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

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Speaker, I share some of the concerns. There are guidelines. There has been no amendments to the consumer protection area. There is the ombudsman aspect of it, where they can go. In my riding if the bank tries to close, it merges its two branches together and there is consultation. That is the answer I can give in half a minute.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I am very pleased to speak today to Bill C-37. This bill is the mandatory review that is provided for regarding the operation of the banking system. Every five years, we have to review that piece of legislation to try to make it as functional as possible and to adjust it to changing technology. The Bloc Québécois will therefore be voting for the bill, because even though it is not perfect, it does contain significant improvements.

First, Bill C-37 institutes mechanisms for disclosing information to consumers, so that they will be able to make informed choices regarding the banking services they use. We all know that, historically, banking services have not always been models when it came to providing information to consumers. People did not find it easy to understand and it was very difficult to compare one bank to another. There are improvements in the bill that will allow people to get this kind of information, and this is a benefit for consumers.

Second, the bill will establish the regulatory framework to allow for digital data to be used in cheque processing, which will reduce the time that cheques are held by banking institutions. A new technology has been adopted, and this means that a cheque will be frozen in a banking institution for less time. This provides a benefit for the consumer and an important benefit for small and medium-sized businesses, which often have to wait until a cheque is released before it becomes available and can be cashed. It will facilitate both business operations and everyday management of family and individual budgets. In this respect, it is a practical application of a technology.

Third, the bill will reduce the regulatory burden for foreign banks, credit unions and insurance companies, to make the regulatory compliance mechanisms more efficient. For example, credit unions that have fewer people and that apply to do this will be recognized. As for foreign banks, the aim is for there to be more competition because a lack of competition is a problem in the Canadian system. In regions like the one I represent, bank branches have disappeared, one after the other, in recent decades.

At present, I can tell you that the Desjardins movement is represented, as is the National Bank of Canada and a few other banks, but those institutions cover huge geographic areas. The way that the rules about loans to businesses or individuals are applied, for example, increasingly fails to take the local situation into account and is increasingly often no more than a mathematical financial calculation. From that perspective, even the disappearance of the banks has an effect on how credit unions operate, because the banks' focus on profitability at any cost has prompted the Desjardins movement, for example, to review its structures with a view to that fact.

We have to find solutions to the lack of competition, solutions that may lie in providing foreign banks with market entry conditions that enable them to offer services so that ultimately the consumer wins. This should be done, on condition that appropriate operating rules are obeyed and also that we ensure that in terms of employment spinoffs, jobs are not simply being exported abroad. On that point, the amendments in the bill are acceptable, and are even attractive.

Fourth, the bill aims to amend the rules governing mortgage loans, thereby enabling more people to take advantage of that financial tool. A previous amendment has already increased the percentage that could be obtained without an insurance guarantee. This bill aims to increase it to 80%.

Lastly, the government is increasing the equity threshold from $1 billion to $2 billion, thereby making it possible for a single shareholder to wholly own a bank, and thus encouraging new competitors on the market. I mentioned that earlier. We need to ensure greater competition. This measure aims to move forward in this area.

The Bloc Québécois wants to ensure, however, that the amendments to the regulations do not allow the kind of uncontrolled mergers and acquisitions we have seen before in the banking sector. I have been a member of this House for about 12 years and we have seen all kinds of situations in terms of bank mergers. Under the former Liberal government, during my first few years as a member here, there was greater willingness to allow this. Systematic opposition from the Bloc Québécois, other parties of this House and civil society made it possible to ensure that there were no uncontrolled mergers and, that, at the end of the day, there were no fewer intervenors.

Canada currently has five major banks. If that number had decreased to only two, clearly, there would have been less competition. If we do not open the market up externally at the same time, we would be creating a duopoly, and we certainly do not want that to happen.

While the committee was studying the bill, we wanted to make sure that we continued to look at this issue to avoid unrestrained mergers.

Speaking of mergers, we demand that any amendment to the moratorium on bank mergers be made in the best interest of citizens, not just to make the financial markets happy. There is an unfortunate tendency in this sector to see this activity as being the sole province of economic players, but clients, consumers, citizens, have the right to know how these things work. We must ensure that the mechanism gives everyone a fair chance and that we have a stable, structured system that fosters real competition. In that respect, the Bloc Québécois will ensure that the committees hear all relevant witnesses so they can make good recommendations.

That, in a nutshell, is the Bloc Québécois' analysis of this bill.

I would also like to talk about promoting consumers' interests by improving the information disclosure regime. A lot of progress was needed on this issue. For example, institutions will be required to clearly disclose their information on the Internet, in all branches and in writing to anyone who asks. This is a major change to the way banks do things, a change that we applaud. We hope that this will come to pass and that the banking system will become more democratic.

We also want to change the regulatory framework to enable the implementation of digital imaging. The legislative framework must therefore allow digital imaging in order to facilitate the cheque cashing process and to reduce the length of time banking institutions can hold cheques, as I mentioned earlier.

We must also reduce the length of time banking institutions can hold cheques directly, because following the publication of the 2006 Financial Institutions Legislation Review, the government promised to reduce the cheque holding time to make life easier for SMEs and other citizens. Bill C-37 gives the superintendent the authority to limit the length of time for which cheques can be held. We will see how that works out in practice.

