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

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I am pleased to speak to Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters or, in other words, the bill that represents a statutory five year review of the Bank Act.

I would like to state that during the finance committee's deliberations or hearings on Bill C-37, I had the pleasure of chairing the committee because of the problem with the chairman having to excuse himself. I would like to take two minutes to thank all the members who were quite understanding that this important piece of legislation with over 450 clauses had to be passed in a relatively short period of time.

I would like to thank the witnesses who appeared before the finance committee on short notice and gave us pretty detailed presentations. I would also like to thank those people who participated in the deliberations.

I would like to talk about the current session of Parliament where the Standing Committee on Finance, of which I am the vice-chair, has seen its share of contentious issues and serious studies.

First, committee members undertook the long, cross-country prebudget consultation with Canadians that spanned over months, eight provinces and one territory.

Thanks in part to the diligence of the Liberal members, the finance committee also reviewed the finance minister's astounding decision to tax income trusts. This unbelievable policy reversal has taken $25 billion from the pockets of hard-working Canadians and billions of dollars in income taxes that would have been collected on the capital gains to pay for some of the requirements that will be needed by the government in its next budget.

The committee has not tabled its report, just in case anybody in the House is unaware. We will table that tomorrow. This controversy is probably the most contentious piece of legislation related to tax legislation that I have seen since I have been here in the House.

The committee is also not adverse to controversy and is now studying the tax implications on the oil sands sector, an initiative that was also supported by the Liberals. The committee, with the support of the Liberals, is also once again studying how ATM fees are charged by the banks, their subsidiaries, other financial agents, and other networks that provide these financial service organizations, and any other things related to these communications services outlets.

To this I am hoping to add as well that the whole issue of the timeliness and charges that relate to electronic payments also get addressed during the study in finance committee.

With all these issues before us during the last few months, it is understandable that the finance committee members breathe a small sigh of relief when a straightforward bill like Bill C-37 comes before us.

Bill C-37 represents legislation that is likely to receive support from all parties. Recently, I heard the Prime Minister complain about the difficulties of receiving the will of Parliament to pass legislation, but with Bill C-37, it seems that the Conservative Party has finally discovered the secret to obtaining unanimous support for one of its bills, and that secret is easy. All the Conservatives have to do is introduce Liberal bills.

The Conservative government has presented a bill that mostly follows Liberal policy. Just to give a little bit of history, in 2005 the Liberal government commissioned a white paper to make recommendations for the review of the Bank Act, which is what we are discussing today. I am pleased that the Conservatives have seen the wisdom in these recommendations and have adopted most of them. They have ended up in what we are seeing today, Bill C-37.

The purpose of the bill is to ensure that Canada continues to be a world leader in financial services and I believe that the current bill takes important steps toward that end. As technologies related to financial institutions evolve, it is important that Parliament keeps our country's laws in step. We, as parliamentarians or legislators, must continue to keep our laws up to date as we did during the past 13 years of Liberal government in an ever changing global economy where Canada will quickly fall behind other more proactive nations if the Conservative government does not follow Liberal policy.

Bill C-37 amends a number of acts governing financial institutions as well as legislation related to the regulation of financial institutions. These amendments are essentially designed with three objectives in mind.

The first one is to improve service to consumers. For example, and I will speak a little bit more on it later, it is to harmonize online and in-branch disclosure requirements. We are looking at decreasing the hold periods for cheques from ten days to seven days and we hope it will get down to four days.

The second objective is to increase legislative and regulatory efficiency in the Canadian banking system. This basically means to allow foreign entities and allow more competition to come into the markets, and have what we call these near banks or entities that provide banking type services to be regulated on a national level as well.

The third objective of this bill is to give our financial institutions the ability and flexibility to adapt to changing trends and technologies in the industry, which also means allowing for cheque imaging and providing the financial institutions with the ability to process cheques at a quicker pace so that there is less of a hold period on these cheques.

One of the innovative items in this bill is the writing of electronic cheque imaging into law. We finally got it in this bill. It will require the banks to use new technologies to better serve the needs of Canadians. As it stands right now, the maximum hold period on a deposit cheque is 10 business days.

That can be an excessively long time for some Canadians, especially as we have heard from low income Canadians who need access to these funds much quicker in order to pay their bills, buy food, and whatever else they deem a necessity. Bill C-37 will immediately lower this hold period to seven days, allowing Canadians faster access to their own money.

This can be done even faster. I am speaking specifically to electronic cheque imaging which Canada's banks have already begun to implement. By adopting electronic cheque imaging, banks will no longer need to physically exchange copies of cashed cheques with other institutions. Instead, a captured electronic image of the cheque can be sent instantaneously to other financial institutions.

