say about Bill C-8. It calls to modernize Canada's financial services industry. Canadian consumers have been demanding a more competitive financial services sector and more choices as to where they do their financial business. In addition, the players in the industry, the banks, the insurance companies and securities companies have been requesting more flexibility to catch up with their competitors in the global economy so that they can take part in opportunities.

By catching up, I refer to having the provisions to make acquisitions within Canada and having in place a formal merger approval process. If they decided that it would be in their best interests and the best interests of their customers to merge with another domestic bank, they would have a formal process to follow. They would not have to leave anything to chance nor would they have their proposals subject to interpretation by a number of different parties that have an interest in this merger.

Under the legislation there will be a formal process. One would assume that if this is a process that has some sound reasoning behind it, two banks will be able to sit down and say that this is the criteria they have to meet, these are the steps they have to take and if they do, they can expect, according to the legislation, approval of the merger. That allows them to do some long term planning.

In this business, as a bank or an insurance company, one has to be able to have that opportunity to look far beyond tomorrow, certainly in order to set one's business plans in place. We have some criticism with the five year sunset clause.

Even though the legislation took about seven years, and now the government has promised to review it in five years, I believe the financial services industry, while welcoming the five year renewal in relation to what we have gone through, would like to have the opportunity to see far beyond that. They would like to see 10, 15, 20 years down the road. The government perhaps could have put the sunset clause together a little differently or else left it out altogether. It could have simply had an ongoing review process where amendments to the act could easily be made rather than having a sunset review.

There are many aspects to the bill of almost 900 pages. While we have some areas of concern, I did state that it addresses many of the things the Canadian Alliance finance group, of which I am the critic when it comes to banks and financial institutions, has been pressing the government for a number of years to get with the program in relation to making some changes.

I think back to 1994 when I believe the first white paper was brought in by a former secretary of state who had many years in the banking industry. Nothing was done. I think back to a couple of years later when there was another study done. Again, nothing was done. Then we had the MacKay task force report which was about two years ago. Finally, we had the legislation ready to go and then the Prime Minister in his wisdom, wisdom and Liberals seems to be an oxymoron at times, called an early election. Bill C-38 died at that time.

While the secretary of state was delivering his address in closing, he thanked a number of people. I would like to point out to him that he forgot to thank the member for Prince George—Bulkley Valley. When I read over the legislation, I was quite flattered because I and our party were way ahead the government in the legislation.

In November 1998 I delivered a report to our caucus, and to anyone in the industry who cared to read it. It was called “Competition: Choice You Can Bank On”. It covered a whole myriad of things in the financial services sector. It was accepted by our party and was applauded by practically everyone in the financial services sector as a forward thinking plan for the future of financial services in Canada.

I am really flattered when I read the bill because our party and I used my 1998 report as a benchmark to scrutinize Bill C-38, now C-8. There is an astonishingly close similarity between what is in the legislation and what is in my November 1998 report. I am sure the secretary of state simply forgot to thank me. I know he read and reread my 1998 report in order to get a good grasp on what was needed to be put in here.

I want to talk about some of the points we support such as the legislation that allows a bank to develop into a holding structure. It is going to give banks far more flexibility to compete, particularly with foreign banks that are coming here, not necessarily establishing bricks and mortars but a credit card company, or banking by phone or lending by phone. This will greatly enhance our domestic banks to compete with foreign banks. Certainly we want foreign banks to establish their branches in Canada. It goes back to giving consumers choices. We support the new provision to allow the banks to restructure under a holding company.

We talked about increased access to the payment system which will allow life insurance companies and security companies to basically operate like banks as far as deposits and cash clearing. This will end the monopoly over the payment system that the banks have had and will increase the choices once again.

We talked about the ability for credit unions to expand into a national bank structure owned by one member one vote. We noticed that was not in the legislation, but we know that perhaps this will be dealt with in a separate piece of legislation. We are going to ask the secretary of state to put it on record. We support that principle.