The white paper proposed an immediate reduction of the maximum hold time to seven days, and to five days once the digital cheque imaging system is in place. We will see how this works.

Cheque holds affect not only consumers who need to have access to those funds to pay their bills, but also small and medium businesses that must pay their employees and keep the business operating out of the funds they deposit.

There are currently cash flows because of how quickly businesses are operating and because of the introduction of just-in-time systems. Financial flows need to be just as quick. In that sense, the improvement to the bill should help businesses.

The government wants all users of the payments system—including consumers—to benefit from the increased efficiency resulting from the Canadian Payments Association initiative that involved changing the payments system to facilitate electronic imaging of cheques. These changes must do more than just improve profits. We must ensure that the services are adequate and that the savings are passed on to the consumer.

The second objective is to increase legislative efficiency by lightening the regulatory burden on foreign banks so as to facilitate their access to the Canadian market and stimulate competition.

Competition exists. However, certain problems were raised concerning the regulations governing foreign banks. This bill aims to clarify the measures applying to foreign banks operating in Canadian territory by refocusing the regulatory framework on the chartered banks and simultaneously excluding the near banks.

The near banks are companies that offer banking-type financial services. Unlike chartered banks, near banks cannot change their basic money supply, that is, they cannot borrow money from or lend money to the Bank of Canada to make new deposits or new loans.

Still in the same section, a second measure aims to improve legislative efficiency and streamline the regulatory approval regime. We want to ensure that decisions that do not impact public policy, as provided for in the legislation, are in the hands of the superintendent.

In the opinion of the Bloc Québécois, the minister must not be permitted to depoliticize operations that will have an impact on public policy. We have to make sure that the minister continues to assume his responsibilities. Given the current practice of the Conservative government of not wanting to intervene in the economy, such a caution is quite justified.

The bill also relaxes the federal framework governing credit unions. For example, in order to facilitate the opening of new credit unions, the government would lower to two the number of institutions required to constitute a credit union. At present, a minimum of 10 credit unions is needed to establish an association under the Cooperative Credit Associations Act.

Still, in light of the new commercial possibilities offered by retail associations and ongoing consultation in the cooperative credit system, the current entry threshold is too high. This is why the amendment corresponds to the market reality, which seems to be an advantage. This would increase this sector’s ability to adapt to new developments and better serve consumers and SMEs.

The third objective of this bill would increase from 75% to 80% the loan-to-value ratio for which insurance is mandatory on residential mortgage loans. This ratio was set over 30 years ago. It is a cautionary measure designed to protect lenders from fluctuations in property values and payment defaults by borrowers.

The last time this ratio was changed was in 1965, when it was raised from 66% to 75%. But the marketplace has changed since then. Lenders’ risk management practices have improved, risk-based regulatory requirements concerning capital have been implemented and the financial markets have changed and stabilized.

Finally the supervisory framework for federally-regulated financial institutions has been strengthened. So it seems that the restriction no longer plays the same role with respect to caution. A cautionary provision requiring borrowers to take out mortgage insurance at a loan-to-value ratio set at 75% might mean that some consumers are paying more than necessary for their mortgage.

The second part has to do with readjusting the equity thresholds, which would allow sole ownership or to force wide ownership. They also want to increase, from one third, the minority limit on the number of foreign directors on the boards of Canadian banks. There is an array of measures, therefore, intended to make the banking system work better.

As I said at the outset, my fellow citizens and the electors in my riding are very concerned about the availability of bank services. The banks have undertaken some major offensives over the last few years and have invaded the insurance market, for example. The insurance brokers came up with a strong response to show us what a negative effect this would have had on regional development.

The Bloc Québécois believes that this bill, generally and overall, improves the way the bank system works.

Obviously, there are still some basic questions. However, in view of the fact that the act will have to be reviewed within five years and the government has already offered an additional six-month period ending April 24, we should definitely pass this bill and hope that ultimately the government will listen to what the Bloc has to say. We will continue to monitor these matters.

I want to conclude with the question of bank mergers. This is an area where the federal government's actions have lacked transparency over the last few years. They have gone back and forth and even hidden a document for a few months on the pretext that since we have a minority government, it might have been damaging to make it public. In the meantime, life goes on.

I think that it is good to have an open public debate in a sector like this. We should take a global view now of the measures we are taking and the corrective steps we want to take, to ensure there is genuine competition and we do not just end up creating duopolies.

Foreign banks can come and compete, just as the Canadian banks can make foreign purchases. Globalization in itself is not a bad thing, but we need to ensure that it is done in a way that leaves us winners.

The federal government has often neglected to use all the tools at its disposal, including the safeguards enabling industrial sectors such as the apparel and textile industries to protect themselves, to have a transition period. This was not done in these industries.

With regard to Canada's banking system, which has grown along with Canada, it is solid but it must adjust to new global realities. It must be given the requisite opportunity to serve consumers adequately. In this regard, there are still improvements to be made in terms of the transparency of information available.

I am anxious to see whether or not the clauses of this bill that pertain to disclosure of information to consumers, will be applied correctly and if the banks will provide the maximum amount of information. In the end, the Bloc Québécois will be able to see whether or not results are achieved.