While we were discussing imaging we heard that banks easily clear about 20 million to 30 million transactions a day. We heard of the logistics involved of having to transport a cheque from one part of the country to another part of the country and having to criss-cross and decide which cheques go to which institution. Now with this ability to electronically image a copy of the cheque, we should be able to speed up the process. Hopefully, we will cut down the holding period to a matter of one or two days, instead of the seven days that is in the legislation, and the four days which the finance minister has promised us will be the norm of financial institutions.

A second aspect of Bill C-37 that I approve of is the provision for an increased disclosure regime which will provide Canadian consumers and businesses alike with the information that they need in order to make the most informed investment decision possible.

Bill C-37 will ensure that the savings product disclosure regime is just as effective for the millions of online bankers as it is for in-branch customers. We have spoken about this before. I think it makes sense to have that in the bill.

Strong competition and information disclosure are two of the best tools available to ensure that the needs of Canadian customers are being served well by our financial institutions.

On the disclosure front, however, I am disappointed that the Conservatives have ignored one strong suggestion from the white paper regarding the complaints process that financial institutions use.

I imagine that many Canadians are not very familiar with the complaints process that they have at their local bank or anywhere actually. It should be legislated. By legislating the complaints process, it would have been readily available and a good idea. I can guarantee that there are not too many Canadians who even know that there is an ombudsman for banking services and that they can use those avenues when the opportunity arises.

The Canadian banking ombudsman and his office do fine work from what I understand. It is a question of knowing that it actually exists. I would have liked to have seen a requirement for information about its services being made readily available and more money being spent so that its services are actually put on websites so that people know about its services.

Canada's mortgage loan insurance threshold will also be changed by this bill. Currently, any homebuyer who provides less than a 25% deposit is required by law to ensure a mortgage through the Canada Mortgage and Housing Corporation or similar private sector providers.

Bill C-37 will reduce this minimum required from 25% to 20%, allowing more Canadians to secure a home mortgage without having to pay for the additional cost of mortgage insurance. Obviously, it is sensible to have some sort of legal threshold under which Canadians must purchase their mortgage insurance.

During the Mulroney years of uncontrolled inflation, it was far more than sensible. It was both prudent and necessary. After a decade of strong Liberal leadership, however, this country is enjoying both low inflation and record low unemployment. As a result, I think it is more than reasonable to reduce the minimum deposit that Canadians must have in order to secure a mortgage without insurance.

In conclusion, I am pleased to support Bill C-37 at this stage. I am glad to see that the Conservatives are continuing to implement the Liberal agenda on so many fronts. It is, after all, the same Liberal agenda that saw Canada make a complete economic U-turn after years of Conservative fiscal mismanagement. It was not that long ago when The Wall Street Journal referred to Canada as a third world economic basket case because of the damage done by the previous Conservative government.

[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, 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.

[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.

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.

[The Vice-Chair, Liberal, Massimo Pacetti]

Is it unanimous? No.

So you have to introduce a motion, Mr. St-Cyr.

It's not unanimous. Okay?

You have to introduce a motion in the prescribed manner.

Before we go, I'd like to give formal consideration to a motion. I'm just going to read it into the record, and then we can adjourn.

Given that the finance committee has adopted a motion to study charges related to ATM fees, and that during the hearings of the finance committee concerning Bill C-37, testimony was received respecting the timeliness and charges related to electronic payments, I move that in addition to the Standing Committee on Finance's study of ATM fees, it include concurrently an examination of any issues related to the electronic payment process.

You will get that in writing.

On that note, thank you very much.

The meeting is adjourned. We'll see you Thursday.

[The Acting Speaker, Conservative, 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.

[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.

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

Mr. Speaker, on behalf of my constituents of Don Valley East, I am pleased to address Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters.

Canada is somewhat unique in the sense that all federal legislation relating to financial institutions is subject to a sunset clause and must, therefore, be reviewed every five years by law. This has the effect of making Canadian financial institutions more efficient by keeping up with rapid changes in technology and the variety of services which arise from new technologies.

As the hon. member for Markham—Unionville has indicated in the House, the main content of Bill C-37 is largely based on the white paper commissioned by the former Liberal government in preparation for the statutory review of the Bank Act.

One of the aspects of this bill that I approve is the provision for an increased disclosure regime that would provide Canadian consumers and businesses alike with the information they need in order to make the most informed investment decisions possible. Bill C-37 would ensure that the savings products disclosure regime is just as effective for the millions of online bankers as it is for branch customers.

Strong competition and information disclosure are two of the best tools available to ensure that Canadian consumers' needs are being served well by our financial institutions. On the disclosure front, however, I am disappointed that the Conservatives have ignored one strong suggestion from the white paper regarding the complaint process for financial institutions.