The provision to allow banks to set up under a smaller capitalization is going to increase choice once again. Those parties will be able to set up smaller regional banks with an initial $5 million capitalization. I hope that investors who want to get into the banking business will take advantage of this provision. Again, we have increased choice for consumers.

I talked about the formal review process for mergers and we support that. We are quite pleased about the absence of the banks' ability to retail insurance and auto leasing through their branches. That has been left out of the bill and the prohibition still remains. There is no doubt that some day, sooner or later, the banks will be in the auto leasing and in the insurance business. I do not know if that is going to be such a bad thing. However, because that provision is not in the bill, it gives the auto leasing business and the insurance business, which is a very competitive and vibrant business in Canada, a chance now to begin to lay plans for the most assured entry of the banks into those businesses. It gives them some time.

I have talked to representatives from the industry and have said that the banks will not be out forever, but here is some breathing room. I told them not to miss the opportunity to start laying some plans for the impact of the banks coming into their business. I hope they are making plans to mitigate the impact of banks coming into that business.

When it comes to the financial consumer agency of Canada, our party has some concerns in as much as the agency will report to parliament through the Minister of Finance. We are quite concerned with the fact that within the bill there are tremendous powers given to the Minister of Finance. We believe those powers should be given to parliament, and by extension, the finance committee as opposed to the Minister of Finance.

I will talk about the financial consumers agency as an example. While the bill calls for that agency to report to parliament through the Minister of Finance, we would prefer that the agency report directly to the House. By extension, this would allow a review process to be done by an all party finance committee.

I think that would serve Canadians better in terms of openness and a non-partisan look at what the financial consumer agency has to say.

We hope we will be able to deal with this in committee. I know the government is anxious to make improvements to the legislation, perhaps through amendments in committee, and I am sure it will welcome that amendment with open arms and will get on with it.

I want to talk about the financial services ombudsman and, again, the financial consumer agency. I just hope and pray that this will not be another means for the Liberal government to give jobs to its friends, something we have seen so many times.

I expect a number of defeated Liberals may appear on these boards. I hope the government will be able to surprise us and that we will see some people who have never expressed any type of strong Liberal leanings, as impossible as that may sound, when it comes to government appointments. We will look forward to that. I see the hon. member nodding his head again so I know he likes the idea.

We will support the bill, of course, but we will raise our concerns through amendments. I want to straighten out the secretary of state. He seems to have the idea that regulating low cost bank accounts of $2, $3 and $4 a month will somehow get Canadians off welfare. I fail to see the direct correlation between having a bank account and getting off welfare.

There are a number of reasons why people are on welfare. First, people, through circumstances that are no fault of their own, are unable to work. We have a responsibility to look after such people through the social welfare system.

Second, there are those people who simply do not want to work and just love welfare Wednesday, and they will never work whether they have a low cost bank account or not.

There are other people on social assistance who would dearly love to work but unfortunately, in a number of the provinces and throughout the country, there simply are no jobs. This situation exists because while we have been able to generate quite a bit of revenue from our export economy, our domestic economy still needs a lot of help.

That means that the federal government, working in co-operation with provincial governments, could do far better in providing an environment that would ensure a buoyant economy right across the country, and not just in pockets where there are conservative governments such as in Ontario and Alberta, which have booming economies despite the deterrents presented by the Liberal government.

We would prefer that the government, instead of counting on low cost bank accounts to get people off welfare, took a serious look at how it has been curtailing economic growth and how this has not helped investors and businesses create new jobs for people on welfare.

I know my colleague from Saanich—Gulf Islands has a lot of good things to say about the bill, both from a supportive point of view and a critical point of view.

I look forward to committee, as I know do members of the government, the secretary of state, his parliamentary secretary and everyone connected with the bill on the finance committee. They are very anxious to see the amendments we put forward. They will appreciate the wisdom of them and be very supportive.

[Jim Peterson, Liberal, for the Minister of Finance]

moved that Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions. be read the second time and referred to a committee.