In any event, this is an on-going process. We will have to re-examine this legislation to ensure that it always reflects the market reality. However, at present, the Bloc Québécois thinks it is a good thing to vote in favour of this bill, which makes certain improvements to our banking system. We hope that the banking system will be of benefit to our entire economy and that, in particular, it will address the lack of service in areas outside of major centres, in the rural areas of Quebec and Canada. In this regard, the banking system needs to pay more attention to our citizens.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, this particular bill amends some 14 acts and I believe there are some 450 amendments to a variety of these bills. Interestingly enough, there were a few hours of debate at second reading and three hearing days in committee where witnesses came forward to talk about some of the aspects of the proposed changes. There were a handful of changes made at committee and now we are going to have another few hours of debate. This happens every five years.

I am not sure whether the member agrees, but it would appear to me from the debate so far that a number of issues have been raised by members that are beyond the scope of this bill. There was no opportunity to have consultations with parliamentarians on behalf of their constituents to talk about issues relating to things like bank mergers, more information for consumers, foreign banks, and small and medium sized business loans and their impact.

There are so many issues that come up when we talk about this and yet it is almost impossible to deal with a 230 page act and 450 amendments. If we do not have the acts that they in fact amend, everyone will understand how difficult it is to even follow the document. We have to rely so heavily on others.

My question to the member is whether there should be consideration given to changing the way in which we view the amendments to the Bank Act and other financial institutions, so that all of the other kinds of items and the full exploratory discussions can take place so there can be influence on the content of the amendments coming forward to Parliament for discussion?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I listened with interest to the comments made by my colleague, and I think that some action can indeed be taken. First, as members of Parliament, we must be aware that the act is reviewed every five years and that we can start again, as soon as tomorrow morning, to make some contacts and make proposals to the government.

Instead of waiting four and a half years or almost five years to undertake the review of the act, the government would be better to do so rapidly after three years. We should ask the committee to study the issues and we should give ourselves some extra time, so we can study the situation as a whole.

I agree with my colleague that many constructive proposals come from witnesses and members of Parliament. What we find in this bill are the main technical points that were agreed to so that the bill would pass here without confrontation. Indeed, we are very close to the limit and the original five-year deadline to review it, as provided in the act, has expired.

We should give ourselves this responsibility because there are important issues, such as mergers, information for consumers, new markets and foreign banks. These are realities that will change every six months in coming years. We should not wait five years before making proposals for the new reality.

I would invite the hon. member, as well as all members in this House, to work on this as soon as possible, so that all our fellow citizens are aware that this is an evolutionary system and that, if constructive proposals are made, we will be able to change the system accordingly. To this end, we must break through the indifference that we see sometimes in our constituents towards the possibility of influencing our action. I think that this is a concrete example of this possibility.

[The Acting Speaker, Royal Galipeau]

We will now go to statements by members. When the study of Bill C-37 resumes in the House, the member will have six minutes left for the period of questions and comments.

The House resumed consideration of the motion that Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the third time and passed.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in the third reading debate on Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters.

I spoke on the bill at second reading and raised some concerns. I think those concerns have been enforced even further by virtue of the activity at the Standing Committee on Finance. It had an opportunity to review the bill with regard to the commentary and interventions of a number of members.

This particular bill is one which is pursuant to an obligation of the government of the day to carry out a five year review of the Bank Act and related financial institutions.

It touches about 14 different acts of Parliament. It includes about 450 amendments to the various pieces of legislation that it touches upon. The House spent a few hours at second reading dealing with a bill which in itself is not readable without having the benefit of the bills to which it is related. As a consequence, we would probably have a stack of paper in front of us to properly do a review.

The reason I raise this is because I want to make a recommendation to Parliament with regard to the review of the Bank Act and related financial institutions.

At second reading we simply talked about those items which the government is proposing to change based on its own consultation and matters that may have arisen since the prior review.

The finance committee had three hearing days at which it went through a number of witnesses to discuss some of the items in this particular bill. The committee also dealt with committee stage amendments, of which there were a number. Most of them were ruled out of order because they were beyond the scope of the bill.

What it did tell me was that there were a fair number of matters of interest related to the Bank Act and other acts which were beyond the scope of the bill but which should not be beyond the scope of the bill. We can look at something that we went through and that is the budget process before it is presented on March 19. The finance committee did some broad based, cross-Canada consultations to talk about the issues that were important to Canadians. It talked of budgets and related legislation that may touch Canadians. There were policies of government, whether taxation, income trusts, deductions, child care or aboriginal health issues. There was a whole range of issues that impact Canadians and there was an opportunity for Canadians to have an input.

We do not have that kind of input in a bill like this that touches 12 or 14 different acts of Parliament. Once it is handled at second reading there is no opportunity to introduce amendments. During the debate I started to list some of the items that members were talking about. Some issues related to bank mergers; information for consumers on particular instruments; the whole idea of foreign banks, and some of the obligations and undertakings; credit union issues; bank closures in communities, particularly small communities; and small and medium sized enterprises, the instruments available to them, whether it be loans, lines of credit or other assistance that could come from the financial services industry to allow them to continue to promote competitiveness within the Canadian economy.