I imagine that many Canadians are not very familiar with what the complaint process is at their local banks. Legislating that information with respect to the complaints process be readily available would have been a good idea.

I am willing to bet that there are a good number of Canadians who do not even know that there is an ombudsman for banking services should they exhaust all venues available to them. However, the ombudsman for banking services and his office do fine work and I would like to have seen a requirement for information about his service be made readily available.

Canada's mortgage loan insurance threshold would also be changed by this bill. Currently, any homebuyer who provides less than a 25% deposit is required by law to ensure that a mortgage through the Canada Mortgage and Housing Corporation or similar private sector providers will be able to attend to this.

Bill C-37 would reduce this minimum requirement of 25% to 20%, allowing more Canadians to secure a home mortgage without having to pay the additional costs of mortgage insurance. Obviously it is sensible to have some sort of legal threshold under which Canadians must purchase their mortgage insurance. During the Mulroney years of uncontrollable inflation, it was far more than sensible. It was both prudent and necessary.

After decades of strong Liberal leadership, however, this country is enjoying both low inflation and record low unemployment rates. As a result, it is more important than reasonable to reduce the minimum deposit that Canadians must have in order to secure a mortgage without insurance.

I would also like to say that from the outset Canadians must place their trust in government to provide adequate consumer protection. Last year, however, the Conservative government shocked the nation with a devastating announcement that brought a key election promise.

On October 31, the Conservative government dropped a bombshell on Canadians by imposing a new tax regime on publicly traded income trusts. The effect on Canadian markets was devastating, resulting in the permanent loss of well over $20 billion in wealth, most of it at the expense of Canadian seniors who were relying on income trusts for day to day living expenses.

Worst of all, Canadian investors were lured by a Conservative election promise made by the current Prime Minister. In the middle of the last election campaign the Prime Minister said, on December 9, 2005, “A Conservative government will never raid seniors' nest eggs by taxing income trusts”.

Canadian investors took the Conservatives at their word and put more and more of their life savings into income trusts, making this the fastest growing sector on the market, all until the Prime Minister broke his word to Canadians. Sadly, Canadians are learning the hard way. The Conservatives are more than willing to betray election promises without any regard for the damage done to thousands of seniors who worked hard for their life savings only to have it wiped out with the stroke of a pen.

This is a sample of one of many letters and emails that I received from my constituents of Don Valley East. It states:

The damage done to the value of my investments in income trusts is devastating. I have incurred a 20% decline in value. It is my sincerest wish that an election will be held in the very near future and that the majority of Canadians will not re-elect your party. This is a very sad commentary and one I wish was not necessary to write. However, I have definitely lost my confidence in your party's approach to fair treatment of its citizens, particularly seniors of which I am one.

The current Prime Minister knew how much seniors were depending on income trusts and yet he was determined to break his word. With one hand the government has swiped billions from seniors through their income trust savings and with the other offered very little in the form of income splitting. In fact, some have construed this pension splitting to be income splitting. It is not.

Pension splitting will do little to curb poverty among seniors and even less to alleviate the huge losses they have suffered as a result of the Conservatives' broken election promises. Hundreds of thousands of single seniors, the majority of them women, will not see a penny from this policy.

I am pleased to support Bill C-37 at this stage. I am glad to see that the Conservatives are continuing to implement the Liberal agenda on so many fronts. It is, after all, the same Liberal agenda that saw Canada make a complete economic U-turn after years of Conservative fiscal mismanagement. It was not long ago when the Wall Street Journal referred to Canada as a third world economic basket case because of the damage done by the previous Conservative government.

Thank goodness the Liberal Party was able to come to power to eliminate Mulroney's $42 billion deficit, balance the books for eight straight years, while offering Canadians the biggest tax break in Canadian history.

I sincerely hope that Canada's alleged new government will continue to use our ideas to their fullest and can refrain from returning to the dangerous incompetencies of the previous Conservative government, which was so damaging to Canada's economic well-being.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

--because in fact the Bank Act is not written to ensure transparency and accountability to Canadians.

I see there is some curiosity on the part of my colleagues across the way. Let me tell them what we tried to do at the committee that was studying Bill C-37. In order to get some accountability from the banks, we moved a motion suggesting that there should be publication of the names of the banks that violated the consumer provisions of the Bank Act. We were not allowed to do that. Supposedly it was beyond the scope of the bill.

I must say that outside of an amendment from the Bloc around equity in community reinvestment and a few technical amendments from the Conservatives, the rest of the amendments came from the New Democratic Party. The two hours spent debating and amending the bill were primarily focused on the 30 or so amendments that I put forward. Not one was put forward by the Liberals, not a single amendment, not a single recommendation to change the Bank Act. Nothing. Nada.