Mr. Speaker, as everyone knows, Bill C-8 is a major bill, over 900 pages in length. It is, I believe, the biggest ever placed before the House. It is the outcome of a great deal of work and consultation in all sectors, including consumers and the members of the House of Commons. In fact, the latter had already seen this bill during the last parliament. At that time it was called Bill C-38.

With it, we aim to reform the strategic framework of the Canadian financial services sector, which comprises Canadian and foreign banks, trust companies, insurance companies, co-operative credit associations and other financial institutions. We have proposed a few minor changes to Bill C-38.

In essence this is the very same bill but with technical, grammatical and editorial improvements, as well as some clarifications where stakeholders identified points of confusion about the intent or application of the policies.

For example, the Canadian Bankers Association pointed out that under Bill C-38 it was unclear whether new financial sector holding companies could hold portfolio investments. The fact is that this is allowed and is now clearly stated. I thank the Canadian Bankers Association for its incredibly valuable input in the new bill, as well as that of all other industry and consumer driven stakeholder associations.

There can be no doubt that Canada's financial services sector is critical to us. It is critical as an industry, one of the truly great industries of the country, employing over 500,000 Canadians directly. It is highly export oriented, with more than 50% of the revenue from the insurers and the banks coming in from abroad. Most of the global taxes are paid in Canada, over 80%, and close to 90% of their global employees are in Canada. If we set out to devise through an industrial policy an industry that would be ideal for Canada, we could probably find none better than our financial services sector.

It is also important to us for the role it plays in our society and in our economy. After all, without financial intermediation, the capacity to deposit and withdraw funds, and to send funds around the world, where would we as individuals and our businesses be?

When we go abroad we find in many parts of the world that Canadian financial institutions are predominant in those foreign markets, giving a role of leadership not only to foreigners but also Canadians who want to do business in particular foreign jurisdictions. We have an important responsibility, therefore, to maintain the health and the vigour of this great industry.

Because they operate within a legislative framework determined by parliament it is essential that we have ongoing reviews of financial services legislation. This is probably the most extensive review that has ever been undertaken.

As a result of an extensive consultation going back to the MacKay task force which reported to parliament, the finance committee of the House and the Senate banking committee held extensive public hearings and reported back to us.

The minister then tabled before the House a white paper in June 1999, which again allowed for extensive consultation and input from all stakeholders. The bill was finally tabled last June as Bill C-38 and but for the election I am sure would have been law today. We are back to do the job, which is the culmination of all this great input.

There are four major themes in the bill. The first is encouraging the flexibility of our financial services both domestically and globally. To do so we have put in place a number of options and facilitating devices.

The first and probably most important is the holding company option. This means that our institutions will be able to compete in Canada with the foreign monolines such as credit card and lending companies that are coming here in an unregulated manner. We will give them that level playing field. It will also give them flexibility in the way they structure their Canadian and global operations.

The second point in terms of flexibility is that we are allowing a change in the ownership rules. This means that any shareholder, which under the current law would be limited to 10%, could go up to 20% of equity or 30% of non-voting shares. This is to give our institutions the flexibility to enter into strategic alliances and joint ventures with other institutions here and around the world.

The third area where we are helping them compete better is with respect to the merger review process. We have set out in the guidelines a process which must be followed for the major banks to enter into a merger.

This will offer certainty of process. At the same time it envisages hearings before both the Senate banking committee and the House of Commons finance committee. There is a great opportunity for public input because the final decision on mergers rests with the minister. He and Canadians must be convinced that any merger which takes place is in the best interest of all Canadians.

The second major thrust of the legislation is to encourage domestic competition in Canada. The reason for this is that we believe our customers are best served where there is vigorous competition in the marketplace.

How are we doing this? We want it to be easier for people to set up smaller banks or community based banks. This is why we are lowering the minimum capital that a bank must have or an institution must have from $10 million to $5 million. We think this will lead to new types of community banks.