We have heard a lot about bank charges and ATM fees, about private ATMs, about using another bank's ATMs, and about using our own bank and charges ranging anywhere from a $1 to $6. Those are the kinds of issues that Canadians probably would have thought of when we are talking about the banks. We ought to talk about the issues that touch Canadians.

When I heard some of the discussion, particularly in the speech of the finance minister during second reading, I thought that this bill, if I were to characterize it, has to do with three words. It has to do with openness, transparency and accountability.

If we have those elements in a process as well as in a piece of legislation, then Canadians can take comfort that there has been a thorough and comprehensive review of the important issues of the day that are related to the subject matter and that they have come before the House in a manner which parliamentarians understand and have an opportunity to consult on.

My recommendation to Parliament is to encourage the government of the day in the future to commence consultations with Canadians, not just a couple of months before a bill comes forward but to treat it like the budget. We need to hear what Canadians have to say, as well as the financial institutions themselves.

It is extremely important that we have the broad input from Canadians so we have a good understanding of their ideas with regard to how financial institutions can better provide the services and products that Canadians need for their personal and business purposes. I think we ignore the needs of ordinary Canadians and the realities of people who do not have the accessibility. We have the principles of the Canada Health Act. I wonder if we should have the principles under the Bank Act of Canada about accessibility, affordability and comprehensiveness. These are the same kinds of things. They are principles that Canadians can rely on and can look to legislators to say that we will support those principles in matters such as the Bank Act.

I raise it because, quite frankly, I find it very difficult as a parliamentarian to deal with Bill C-37, which would amend 14 acts with 450 amendments, without having all of the bills. As the House knows, even with one amendment in the bill we cannot clearly understand the intent or the impact of that amendment without looking at it in the context of the legislation that it is amending.

If members were to consult with each other on this matter, I believe there would be a fair bit of support for streamlining this process so we can deal with certain areas of issues related to the Bank Act and do a better job on those areas that are most important to Canadians, as well as deal with the regulatory and jurisdictional issues that must be dealt with to respond to the changes in the international community.

That is enough about the process. I believe the process can be improved immeasurably and would improve the quality of the legislation that we deal with as we do this five year review on the Bank Act.

I will now turn to the finance minister's speech at second reading. The finance minister took the lead on the bill and thought it was important to put some of the principles forward to guide us in our deliberation on this bill. He talked about trust in the institutions and I want to talk about trust very briefly.

Many of the NDP members who have spoken have taken the opportunity to basically say that they do not like banks. They think banks are bad. Canadians should be very pleased to have a very stable financial services industry in Canada compared to other jurisdictions. We need to celebrate the fact that our banking system has served Canadians very well.

We also need to understand that Canadians rely on the financial services sector for investments, directly or indirectly, as in their pension plans or RRSP programs. A stable financial industry means that there will be a good return for those pension plans and 80% of Canadians are invested directly or indirectly in the financial services sector. It is important that they are strong and vibrant and that they give a fair and reasonable return.

The marketplace is a dynamic place. People have opportunities and they have choices. However, if the banks had usurious yields from their operations, everyone would invest simply in banks and in nothing else, but that, obviously, is not the case. The environment out there is competitive and competition, which is an area of concern to Canadians, is an important element. I do not think we have had that fulsome debate recently in Parliament and it is one that we should have.

The finance minister also talked about ensuring financial stability and he gave the reason why we had to do these reviews. He concluded his remarks, and phrased it quite well, by saying that the best approach to improving services for consumers was through competition and disclosure.

No matter which business or which industry, we know that competition is an important element to ensuring the consumer is protected, which means that the consumer has choices.

However, we have had a great deal of discussion over the years about bank consolidations and mergers comparatively speaking. One of the things we do know is that the banking industry in Canada is relatively small in the international comparisons in terms of its capitalization, notwithstanding the fact that many of the banks have had very attractive business operations offshore that have generated substantial income for Canadian banks that pay a lot of taxes.

The other thing the banks have in their stead, and which we should not forget, is their contributions back into the community. Their charitable giving through philanthropy and through community service is unparalleled in business and industry. The banks have been extremely supportive and I am sure every member in this place can find an event or activity within their own communities where the banks have been supportive in investing back and giving back to the community.

If the banks were to stop their charitable giving and philanthropy, the money would need to be made up elsewhere. On balance, it would be very difficult for a lot of members in this place simply to write off banks as being bad institutions. Bank employees, some 700,000, pay a lot of taxes. I know people see big numbers and they suggest that somehow banks are bad because they make a profit. It is a profit based on the capital invested. If we were to look at the yield, the return and the dividend ratio that they have, et cetera, I think we would find that they are blue chip stocks that not only provide a healthy return but also provide a tremendous security and stability within the financial system of Canada to ensure we have a vibrant financial community to help Canadian business and industry, as well as consumers and individuals to have safe and secure banking service. That is extremely important. I wish the NDP would give some credit at least to the important contribution that our secure financial system has given to Canada.

The other aspect that the finance minister mentioned in his speech was the whole issue of disclosure. I was a little taken aback when I read a couple of the amendments dealing with customer charges. Canadians talk a great deal about some of the charges for various services, whether it be on a particular account or on some other product that is offered to Canadians.