Yet the former minister of national revenue, presently the Liberal finance critic, stands up in the House and lambastes the NDP for what? For doing our job. For devoting time and energy to study a piece of legislation.

Or is it still a sore point around the income trusts and the fact that we did our job when the Liberals were in government? When the Liberal government would not answer for the suspicious stock market activity on November 23, 2005 we asked the government to do something about it. We asked the government to investigate. It would not.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, I am pleased to participate at final reading of Bill C-37. The bill would ensure that legislation is changed to reflect the Bank Act review.

I have to say from the outset, as we heard repeatedly at committee, that this whole process and the legislation is a major disappointment to Canadians everywhere. We are talking about a fundamental issue pertaining to communities in this country, and that is the right to access community financial service.

We are dealing with a fundamental obligation on the part of our chartered banks. We are dealing with a situation where increasingly Canadians are feeling overburdened by the regulations and the charges of the banks without access to information so that they can make wise decisions.

We are dealing with communities everywhere, especially inner city, rural and northern communities, which are faced with branch closure after branch closure. We are dealing with people in communities who are then left to deal with payday lenders and other fringe financial institutions on a regular basis where, of course, they are subject to astronomical interest charges. We are dealing with people in communities who are left to access their hard earned money through ATMs, automated banking machines, for which they must pay dearly.

On every aspect in this whole area of banks and financial institutions, Canadians have not been served well by this legislative process. This is an opportunity we have every five years to review the Bank Act and to make necessary changes to ensure that we keep pace with Canadians' concerns and that we keep pace with changes in new technology.

We have not done that in the bill. We have failed Canadians dismally. Why? How did this happen? Let us start with the fact that by and large the dominant players in this process of review and study of the Bank Act are the big banks, moneyed institutions, and people and organizations with a heck of a lot of power and money.

It is pretty hard in that context for ordinary Canadians, for everyday working families, and for non-profit advocacy organizations to compete in that context. There is no money and support from this government to help balance out the equation. There has been no attempt on the part of governments, whether it is this one or the previous Liberal one, to actually ensure a level playing field to ensure that consumer groups and everyday Canadians could have a say in this Bank Act review process and be equal to the part being played by big banks, big insurance companies and moneyed interests in this country.

As a result, we have before us a very limited piece of legislation that tinkers with the system, does make a few necessary changes, granted, but misses the boat on the most pressing issues of the day in terms of banking and financial institutions.

If there is one shining light in all of this, if there is one silver lining in this process, it is the fact that because of the turbulent political times we are in, the present government and the former government have decided to pull back on their agenda to adhere to the banks' wishes for mergers, both in terms of banking institutions and cross pillar mergers.

It is a blessing that this minority situation we have been in for the last couple of years has slowed down the agenda of big banks and their mouthpieces here in Parliament. This legislation, thank goodness, does not include any reference or any permission to allow for bank mergers, nor does it allow for cross pillar mergers which involves the sharing and the merging of responsibilities around insurance.

That was a fear many of us had. Many small insurance brokers right across this country thought that the banks would win the day and gain control not only of every other area in the financial world but also of insurance, thereby putting out a lot of independent insurance brokers and leading to tied selling and lack of competition. One good thing about this bill is that is not in the legislation. However, that is about all I can say right now on the positive side of things.

What is so sad about this bill is what is missing in terms of the everyday lives of Canadians. There is nothing in this bill to make the banks accountable to Canadians and responsible for demonstrating why the banks deserve $19 billion in profits this year. We only have to look at the statistics to know that the banks are in a very stable and very lucrative position with better profits than they have ever enjoyed. On top of the huge profits that we see being earned by the banks, the CEOs of the major banks are being paid exorbitant, unbelievably high salaries.

A recent study by the Canadian Centre for Policy Alternatives documented that the salaries of CEOs at the big banks and big oil companies were so high and out of line that the CEOs could make in a few hours what many Canadians make in a whole year.

That has certainly been revealed to us by the recent decision of the Royal Bank of Canada. By the way, the bank was up 40% in terms of profits this past year. It brought in $4.7 billion in profits. The Royal Bank gave its CEO, Gordon Nixon, a 25% raise last year, up to $11.9 million, including a salary bonus of $5 million. Mr. Nixon receives a salary of $1.4 million, a bonus of $5 million and deferred shares and stock options valued at $5.5 million. That is up from $9.5 million in fiscal year 2005. The bank also contributed about $766,000 to Mr. Nixon's pension plan, compared with $620,000 a year earlier.

Never mind that the CEOs make in a few hours what Canadians make in a year; I think those CEOs make in a year what Canadians could never make in a lifetime.