We are also seeing under the evolution of this sector new banks associated with retailing institutions such as President's Choice Financial, a relationship between the Loblaws companies and CIBC which does their backroom work on a contract basis. This is a bank which now has over 400,000 customers and over $2 billion in assets.

Another way we are facilitating competition is with the new three tier size based ownership regime. If the equity is under $1 billion it can be wholly owned. Again this will help new banks to get established.

If the new size based ownership regime is between $1 billion and $5 billion, up to 65% of the shares can be owned or controlled by one shareholder and the rest must be the subject of a public float on the market. If the equity is over $5 billion, such as with our major banks and demutualized insurance companies, the rule is that these institutions should be widely held.

We are seeing new measures to encourage domestic competition with respect to credit unions, particularly those outside Quebec which do not have significant size and therefore economies of scale and are thus facing higher costs of operating and serving their customers who are also the owners of these unique community based institutions.

We have worked very closely with the credit union movement to help give them greater competitiveness. This is why, working with them, we have come up with an entity called a national service entity. This would allow them to combine to get economies of scale. It would enable them, for example, to issue a common credit card, and they could roll out new service offerings across provincial borders. This is a major step forward.

I will say a brief word about co-operative banks. This was a very important consideration brought forward by the MacKay committee and endorsed by the committees of the House and the other place. We have been working with the credit union movement to find out exactly what type of co-operative bank legislation should be brought forward. Unfortunately, the big group with whom we were working fell away from this project, but we have continued to study it and we will continue to study it, running on a parallel basis to Bill C-8. When the model is in place we will issue it and we will have extensive consultations, because we know there are provincial concerns and there are concerns within the credit union movement. We will subject that new measure to the same type of extensive input from the communities, the industries and the consumer groups, so that when we do come forward with the legislation it will meet the needs as expected.

A fourth way in which we are encouraging domestic competition here in Canada is through the entry of foreign banks via branches. This legislation was in place a couple of years ago, again as a result of extensive consultation, but we have enhanced it in this legislation to bring the foreign banking regime in Canada up to a level playing field with Canadian institutions, again requiring amendments in the legislation.

A fifth way in which we are encouraging domestic competition for the benefit of consumers is by opening up to the payment system the operations of life insurers, security dealers and money market mutual funds. This means that these new institutions would be able to have funds of a customer on hand and the customer would be able to exercise chequing privileges on that account, again enhancing competition.

The third major heading under this bill is the protection of customers. We think customers are best protected under any regime where there is maximum competition, so I have outlined what the government is doing in terms of enhancing competition. However, even with competition we have found in the past that there were those who remained unbanked; basic financial services were not available to them. This is why the government has taken measures under the heading of access. We are ensuring that Canadians have access to the financial services they need. We have introduced measures which would require the opening of accounts with a minimum amount of ID. Past credit or employment history, provided there is no fraud, would not be a bar to cashing government cheques.

As well, I have recently entered into a memorandum of understanding, a signed agreement, with eight of the large deposit taking institutions, which would make basic bank accounts available for Canadians. They are not all the same. This is not a cookie cutter, because we believe that competition will benefit consumers. However, each institution has come up with its own basic account with a minimum number of transactions, be they in person or via the Internet.

The costs are set forth and range among the five from $2.95 to $4 a month. We are making sure that those who can least afford it have access to the basic banking they need to get off welfare, to be able to deposit that cheque so it is safe and secure, and to pay their bills, including rent. This is important because, really, it is almost impossible to get off welfare if one does not have access to this type of basic banking.

As well, we have put in place rules for the closure of bank branches because that could be another way that access to basic services might be denied. We do not treat the banks as utilities; what we have said is that if they want to close a branch, that is their business decision. We are not going to force them to operate branches that are not profitable. That would undermine the strength of our financial services sector. However, what we have said is that they have to give notice. If the branch is in an urban area, they must give four months' notice so people can make alternative arrangements. If the branch is in a rural or less populated area, they must give six months' notice. This is so the community itself can find alternatives for the provision of these basic banking services.