Two amendments are virtually identical. The first one is to the Bank Act itself and the other is to the Cooperative Credit Associations Act, basically credit unions and the like.

Some of the provisos in clause 31 of Bill C-37 with regard to a product, a service or an account that an individual may have with a financial institution, state a number of things an individual must be provided with:

(a) information about all charges applicable to the registered product;

(b) information about how the customer will be notified of any increase in those charges and of any new charges applicable to the registered product;

(c) information about the bank’s procedures relating to complaints about the application of any charge applicable to the registered product; and

(d) any other information that may be prescribed.

With regard to the products and services of banks where charges are made, that suggests to me that there is full disclosure.

A number of amendments were proposed at committee stage. Some were passed and they are available for members and are highlighted in the reprinted bill.

In the case of clause 31, to which I just referred, an amendment was made that added subclause (2), which reads:

The Governor in Council may make regulations specifying the circumstances under which a bank need not provide the information.

The whole clause in question says that customers shall be provided with all of the information on the amount of the charges, changes to the charges and complaints regarding the charges. For the life of me, I could not think of a product that we have now in the financial services sector or one that might be proposed that has charges associated with it where customers would not be entitled to know the amount of the charges, the changes to the charges or complaints regarding the charges.

I do not understand this section related to the Bank Act and with regard to the Cooperatives Act and the provision about giving governor in council or cabinet the authority to make a regulation exempting certain products or services from full disclosure. It makes no sense. The finance minister said that the best thing for consumers is disclosure.

I cannot change that. I think I will probably support the bill on balance because there are some important technical changes but these are things that I believe we should not be able to put in unless members who have proposed them, particularly government members, can explain to Canadians why it is this change is there. I have asked the question three times but I have never received an answer.

I would like to close with regard to the disclosure issue. We have had a lot of discussion today about the $42 billion deficit inherited by the Liberals from the Mulroney government. We have had all kinds of discussion about income trusts, the broken promise, et cetera. It has been way beyond the scope of the discussion but it has been allowed to proceed.

I will just close by saying that the finance committee had public hearings on the decision of the government to reverse itself in its election promise and to tax income trusts at a rate of 31.5%. Expert witnesses appeared before that committee. The finance minister failed to justify the $500 million tax linkage calculation on which he based his decision to tax trusts. He then stonewalled the committee by not giving any explanation as to the criticisms, identified clause and the methodology that were brought up by expert witnesses. In other words, the finance committee determined that there had not been full disclosure and tomorrow there will be a report tabled by the finance committee.

I encourage all members to look at the report because it shows clearly that the finance minister has not given full disclosure, has not shown accountability, has not been transparent and has not been open with Canadians. It has cost seniors, in particular, $25 billion in their hard-earned pension savings.

[Maurizio Bevilacqua, Liberal, Vaughan, ON]

Mr. Speaker, I listened to my colleague deliver yet another speech in the House of Commons. He is known as an individual who delivers quite a few speeches and that speaks to his dedication to the things that are important to Canadians. As well, he and I have shared many days and nights in the finance committee, and I can tell everyone that very few people work as hard as he does.

I am interested in the broader issue related to an issue that I think needs to be addressed as Canadian financial institutions deal with key issues and pressures like demography, globalization and competition in the broader global context. Of course my hon. colleague would know that I am referring to the issue of the merger review process as it relates not only to banks but also to the cross pillar option.

In the 21st century economy, where financial institutions play an important role, I would think that Canada should in fact have clear guidelines that relate to merger possibilities, not only for banks, as I said, but possibly also for insurance companies as well. While there is in fact a review mechanism in place that speaks to the importance of going through the Competition Bureau and OSFI, the public interest assessment portion of the merger review process is still very unclear.

I want to ask my hon. colleague if he feels that in a country like ours in this century where financial institutions are facing not only domestic competition but also competition from abroad, and as the entire financial service sector redefines itself given all these pressures, whether or not he feels that it is perhaps time for the Government of Canada to clearly outline to the financial institutions what the merger review process is.

These words I am saying should not be misinterpreted to mean that I am in favour of or against mergers, because at the end of the day they will be evaluated according to their merit, but I do want to hear from my hon. colleague what he feels about the fact that it is still not very clear what financial institutions need to do if in fact they want to engage in a merger.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I thank the member for Vaughan for his input, his having been the chair of the finance committee for a number of years, particularly during the period when we went through the last round of merger discussions in which it was ultimately decided that mergers would not be permitted to proceed, but that we needed to get this process right.

The member is absolutely right. This is an issue of process. If the process is right, the decision has a better chance of being right. The process has to engage all of the stakeholders. That means not just the parliamentarians and the banks. It means the people of Canada. It means those who are going to be impacted by making moves, because there is some Newtonian physics involved here. For certain actions, there will be reactions, and we have to be sensitive to that.

We know that Canadians are trying hard to understand big numbers and big business, but they often do not get all the information, so the process has to be comprehensive in the sense that it needs to be educational, engaging, open and transparent, and indeed, ultimately it needs to be accountable to the people in terms of the needs we have.

