Bill C-37 (Historical)

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

This enactment amends a number of Acts governing financial institutions. It also amends legislation related to the regulation of financial institutions. Notable among the amendments are the following:
(a) amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, and the Trust and Loan Companies Act aimed at achieving three key objectives:
(i) enhancing the interests of consumers,
(ii) increasing legislative and regulatory efficiency, and
(iii) adapting those Acts to new developments;
(b) amendments to the Bills of Exchange Act to provide for the introduction of electronic cheque imaging; and
(c) technical amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Bank of Canada Act, the Bills of Exchange Act, the Canada Business Corporations Act, the Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Financial Consumer Agency of Canada Act, the Green Shield Canada Act, the Investment Canada Act, the National Housing Act, the Payment Clearing and Settlement Act and the Winding-up and Restructuring Act.

Bank Act

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member raised a certain aspect of the bill that relates to housing, an area in which I have some experience having served on the board of the Peel Regional Housing Authority for some time.

She also spoke about Canada Mortgage and Housing. I know we have had this discussion in a private member's bill that was recently before the House with regard to the accumulated surplus that CMHC has had. It is a very large number.

It is important for members to understand a little bit about CMHC but I will not have the time in a question. However, effectively, it relates to the same kind of principle that general insurance companies have. They must have sufficient reserve funds, through investment or whatever it would be, to have the coverage ratio necessary to meet the risk of loss, and CMHC is no different. It is not a matter that we can just simply take the resources that are there to provide the security that allows CMHC to provide the services that it does.

I would just ask the hon. member if she would maybe come to an understanding that CMHC does not have a surplus because it just wants to hoard cash, but that it is jurisdictionally and legally obligated to maintain coverage ratios. I do not know if she understands that concept, but there are coverage ratios that must be in place.

It is really important and appropriate in the House not to suggest that somehow the surplus is discretionary and can be invested elsewhere. I would encourage the member to ensure we get that straight so Canadians do not assume somehow that CMHC is hoarding cash.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Actually, Mr. Speaker, I do know that quite well because I remember opposing the amendments to the National Housing Act in 1998 that were put through by the former prime minister. Why did I oppose them? I opposed them because they concerned the commercialization of CMHC.

On the cover ratio, CMHC has $5 billion in its reserve fund. Surely it does not need $5 billion in the coverage ratio. The surplus has grown tremendously. Even if we take one-fifth of it, or 20% of it, we could use those funds to start creating some affordable housing.

The amendments that were put through in 1998 in the National Housing Act limited the role of CMHC in working with municipalities and community based housing providers, which prevented them from developing innovative new ways to create desperately needed affordable housing. At the same time, the amendments opened CMHC's mortgage insurance business to the private sector, which is what it is doing now.

What was started with the former prime minister is now being continued, and both of those trends are very bad trends.

In other countries around the world, their equivalent of CMHC provides that kind of bases. Every time mortgage interest rates go down, they take the money that is gained from that lower interest rate and reinvest it into building new affordable housing.

It has been done in Hong Kong, in Britain and in many parts of the world. It is only in Canada that we have a very reactive and negative way of dealing with CMHC. As a result, very few affordable houses were built after 1994-95 when the national housing program was cancelled.

I lament the complete walking away of the government from its responsibility of building affordable housing. It started with the former prime minister, Mr. Mulroney, and later on the former Liberal prime minister continued that trend and continued to cancel the national housing program.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in the debate on Bill C-37. I found it very difficult to deal with the bill. First, the bill in itself is probably one of the larger bills I have ever seen in this place. It is some 237 pages long.

It is an omnibus bill of sorts, which means it provides a variety of amendments, technical and otherwise, to a wide range of bills. When people read the bill, they cannot understand what the provisions in it mean unless they have the bill to be amended beside them so they can see the provisions that are already in place and understand the context in which they relate to that bill.