It would not be so bad if we could actually get some accountability from the banks. That is the purpose of government. That is the purpose of legislation. That is why we are here: to scrutinize legislation to ensure that there is a level playing field and to ensure that Canadians are given some protections. I am afraid we do not find that in this bill.

Before I give some of the critiques of this bill on that front, let me also say that when it comes to the big banks we also know that many of these institutions are moving their money offshore to avoid paying taxes. Let us not forget the studies. I am referring to one that is a couple of years old, but I am sure its findings are still current. It was clearly reported that Canada's top five banks have deprived tax coffers of $10 billion since 1991 through offshore tax havens. Not only are banks making those kinds of profits, they are moving money offshore so they do not have to pay taxes on it.

And of course they were anxious to make sure that we followed the advice of the Liberals and kept the income trusts alive and well on our agenda so they could have these flow-through entities and not have to pay taxes. Let us keep that in mind as we hear the former Liberal finance minister criticize the New Democratic Party which had the strength of its convictions to stand pat and stand firm and to say from the very beginning that income trusts had to be phased out, that we needed to do everything we could to stop this tax leakage and to close all corporate tax loopholes. This is something that he and his colleagues did not do when they had a chance in government. Despite all the hot air today, we know on what side their bread is buttered and on whose side they stand when push comes to shove.

Let us also be clear that the banks have used much of their money to gamble on the international casino stage. Let us not forget some of the endeavours by CIBC and its ties to Enron. Let us not forget some of the scandals that our banks have been involved in. We have seen some of the profits squandered in terms of playing the casino game on the international scene.

I say all of this to make the point that in fact we have to do something as a Parliament to get control over the situation and to hold the banks to account. Reputation is important and the banks know that. I think their response by some of the big banks to our plea for a rolling back of the fees charged to people when they use ATMs is an indication that they realize they have a public relations problem on their hands and that they must begin to deal with it.

In speaking of the need for Canadians to have confidence in the banks, I would like to refer to statements by the Office of the Superintendent of Financial Institutions and to Nicholas Le Pan's statement not too long ago when he said:

There is no other basis for the financial services business than trust and confidence! And that goes to a firm's reputation and why reputation is a zero tolerance risk.

That is the message the banks need to hear from this Parliament. The banks need to be told that they are way beyond the zero tolerance risk level. The banks do not have the trust and confidence of Canadians. They do not have absolute loyalty to the very advantageous position of the banks today. This is what we have to change. That is why we are here. We are here to say that the banks owe it to Canadians to be accountable, transparent and open. There is nothing in the Bank Act and nothing in this legislation before us that requires the banks to do that.

It is interesting that according to the Financial Consumer Agency of Canada, which is authorized under the Bank Act, there are hundreds of violations, but do we know the names of any of the banks that have violated the Bank Act and violated the laws of this country? No. There is no obligation for the banks to come forward. There is no obligation on the part of government to give their names.

Consumers who want to shop around to get the best service available cannot get the basic information to do that. We could get it if we were buying a toaster. We could get it if we wanted to take a vacation. We could get it if we were buying a house. However, we cannot get the basic information to choose a bank. Canadians cannot get the information they need to make a wise decision--

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I thank the hon. member for his very relevant question. In fact, I should have included it in the questions to be submitted regarding Bill C-37. That issue is like a sword of Damocles hanging over our heads.

Currently, there is not enough competition on the banking market to allow for mergers, particularly in the case of major institutions here. This is not to say that it will never happen, but before thinking about merging two of our five largest banks, there will have to be more competition on the market.

A number of laws have been passed so far, but they have not had the anticipated impact, perhaps because they are too recent. So, we just have to wait and see.

Also, not only will conditions be imposed on eventual mergers, but the two or three businesses—I hope there are not more than that—involved will have to demonstrate that it is in the public interest, and not just in their own best corporate interests. Even though banks are private institutions, they remain an essential public service. As citizens in a modern Canadian or Quebec society, we cannot live fully if we do not have a bank account somewhere. Even welfare recipients must have a bank account. So, the state already provides a framework, but we must ensure that the outcome is positive.

The Standing Committee on Finance has already recommended to reverse the onus. Instead of doing what the then Minister of Finance wanted to do—namely to allow banks to merge if they meet some set criteria—businesses that want to merge should demonstrate that such a move is in the public interest.

If we had a Canadian megabank to compete on the international market—our banks are very big institutions in North America—and if that megabank had financial difficulties, what would happen to the Canadian banking system?

This debate is extremely important, and I hope that it is as transparent as possible.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, before I begin my remarks on Bill C-37, I would like to add a few comments on the issue of public finance.

The Liberal finance critic who just spoke reminded hon. members that the Mulroney years were extremely disastrous as far as public finance was concerned, with major deficits including the last one of $42 billion.