The member is quite right, though, in that this issue and the process have been done partially. I do not think that we are exactly there. I do not think there is a comfort level, either within the industry or within Parliament, or even among Canadians, that we really understand how it is going to work. It is inevitable that we will again have this more serious discussion on the issues with regard to the insurance industry, the trust companies and now with regard to banks, in that there now is a greater facility to consider certain combinations or mergers but in a better context in which there will not be unanticipated consequences.

I think there is a good opportunity here, but the member is quite right in that the process is not there in terms of the stakeholder knowledge. It is time we had that discussion.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, I would like to know my colleague's opinion on the provision in the bill that will reduce the minimum equity that must be applied to buying a house, in the context of a mortgage, to 80% of the value instead of 75%. I will have the opportunity to talk about this myself in my presentation. What is his opinion on this provision?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, there is no question about it. Home ownership is part of the Canadian dream and it is not available to a lot of people. We know what has happened to the price of houses generally across the country. We are certainly aware of what has happened to the price of houses in boom areas, particularly out west. For some of us, and I am sure for most of us, it is hard to understand how people can even afford to have certain houses on which they have to carry mortgages of hundreds of thousands of dollars.

However, the member's specific question about reducing the rate to 80% has to be taken in the context of the options available. If we make it totally unfinanceable to the majority of Canadians, then we have served no one. Obviously there has to be a continuous review, I would suggest to the member, and these specific matters probably should be dealt with a lot more frequently than every five years.

These are important dynamics that affect Canadians' decisions, and they affect an important aspect of Canadian life, that being home ownership and purchase. It is an investment that is probably one of the biggest decisions a Canadian family can make. As well, they need to have some security that they are not going to be jeopardizing their financial viability without having a backstop or support from the mechanisms available to them.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, as long as there are no other questions, I will respond to what was just said. It is worth noting that my Liberal colleague is concerned about the matter of houses and housing in Canada and Quebec.

There was a question that I wanted to ask him, if we had the time: when the Liberals were in power, why did his government slash funding for social housing programs?

Those programs were very important and helped the most disadvantaged people in our communities. Those cuts seriously hurt people in our communities. The housing situation is a matter of concern in some neighbourhoods, in Montreal for one, but also everywhere in Quebec and Canada. I would have liked to hear his response on that subject.

I would also have liked to hear his response on another subject. The Bloc Québécois recently introduced a bill to invest the surpluses accumulated by the Canada Mortgage and Housing Corporation in social housing to help people who need it most. Why did they vote against it?

I have just bought a house. I am persuaded that most homeowners who have paid premiums to the Canada Mortgage and Housing Corporation and have had the chance to become homeowners would have been happy to lend a hand to people who have not had that chance and who are having trouble finding housing.

I find the response astonishing. I think it is a shame that when the Liberals had the opportunity, they did nothing for renters and people looking for homes—for the people. They did nothing. I will return to this a little later in my presentation.

Nonetheless, the Bloc Québécois supports the bill, for a number of reasons. First, the bill will create mechanisms for transmitting information to consumers, and this will enable them to make informed choices about the banking services they use.

Bill C-37 will also establish the regulatory framework to allow for digital data to be used in cheque processing, which will reduce the time that cheques are held by banking institutions.

Bill C-37 will reduce the regulatory burden for foreign banks, credit unions and insurance companies, to make the regulatory compliance mechanisms more efficient.

The Bill will also change the rules that apply to mortgage loans so that more individuals will have access to this financial vehicle. The government will raise the equity threshold to $2 billion from $1 billion for ownership of a bank by a single shareholder, to encourage new competitors to enter the market. For all these reasons, the Bloc will support the bill.

I will not be able to list all of the provisions in this bill, obviously. It is a very large bill, the size of a hippopotamus, and it refers to another bill, which is itself the size of a hippopotamus. It is an enormous bill. Some of its provisions were of particular interest to me.

The first, to which I referred in the beginning following my colleague's speech, is the provision regarding the ratio, the minimum equity that is required for a mortgage so as not to have to pay mortgage insurance.

At present, the minimum equity ratio is 25%, with the corollary being that the maximum ratio of the mortgage to the value of the purchase is 75%.

This rate will be reduced from 25% to 20%. If someone takes out a mortgage for 80% or less of the value of the home, he or she will not be required to buy mortgage insurance. In my view, that is good.

Allow me to recount a bit of the history of this requirement. The threshold was last changed in 1965, so quite a long time ago. At that time, the rate was 66.7% or two-thirds. In 1965, it was raised to 75%.

Now this bill would raise it from 75% to 80%. In previous times, this requirement was a prudential measure intended to protect lenders against fluctuations in interest rates and property values and ensure that we did not find ourselves in a situation where many people could not pay their mortgages back.

The market has obviously changed a lot over the last 30 years, partly because risk-management practices have improved. Banks are much better now at predicting the risk posed by various borrowers. Regulatory risk-based capital requirements have been implemented and have generally matured. This is to ensure that it is really capital, real assets, and the financial market has changed.

The supervisory framework for federally regulated financial institutions has been strengthened significantly. It seems obvious that the restriction does not play the same prudential role that they used to. As a result, the statutory requirement for a 75% loan-to-value ratio is no longer necessary.