I know the members know, but Canadians should know that when we get bills such as this, members, who are involved in the finance committee, have to rely on the work and due diligence of others to make absolutely sure the provisions are there. In fact, it is probably the most extreme example that I could cite.

I have a problem with the bill because it covers so many things. I suspect that if any government ever wanted to do anything to amend certain acts, this certainly would be the way to do it, to put through a bill in excess of some 230 pages, which affects maybe 20 or 30 different existing pieces of legislation.

In order to give people an idea, the summary to Bill C-37 indicates that it is an enactment that amends a number of acts governing financial institutions. At least it is in a pocket that we understand.

The bill also amends legislation related to the regulation of financial institutions. This place has been seized over the years with legislation related to financial institutions, particularly as it relates to bank mergers and the lines of business banks can get into. I must admit it conjures up some memories of clichés that some members would use in their speeches during some of the debates about banks being terribly bad. However, most people would say that their bank branches are pretty good.

The notable pieces of legislation that are being amended are the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act and the Trust and Loan Companies Act. All of the amendments are aimed at achieving three objectives: first, enhancing the interests of consumers; second, increasing legislative and regulatory efficiency; and third, adapting those acts to new developments. These sound a little comprehensive, but they are envelopes under which these particular amendments could be placed. There are also amendments to the Bills of Exchange Act to provide for the introduction of electronic cheque imaging.

There are also technical amendments, which cover a broad range of acts: the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, and I could go on. There are at least 20 of them.

I think maybe I have made my point, that ordinary members of Parliament, who are not involved in the finance committee and maybe do not have some of the background and training, will have a very difficult time. A number of votes are taken on bills like this, whether it be at second reading, committee stage amendments, report stage, third reading. I think Canadians will ask themselves this. If this is so cumbersome, if there are 230-some odd pages, if there are virtually hundreds and hundreds of amendments to dozens of acts, how can a member of Parliament, with all the responsibilities, make an informed decision and cast a vote reflective of the due diligence that has been done?

How that happens here is probably the same way it happens in real life.

I can recall being the vice-chairman of the board of the Mississauga Hospital. Under the Ontario hospitals act, the board of directors is responsible for every aspect of the administration and operation of the hospital.

I remember giving a seminar on trustees of hospitals. As I recall, the title was “Hospital Trustee: Mission Impossible”. It is impossible because we can not possibly expect volunteer members of a board of directors to be fully informed about the day to day activities of the hospital, to take full responsibilities for what the doctors, nurses and administrative people do and, if anything goes wrong, to be personally responsible for those.

What happens is the responsibilities of the board are seconded or delegated to other persons. Therefore, for the board's responsibilities, as is the case for members of Parliament, there is a delegation or a secondment of those responsibilities to others who specifically spend their time on them. They perhaps have the specific expertise and the support personnel, either within their offices or from parliamentary offices, to do the necessary due diligence, to do the checking, to ask the questions, to hear witnesses and to make some ascertainment as to the propriety of the amendments being made.

We have in this chamber always the presumption of honesty. We certainly have that as well in our committees as we bring witnesses forward. It is a process which the members of Parliament rely on their best judgment to ascertain that witnesses who appear before the committee are appropriate witnesses, that they cover the necessary areas and that they get the proper representations from the departmental officials who are responsible for having drafted this.

We also have the support of the Library of Parliament, which does some excellent legislative summaries to the extent that it can. In this regard, I suspect the legislative summary for a bill this size might very well be five times larger, maybe about 1,000 pages, but we have the resources available to us of the Library of Parliament to assist us in specific areas.

It is an onerous task. I do not purport to be fully knowledgeable and able to come here and argue the case of why members should vote for a particular clause in a particular bill that is to be amended, whether it be technical or otherwise. However, the job does get done and it gets done through a process of secondment, provided the committee is doing its work and provided the officials have done their work.

I must admit Canadians should be assured, and I wish they would get a better chance to see it, that the work done in committee is probably the most productive work that members of Parliament do. The work in committees is excellent. The quality and level of questioning of witnesses is excellent in terms of discharging the responsibility of due diligence or doing the detail with regard to the legislation before this place.