Some of the alternatives will come from other institutions. With the closure of many branches in some of the western provinces, we have seen how provincial credit unions have come in and bought up those branches, at the same time ensuring ongoing employment to all of the employees who otherwise would have been affected. This is one of the virtues of giving notice. The federal government is also prepared to play a role in remote communities. Perhaps the post office could be the place people could look to for basic banking.

Another area where we have had the views and interests of consumers in mind is the financial consumer agency of Canada. Right now there are three federal departments in Ottawa that deal with enforcing our laws as they relate to consumers: Industry Canada, the Office of the Superintendent of Financial Institutions and the finance department itself. We are putting all of these operations under one roof. There will be savings in the costs of administration in so doing. It will be much more effective and efficient. We think this is a step forward for consumers.

We have had in place for a number of years the Canadian banking ombudsman. In this bill we are trying to expand the role of the Canadian banking ombudsman so that it covers all financial institutions. In an era of conglomeration where different types of financial institutions, such as banks, insurers and trust companies, are coming under the same ownership and the same roof, we think consumers would be better served if they could go to one dispute resolution centre for all their disputes regarding financial services, as opposed to having to find different ones depending upon what type of financial service they are having difficulties with. We also believe that the financial institutions sector will be better served by having this type of single dispute resolution centre.

Of course under the constitution we cannot mandate that entities which are not owned by banks have to come to this centre. That is why we have undertaken to work in very close co-operation with the joint forum of financial regulators from the provinces to find a way to bring together the disparate dispute resolution mechanisms aimed at helping consumers today. We welcome the efforts undertaken by Dina Palozzi of the Financial Services Commission of Ontario and Doug Hyndman from the British Columbia Securities Commission, who are heading up this task force which also has representation from the federal government.

The fourth major thrust of the bill is to ensure that on an ongoing basis we have responsible but responsive regulation of the sector. Of course safety and soundness have to be number one. That is why the bill has a number of measures which give enhanced powers to the Office of the Superintendent of Financial Institutions to intervene where there are difficulties, to remove directors if necessary and to impose fines where there is blatant disregard of our regulatory regime.

At the same time we want to ease the regulatory burden. This is why we are streamlining the approval system. Many approvals would be done on an exception basis: a request for an approval, if it goes to OSFI and is not denied within 30 days, would be deemed automatically passed.

It is critical as we go ahead that we have in place an evolving, dynamic regulatory regime, because we are seeing incredible changes with globalization, with exploding technology, with conglomeration and with consolidation, all of it taking place on a global basis. Our regulatory regime must be capable of keeping up with this. That is why in Bill C-8 we have reserved to the minister many areas of ministerial discretion. If it were there in black and white law, it would require an act of the House to change it. That is why we want, in many areas, to have this ministerial discretion.

As a minimum, within five years this law will sunset, again triggering, I hope, vigorous debate, with a telescope on the future looking at where the sector is heading, but because the changes in this industry and sector are so dynamic and so global, we cannot predict where they are going to be. We cannot predict what types of countermoves or accommodating moves we must make in order to ensure that we have a dynamic, competitive sector helping our consumers and competing globally. This is why we are committed as a government to reviewing the bill, not just five years from now but at any time sooner should it be necessary to do so, and then making the necessary changes.

In conclusion, I thank the stakeholders, the institutions, the financial sector, consumers' groups, members of this House and members of the other House. I particularly thank finance officials who have worked so assiduously on this, as well as those in OSFI and the other institutions, for bringing the bill to fruition in what I believe is a very responsible and critical way. Because the bill has had input from so many, I believe that it behooves us as parliamentarians to give it serious consideration. Because we have already had the input, I ask that it receive speedy passage. I would hope that it goes from this Chamber as quickly as possible into committee, where the real detailed work can be done and the witnesses can be heard.