Even if people in the market do not have enough money for the down payment, they can get mortgages with higher loan-to-value ratios, but then they will have to get mortgage insurance.

The Finance Committee held a long discussion and debate on the point at which the mortgage insurance market should be opened to other insurers than the Canada Mortgage and Housing Corporation, which currently provides most of the mortgage insurance. Genworth Capital also does so. This is a discussion that will doubtless continue.

We see more and more mortgage lenders requiring down payments even with less and less mortgage insurance. Five per cent is common now. We have even mortgage insurance of 2.5%. According to some promotions, virtually no down payment is needed any more. So the 25% down payment required to avoid having to buy mortgage insurance no longer made sense.

In fact, it forced people who were able to make a large down payment but less than 20% to buy mortgage insurance for virtually nothing. This will, therefore, help these people save a little money, which is a good thing.

I tried to introduce an amendment pertaining to mortgages, which could have been addressed in this bill, but unfortunately it was beyond the scope of the bill. As a result, my amendment was ruled out of order. We need to look at the banks' responsibility for mortgage fraud. People are increasingly concerned about mortgage fraud. For example, someone steals an individual's identity, then takes out a mortgage on the person's home or takes over the person's titles to property, then takes out a mortgage and takes off with the money.

The courts have handed down judgments in such cases, but they are contradictory or ambiguous. People whose houses were stolen or mortgaged without their consent are today being asked to pay up or lose their homes.

I would have liked to see a provision added to the Bank Act to ensure that in cases of identity theft, the bank is held responsible for the fraud and for repaying the mortgage in some other way. If this provision had been adopted, the bank could not have gone to a property owner who had been a victim of mortgage fraud and said that he or she had to repay the mortgage that had been fraudulently taken out on the property.

The amendment was not approved, but I plan to raise this issue again in the near future. In any case, I hope that the government is aware of this issue and will move forward.

Certainly, improvements can be made to protect people against identity theft in general, because as the law stands at present, identity theft itself is not a crime. Using a false identity to commit fraud is a crime, because of the fraud, but identity theft itself is not a crime as the law stands at present. This is something that should certainly be changed. A good measure would be to protect people by making sure that in cases of identity theft, the banks are automatically responsible. This would force the banks to take every precaution to avoid another fraud. If such a measure were in place, the banks would be held responsible for anything that happened. Currently, consumers are held responsible.

In our society it is increasingly difficult to protect ourselves from identity theft. There are many things consumers can do, but our personal information is given out. It circulates more and more. We have recently seen data stolen from computers. Hard drives have been lost. So it is very hard to say to consumers that they are responsible for not having their identity stolen and that, if it is stolen, it is their problem. I think it would be better to have the banks bear the burden.

I said earlier that we support the measure pertaining to mortgage loans, since it is a good measure. We had other projects for the Canada Mortgage and Housing Corporation, which I mentioned before. The bill tabled by the Bloc Québécois, which aimed to use some of the surpluses accumulated by the Canada Mortgage and Housing Corporation to provide social housing was rejected. The Conservatives and the Liberals voted against it. Regarding social housing in general, the Conservatives’ record is certainly as bad as the Liberals’.

I would also like to touch on another measure provided under this bill, namely the length of time during which cheques are held once they are deposited in a financial institution. When we deposit a cheque we have received in one branch, this is the beginning of a lengthy trip from the place where the cheque is deposited to the issuing institution. Then, once it is approved, the cheque makes the return trip to the place where it was deposited. Actually it travels around here and there and obviously may physically cover great distances that increase hold times.

The current bill makes provisions for digital imaging. So instead of having the cheque travel physically, it could travel in digital format, which would greatly speed up processing. The banks claim that this measure will reduce the longest hold time from ten days to six, and then to four days, once the system is fully operational. To my mind four days is still long. They say, though, that it is much faster in the very large majority of cases. A hold period of four days would be for the most difficult cases.

However, I must say, the question of the time it takes to process financial transactions has come up repeatedly in committee. There is a reason for this. It is because our fellow citizens often mention it. In this modern age of the Internet and electronic transactions, people expect a little more instantaneousness—if I may use that word—in transactions performed by financial institutions.

More and more, the funds are frozen for a while when we deposit a cheque. The funds may be frozen even if the cheque is processed quickly. Furthermore, when we transfer funds from one account to another, the money can disappear from the first account for a few hours or a few days before it re-appears in the other account. People are wondering where that money went in the meantime.

I can give a rather interesting example from my personal experience. I told the committee about it when I was addressing my questions to the various bank representatives. I sold some shares and received a cheque from my stockbroker. I decided to invest this money in an RRSP. Thus, I wrote a cheque to my financial advisor. Both cheques were deposited on the same day, at the same time. What happened? The cheque I wrote to my financial advisor was withdrawn from my account immediately and I therefore had an overdraft. Since my account has overdraft protection, the money was taken from my line of credit. That same day, I had deposited a cheque from the broker who sold my shares, but that money was not immediately deposited to my account. I therefore found myself in the ridiculous situation of my line of credit being in the negative and my account showing a positive balance, but I could not transfer any money from one to the other because the funds were frozen.