Being a legislator is an important responsibility. One of the things that I note in the bill is right at the very end. It is coincidental, but I just gave a speech a couple of days ago on a private member's bill that had to do with repealing acts that had received royal assent. They had gone through the entire legislative process of being tabled at first reading, debated at second, went to committee, committee stage amendments, report stage amendments back to the House, third reading, passed on to the other place and then went through an almost identical process and then received royal assent.

The public would think that when the bill receives royal asset it is law. It is not law until it is proclaimed. It must be in force.

The private member's bill I referred to was started in the Senate by Senator Tommy Banks. It was the third iteration of a bill that has been around since about 2002. It has to do with repealing legislation that has received royal assent but has not been proclaimed and put into force, and therefore is not active law in Canada.

I note the final provision of the bill found on page 237 entitled, “Order in Council” under the subtitle of “Coming Into Force”. It reads:

The provisions of this Act, or the provisions of any Act enacted by this Act, come into force on a day or days to be fixed by order of the Governor in Council.

This appears from time to time in bills. It means there is no set date as to when the provisions of this bill will be put into place. Often that happens because other things must occur before the provisions of the amendments within the bill could be operative. It is almost like once we pass this, before we put it in force, certain other things have to happen. Once they have happened, then the governor in council, which is basically the cabinet, sets a date fixing that certain provisions of this act would come into force.

As an aside, in most of the cases bills would generally say that the act would come into force on the date on which it received royal assent. That is fairly straightforward. There are others which have provisos that the in force date will be on a specified date, for instance, January 1, 2007.

In the reproductive technologies bill, I believe there two key areas. One is called prohibited acts under the bill. The other is controlled activities. The prohibited acts were all in force on royal assent. The controlled activities were subject to being in force by a date set by order in council. The reason for that was the controlled activities required the establishment of a board of management that would do certain things. Until that was set up, the provisions of that could not go forward.

Another example is Bill C-11 from the last Parliament, the whistleblower legislation. This legislation received royal assent in November of last year. The legislation provides protection to civil servants who have allegations of wrongdoing within the public service or anybody who is within the definition of a public servant. The bill is not in force yet.

In this Parliament we have Bill C-2, and this can get complicated in non-financial bills. Bill C-2 prescribes amendments to Bill C-11.

[John Baird, Conservative, Ottawa West—Nepean, ON]

It just passed the Senate.

[Paul Szabo, Liberal, Mississauga South, ON]

I am advised by the President of the Treasury Board that it just passed the Senate. That is good news for everybody because the House unanimously supported the accountability act. There were some loose ends to be tidied up.

Bill C-2 has to come back to the House. As long as everyone is happy and this place can live with the compromises, it will pass. I will reserve judgment on that until I see the documents. It is like doubting Thomas.

[John Baird, Conservative, Ottawa West—Nepean, ON]

You are going to like it.

[Paul Szabo, Liberal, Mississauga South, ON]

That is a good thing. The President of the Treasury Board is a trusting person, I am sure.

As I said, some amendments in Bill C-2 of this Parliament amend a bill that was passed in the last Parliament, which has not been put into force yet. It is kind of reverse order. One would think that Bill C-11 would be in place and then Bill C-2 would be passed.

I could talk for some time about Bill C-11 and why it would have been important to have it in place because there is so much work to do before it gets up to speed and is operating efficiently. We could have had more accountability within the public service and the Government of Canada had it been in force when the Conservative Party took office. However, that is the Conservatives' choice. I do not think they really wanted to have too many people with the protection to blow the whistle on a government that was not doing things properly.

Before Bill C-2 gets royal assent and comes into force, Bill C-11 must be proclaimed. Because Bill C-2 amends Bill C-11, Bill C-11 must exist in law before Bill C-2 can be proclaimed.