Nonetheless, I want to provide a few facts for the public's information and so that everyone knows the whole story. The first deficit recorded in 1975 was run by a Liberal finance minister, John Turner. Then a whole series of deficits followed until 1993-94. The Liberal solution was to offload the problem to the provinces, Quebec in particular, by creating the fiscal imbalance. If we look at the true public finance story of the past 20 or 30 years, neither side has anything to teach us.

Let us come back to Bill C-37 , An Act to amend the law governing financial institutions and to provide for related and consequential matters. The Bloc Québécois will obviously be in favour of this essentially technical bill and we will have no problem supporting it.

Precisely because this is a technical bill, it does not address the substantive questions that we would have expected the Conservative government to provide us with some answers to, some possible solutions, or even that it raise issues. I am thinking, for example, of the entire question of electronic transactions. There is absolutely no reference to that, apart from cheque imaging, which I will come back to.

We know that this is a major issue in the economic development of Canada and Quebec and all of our economies. Failing to address this question, failing to provide solutions, at least in terms of regulation, means that we run the risk of hitting a ceiling over the next few years in terms of electronic transactions. The regulatory framework is inadequate. We would therefore have expected that this question be addressed in Bill C-37.

The same is true of bank fees. It may be appropriate for there to be fees for certain transactions. But do fees need to be charged for all transactions? Some transaction charges are surely somewhat questionable. An example might be a cash withdrawal at an ATM that belongs to a bank other than the one that the person ordinarily does business with. There are relatively high fees for that transaction. This might at least have been given some thought.

In fact, the Minister of Finance will be meeting with the banks in a few days to discuss these questions. It would have been useful, before they are discussed with the banks, if we could have had a substantive discussion at the Standing Committee on Finance, based on various information that both the Department of Finance and the Minister of Finance could have provided to us. But no, the question had to be raised by one of the members of the Standing Committee on Finance and the committee had to take it upon itself to initiate a study of bank fees.

Once again, on questions of this type, we must not take an ideological approach, whether on the right or on the left. We must first try to understand why banks charge these fees, what they are for, and to establish rules or limits, to regulate this practice based on information and facts, and not based on preconceived notions.

The work on this will be done by the Standing Committee on Finance. We would have expected, however, in a bill to revise the Bank Act, something that happens only every five years, that these subjects, which have been widely debated in Canadian and Quebec society, would have been addressed.

There is another matter that should have been included in this bill. That is the entire question of reinvesting in the community. We know that discriminatory practices sometimes occur on the part of our banking institutions. I would say that they are not even committed intentionally. It is simply a certain way of doing things that is referred to as systemic discrimination.

Here is an example. Every year, the Canadian Federation of Independent Business, which is hardly a left-wing institution, as we know, speaks out against the discrimination that women entrepreneurs suffer, particularly small and medium-sized business owners. March 8 will be International Women's Day, and they will probably speak out against it again this year.

This is a known fact that even the business community recognizes, and we must therefore find ways to counter this systematic discrimination.

In the United States, community re-investment is a practice that forces financial institutions to take stock of their loan and credit applicants, and how the banks approve the applications. If it appears that certain groups are under-represented despite their applications, a special fund makes money available to those investors who have been discriminated against by the banks based on their profile. It is even better when there is no discrimination and the financial institutions take stock of the ratio of loan applications and approved loans.

However, I repeat, this is common practice in the United States, and this forces the financial institutions to re-invest in the community, in those groups that have the greatest difficulty obtaining credit, in particular, to start up a business.

Another question should have been addressed during the examination of Bill C-37 and that is the issue of tax havens. How is it that Canadian banks are such frequent users of tax havens? The Bank of Nova Scotia comes to mind, among others, since I discovered that it has locations in nearly all the tax havens in the West Indies, including Bermuda and the Bahamas. Why? Is it simply because it does not have the choice, given the global economy? We would like to know. The question has not even been asked. Is it because Canadian laws and regulations are not stringent enough? The Standing Committee on Finance began examining one possibility and will delve further into this over the coming weeks.

People will remember some interesting debates we had in the House on how companies like Canada Steamship Lines Inc. were using tax havens to avoid their responsibilities as good corporate citizens. As I was saying, we should at least have touched on this, although we still can. The Bloc Québécois intends, by the way, to introduce a motion in the next few weeks that the committee should pursue its work on tax havens.

Another aspect is identity theft. We know now that criminals can access our entire profile using social insurance cards. There are about five million too many of them in circulation.

With a certain amount of credit information, these people can go to a financial institution, take out a mortgage on someone’s house and disappear with the money. Unfortunately, these things happen every day. There is nothing about this crime, which is still not recognized as such. Sometimes people discover from one day to the next that they are indebted to the banks.