At the time, I asked my banker what was happening and why I was being charged interest. He said that the money from my broker had not been deposited in my account yet. He did not have the money yet and was therefore holding the funds for a few days. I told him he still had not transferred my own money to the other account so why should he charge me interest? He was unable to give me a reason.

I made another attempt in committee. I asked why when I am expecting money it is held from me, but when my money is transferred elsewhere it is immediately debited. No one was able to give me a reason.

I have given this personal example because, obviously, I do not want to disclose the circumstances of the constituents who come to see me. The fact remains that people frequently tell us about this type of problem. Banks and financial institutions have to make major improvements when it comes to processing time or else we will have to consider regulating this matter, since it concerns so many people.

In closing, I would like to address two points, including a provision in the legislation on bank mergers. We are still very concerned about possible mergers between monstrous banks the size of giant hippopotamuses—truly gigantic ones—at the expense of the consumer. We are not completely satisfied with the provisions and we will keep a close eye on the bank merger file. We hope that if mergers occur, it will always be in the best interest of the consumer.

The last point, which is not directly related to the bill but is something we discussed a lot in committee, is the issue of income trusts. Once again, the Bloc Québécois did not think it was a good idea to provide a tax advantage to income trusts. If this structure, this approach to organizing companies, is appropriate in some cases, then it should be allowed, but we should not encourage companies to be structured this way just for the tax breaks. That said, we think it was completely irresponsible of the Conservative government to promise not to tax income trusts. Now it has broken its promise. We agree with taxing income trusts, but we condemn the way it was done.

[Alan Tonks, Liberal, York South—Weston, ON]

Mr. Speaker, I thank my colleague from the Bloc for a very comprehensive overview with respect to Bill C-37.

I understand that the committee travelled from coast to coast to coast in a very onerous and feverish exercise to gain advice and direction from the general community, notwithstanding the financial institutions community.

The member referred to an issue which is very top of mind with people not only in my community but communities across the country, and that is the issue of identity and mortgage fraud. It would appear to me that if Bill C-37 was an attempt to streamline the relationship between consumers and financial institutions, this particular area would have received more attention in terms of legislative changes and recommendations thereto.

I would like to ask the member what kind of discussion, if any, took place at the committee. Why, in his opinion, did the committee not come forward with recommendations as opposed to having to make amendments that were declared out of order? In fact, if they are out of order as has been declared, what is the follow-up the House could take in terms of dealing with a subject that is of extreme concern?

Not only do the banks share some responsibility, but I would suggest the legal profession shares a great deal of responsibility because innocent victims of this type of fraud could be anywhere in this country. It has happened in my riding and I am sure the member can give other examples.

Was there any discussion with respect to identity and mortgage fraud? What is the follow-up that he would recommend, or from his party's perspective, that would allow the House to address the matter?

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, we talked about this quite a bit in committee after I proposed an amendment that was deemed inadmissible by my hon. colleague’s seatmate. I do not hold it against him, though, because we thought that would happen.

I still brought forward the amendment so that it could be discussed. People are worried about this. It was pointed out that there are ongoing discussions about identity theft in general at the Standing Committee on Access to Information, Privacy and Ethics. Surely this committee—and I imagine the same will be true of the Standing Committee on Justice and Human Rights at some point—can produce a specific proposal to make identity theft illegal and a criminal offence in all cases. A person cannot make use of someone else’s identity, regardless of the reason or whether there was fraud or not. It should be a punishable crime in itself just to try to steal someone else’s identity or collect information in order to use someone else’s identity.

I have been wondering how the financial institutions’ responsibility could be included in the current legislation on identity theft. The government has a certain power of initiative in this area and I encourage it to think about this problem and draw up regulations or work together with the banks, at least on a temporary basis, so that they assume their responsibilities on their own. Government and finance department officials, among others, placed considerable emphasis in committee on self-regulation, on how unnecessary it was to pass legislation on everything that arose, and on how they were going to work together with the banking industry so that it would adopt and implement its own rules.

The advantage of this approach is obviously that it is faster than the legislative route. I encourage the government, therefore, to put pressure on the financial institutions. I encourage these institutions to add voluntarily to their code of conduct that they will hold themselves responsible for any cases of identity theft or mortgage fraud that might arise as a result of such theft. That would make it unnecessary for us to legislate. It would show their sense of responsibility, make them accountable, and force them to be more careful at all times. Once someone is responsible for any future fraud, they pay more attention because they will have to pay. It is the same for the financial institutions.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I would like to congratulate my colleague, the member for Jeanne-Le Ber, on his speech, which was easy to follow and very instructive. I am sure those listening understood what he had to say. Congratulations again.

We have before us a bill to change the minimum down payment for a house from 25% to 20%. The consumer could then save on insurance costs. However, my question will not deal specifically with this subject.

At the beginning of his speech, my colleague mentioned the surpluses of the Canada Mortgage and Housing Corporation—surpluses which they keep. One quarter of these surpluses is in Quebec. In my riding, there are plans for a seniors' home. The people have asked for help from the Quebec Housing Corporation, and I would like the CMHC to also make a contribution.

My question is the following: Who might benefit from the surpluses of the Canada Mortgage and Housing Corporation if they were released to Quebec?