I am glad to hear that Bill C-2 is now in the last stages of becoming law and is ready to receive the go ahead in terms of coming into force, which means that Bill C-11 also would be proclaimed and be in force. We will see the beginning of the establishment of the human infrastructure of an effective accountability mechanism and protection for our public servants.

I thought it was important to raise with members that we are now considering a bill which has a very large number of amendments. Today in the Standing Joint Committee on Scrutiny of Regulations which I chair, we addressed an issue where a regulation has been bouncing back and forth. It passed in this place, but on review it was found to have a flaw. We sent it back to the department saying that it should be fixed. The first piece of correspondence on that matter actually took place 23 years ago. A problem in a regulation was cited 23 years ago. The departments are still bouncing back and forth as to who is to blame and why it cannot be done.

[Robert Thibault, Liberal, West Nova, NS]

The Fisheries Act.

[Paul Szabo, Liberal, Mississauga South, ON]

It has to do with the Fisheries Act; the member is quite right.

Here we have the same kind of thing. There are hundreds of amendments, many of them technical, some of which will lose the continuity of the knowledge of the people who are here. We can see how important this is. When we have a bill like this, we have the assurances, the sign off by the minister and all of the clearances, but technically, with regard to parliamentarians, there are more changes in this bill than any one person could possibly be responsible for or track to ensure that their implementation received the proper attention.

The Standing Joint Committee on Scrutiny of Regulations will have to review some of these to the extent that they are amendments to regulations which currently exist to make absolutely sure that the bills to which they relate have enabling provisions within them for that amendment to happen.

We have seen cases, for instance, in the Broadcasting Act there was a regulation which allowed the charging of fees for services provided to the cable industry. As it turned out, the fees were far in excess of the costs that were incurred by the CRTC and in fact were creating surpluses because the fees were excessive. It is currently before the courts. If it is on a cost recovery basis that is fine, but if the amount recovered is more than the costs, it is effectively a form of taxation. Taxation is not enabled in the legislation. In the Broadcasting Act a tax cannot be levied.

Members can see why I hesitate to attempt to try to provide some insight into even one of these because it would probably take an entire speech to explain one of the technical amendments in a way in which all hon. members could understand. That is something we cannot do, but I wanted members to understand that I am confident that the changes that have been made have been followed in due process and the departmental officials have given us the necessary assurances.

I believe members will find there is strong support to pass many of these amendments, most of which I agree very much are necessary to bring up to date the important legislation affecting the daily lives of all Canadians.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Mr. Speaker, in the last six years while the Liberals were in government the total debt load carried by Canadians grew by 50%, the median load 38% to $44,500 per family. The line of credit debt grew more than double to $68 billion and the median line of credit debt jumped 56% to $9,000. For average Canadians that means almost $14 in debt for every $100 in assets. That is a huge jump.

The Government of Canada is loading the debt onto ordinary Canadians. Whether they are students who are graduating with $20,000 in student loans and they are carrying that debt, or ordinary families, that debt load has jumped by 50%.

For 12 years the Liberals did nothing to cap the credit card rates. Would the member be willing to support the NDP motion to begin to cap credit card interest rates at 5%? There is absolutely no reason when the prime rate right now is 6% that the credit card interest rate would be 17% to 18%. Ordinary Canadians are being gouged. Would the member support an NDP initiative to cap credit card interest rates?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, that certainly is a very creative way of getting around to a question which the House has dealt with in private members' bills and in debate before.

I can recall that the minister of industry of the day, Mr. Manley, reported on the Industry Canada website all of the credit card companies and the various rates. The member should know that there are certain commercial entities that have cards with very high interest rates. There are other institutions, particularly the principal banks, which seek to have appropriate rates for their cards.

The problem is whether or not the government should get into the business of legislating how businesses do their business. It is a free market system. They can charge what they want. The most important thing is that there is a competitive environment in which Canadians have choices. The more competition, the more choices. A competitive environment keeps the rates low.