Who is responsible when this kind of thing happens? Are the banks not responsible for ensuring that when someone comes to them with certain information, he or she is the right person?

I think that we could have an interesting debate on this. We did touch on it when Bill C-37 was being studied. However, the department officials told us that it would have to be listed first as a crime in the Criminal Code before it could be included in the Bank Act.

We should have suggested a number of possibilities. The opposition parties, the Bloc Québécois and the NDP, have obviously tried to fix some things. However, most of their amendments were deemed out of order because they went beyond the bill before us.

As I was saying, this bill severely restricted parliamentarians’ ability to do their job and review the Bank Act. Unfortunately, this opportunity only presents itself every five years. I hope that the department, the minister and the Conservative government will not wait five years to do something about these issues of considerable concern to the public.

Some other things too would have deserved further consideration, such as the question of the bank ombudsman, for example.

I quite liked the debate that started up where bank representatives explained what this system was and why the banks financed it. These representatives also explained that the ombudsman is quite independent and the banks have complied with fully with his decisions since the position was created.

Nevertheless, some consumer associations and individual consumers still appeared before the committee and said they did not think they had the protection they needed to proceed with some of the outstanding legal actions between consumers and the banks.

I for my part will not prejudge the issue. However, it seems to me that we should have pursued this further. Even after Bill C-37 has gone through the study phase, consumer associations will continue to think, whether rightly or wrongly, that the Bank Act does not protect consumers sufficiently. I think that they are right at least in regard to the fact that we have not studied this issue enough and did not go into it further. To this extent, their questions remain unanswered.

As I mentioned earlier, Bill C-37 is very technical and has limited debate on a number of questions. Furthermore, this bill was studied very quickly, I must confess. The committee did this work in three sessions. I do not think that the members of the committee needed a great many more sessions, given the technical framework of the bill. However, in my opinion, in future, when we study a bill like this one, we should have much more substantial debates, especially since the Bank Act is only reviewed every five years.

As I have already mentioned, the Bloc Québécois will vote in favour of this bill. Although it does not affect the big societal debates surrounding banking institutions and the Canadian banking system as a whole, Bill C-37 will nevertheless introduce a number of measures on which the Bloc agrees. For example, it will introduce mechanisms for conveying information to consumers, and this will enable them to get more information so that they can make informed decisions regarding their use of bank services. This is a step in the right direction. More remains to be done, but we are headed in the right direction.

Also, a regulatory framework allowing the use of digital data in the processing of cheques has been introduced, and this will reduce the length of time cheques are held by banking institutions.

There too I do not think anyone will complain about the fact that, instead of their cheque being frozen for ten days or seven days, as provided under the voluntary agreement between the banking institutions and the Department of Finance, the funds will only be frozen for four days, if I remember correctly. I will come back to this. The members of the committee nevertheless wondered why the banks were continuing to freeze the funds of deposited cheques for more than 24 hours, in spite of all the electronic means at our disposal.

We will have to wait till digital imaging is put in place. We have not had any answers on this.

The time during which such funds are frozen must be reduced to a minimum. This creates a lot of problems, particularly for small investors and small and medium-sized businesses. Still, the possibility of imaging will be there. Let us hope that the banks will use it to reduce waiting times for releasing funds as much as possible.

There is a provision for reducing the regulatory burden on foreign banks, credit unions and insurance companies in order to make the regulatory approval regime more efficient. Obviously nobody wants regulations for the sake of having regulations. Everyone agreed that this was a good step, especially for the credit unions.

Facilitating the establishment of foreign banks in Canadian and Quebec markets can only be beneficial for consumers. We know that our banking market is extremely concentrated in Canada, with only five major players. Despite the efforts that have been made to create competition, in particular with the passing of Bill C-8 a few years ago, we have to acknowledge that there is not much competition, particularly in the regions.

In the case of Quebec, for example, it could be said that, in the regions, the Desjardins movement practically has a monopoly because the major financial institutions have decided to desert this market as it is not lucrative enough for them.

We find ourselves in a situation where competition does not have all the results expected and the arrival of foreign banks and credit unions provides an opportunity for real competition in the financial sector, which is quite desirable.

Regulations governing mortgage loans are also revisited: the insurable portion of a mortgage will be reduced. At present, up to 75% of a mortgage does not have to be insured; the remainder does. Naturally, that leads to additional costs for consumers who wish to purchase a home. The uninsured portion is being increased to 80%. Reducing by 5% the portion to be insured will make it easier for a number of individuals to purchase property and lower the cost of borrowing. We obviously cannot be against this measure.