I suggest to the member that financing one's lifestyle on a credit card is a bad investment in the first instance.

[Robert Thibault, Liberal, West Nova, NS]

Mr. Speaker, the hon. member made a great exposé of the bill before the House. He spent a lot of time on the process of getting a bill here and how the work gets done by others to make sure that we have the information needed so that we can finally take a decision in Parliament.

One point in this bill discussed earlier is the question of the reserves necessary at institutions like Canada Mortgage and Housing Corporation. Some people would point to the increase in the reserve over the last few years without taking into consideration the changes that have happened in the domestic market situation and domestic mortgages.

Not too long ago it was impossible for a first time buyer to buy a house if the buyer did not have a 10% deposit. Then the regulations were changed to allow for substantially lower deposits. In some cases no deposits were necessary. But that is guaranteed and backstopped with the financial institutions and Canada Mortgage and Housing Corporation plays a great role there. There has been a greatly increased risk.

The member pointed out the question of risk and that the risk had to be covered. When there is less of a deposit in the initial purchase with the mortgage at the bank, the risk grows exponentially. Look at what is happening in the housing market in our principal cities where young couples are working. Alberta is having a huge growth and many people from across the country are going to work there. The housing market there is inflating incredibly fast. If we want young couples to be able to buy homes, then they need that type of assistance from CMHC and the type of reserves needed to backstop it. I would ask the member to comment on that.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I thank the hon. member for his kind words. I could make the very identical commentary on the member's work in this place on a broad range of issues in representing his constituents and eastern Canada.

Banks, insurance companies, credit unions, CMHC and other institutions under the jurisdiction with respect to the financial institutions of Canada all have reserve requirements. This is the law. It is established so that there is coverage in the event that there are losses.

We could imagine an insurance company that simply sells insurance policies and collects the premiums and hopes that it is going to be able to keep the losses down so that it does not make a loss. When I was a chartered accountant with Price Waterhouse I had three insurance companies that I did the audits for, and in all the years that I was there, at least five or six years, there was not one year in which an insurance company made money on selling insurance. Where the insurance companies made their money was on the investment income on the investment portfolio that they were obligated to have to backstop the loans or the insurance policies and the risk on the policies.

That is the way it works. There has to be this guarantee. We can imagine what would happen if an insurance company had sold millions of dollars of general insurance and all of a sudden had an enormous claim that wiped it out. What about the protection for all the other policyholders?

The same has to do with housing. CMHC provides about $1.9 billion of mortgage insurance to Canadians every year. It is a tremendous amount of money and it requires a tremendous amount of reserve. The member is quite right about what is happening in the major urban centres, particularly in the west where the price of houses has gone through the roof because of the significant growth in economic activity. Mortgages being held by people are very substantial. Should something occur where that economic activity tapers off for one reason or another in a significant way, jobs would be lost, people would start selling houses, the value of houses would go down and people would find that they owed more on the mortgage than the house was worth and they would walk away from it. Who would take care of the mortgage?

These mechanics with regard to financial institutions and those who provide the security of Canadians in fact provide us with one of the most secure financial regimes of any country that I know of in terms of the major loss levels and for the extreme risk because of the reinsurance programs that are available.

The member is quite right. The reserves are there in accordance with the law to be sure that there is ample coverage and security for all Canadians, regardless of the financial services they are receiving.

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, I was listening earlier when the member was talking about a private member's bill that he had introduced from the Senate.

I would like to know why anyone would go to all of the work of bringing in legislation, getting it through the House and not follow it through or make sure that whoever was the government of the day at least paid attention to the fact that it was on the books?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, there were two entire pieces of legislation that had been on the books for over 10 years and had not been enacted. If this bill were in play, it would have repealed them. The others were about 57 pieces of legislation which were amending other acts.

These are the kinds of things that occur in a great number of cases when it is a change in government, or it could very well be that they were done to anticipate certain things.

What it gets down to and I think what we really concluded in the discussion on this was that it is important to look at all aspects--