Various other matters were also reviewed. They relate to the proportion of equity of a bank held by a single shareholder or groups of shareholders. This should make it easier for small banks to enter the market. That is desirable. As I mentioned, past legislation adopted has not yet led to the desired competitiveness in the financial market.

Therefore, we will support this bill. In the time allotted to me I would like to talk in more detail about certain matters found in Bill C-37.

My presentation will address the bill's objectives.

The first objective covers all matters affecting the interests of consumers. A certain number of measures in this regard were taken by Bill C-37. As I mentioned, we do not go far enough; however, some measures are headed in the right direction.

The second objective is to improve legislative efficiency and there are a certain number of measures in this regard in Bill C-37.

The last objective pertains to a group of varied measures in Bill C-37.

The first key objective, which is enhancing the interests of consumers, includes a first main element, namely to improve the system of disclosing information to consumers. I talked about it earlier, in my introduction. This will help consumers make informed decisions about the investment vehicles that they choose.

It was decided to set higher standards for disclosure of charges and obligations. Penalties that apply to various accounts and investment vehicles are also heavier. Moreover, once the act is passed, it will require institutions to clearly disclose this information in all their branches, through the Internet, and also in writing to any individual who requests it.

Some might think that it goes without saying, but these provisions were not yet included in the Bank Act. Since one can hardly be opposed to virtue itself, we will support this measure.

There is a second element in this key objective of enhancing the interests of consumers. It is, as I mentioned, the change made to the regulatory framework to provide for the introduction of electronic cheque imaging. This will allow financial institutions to reduce the hold period on cheques. That is also a change that was asked for.

As for legislative efficiency, I already talked about reducing the regulatory burden for foreign banks and for credit unions. We will have to streamline the regulatory approval process, and provide a more flexible framework for credit unions.

Finally, as regards the other measures, the most important one is, as I mentioned, to increase from 75% to 80% the loan-to-value ratio for which insurance is mandatory on residential mortgages.

In conclusion, as I said at the outset, the Bloc Québécois will support Bill C-37.

[John McCallum, Liberal, Markham—Unionville, ON]

--it also leaves me with some concerns about the government's broader agenda.

On the one hand, I am glad to see that the Conservatives have decided to model their bill closely on the Liberal proposals. This bill really is 100% proposals from the previous Liberal government. Naturally, therefore, we do not hesitate very much to support it, but I do have some serious concerns about the government's ability to conceive of any truly new legislation.

Canada's alleged new government is actually starting to look an awful like Canada's used government. If we look beyond the Bank Act to some of the other pieces of legislation put forward by the government, it is hard to see anything that the Conservatives have conceived of themselves. The Conservatives may have promised new government, but they have only delivered borrowed government.

For instance, the EnerGuide retrofit program for homes was once thought a wasteful program by the Conservatives before they looked at the polls on environment. We remember that just three months ago the Conservatives thought spending any money on a clean environment was wasteful. Now they have brought back the old Liberal plan.

However, instead of bringing back the full program, they have eliminated portions of it, particularly the money for energy audits. What will this do? Effectively this will help ensure that low income Canadians are unlikely to be able to afford making use of the program, but low income Canadians are not the base of the Conservative Party so the Conservatives do not really care about that.

This is a shameful act, because I remember very clearly from the time when I was natural resources minister that low income people are particularly hard hit by high energy prices. Low income Canadians pay out 25% of their low incomes on energy, but how has the Conservative government amended and altered our EnerGuide program? It has cut out the audit part, the part that is essential to allow those low income Canadians to access the program.

The Conservatives have deprived these people who are most subject to difficulties from higher energy prices. They have effectively excluded those people from this program. I think it is typical of their behaviour because they do not regard low income Canadians as part of their constituency, so if those people are excluded, that is fine.

If only the government could swallow its pride and reinstate the full EnerGuide program, which I am confident is useful; I am not so confident the Conservatives see it as useful, but that is what is in my speech. Meanwhile, at least they have brought back part of the program, but they have excluded that most critical part, which is the part that is essential to help lower income Canadians.

Another example is Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which we passed last fall. Much like the Bank Act before us today, nearly all of the bill was drawn from proposals drafted by the previous Liberal government. It was a sensible bill, but because of near complete inaction on the part of the Conservatives, Bill C-25 had to be rushed through the House and the Senate in order to make sure it received royal assent in time to be compliant with our international partners.

Today we find the same thing. Once again, we are rushing to get Bill C-37 through both chambers. The Financial Institutions Act was scheduled to sunset this past October, which is why the previous Liberal government began the consultation process over two years ago, but the Conservatives delayed. They dithered. They delayed the release of the white paper and gazed at their navels until they had to ask the House to extend the act by six months, which we of course did. Now we are forced to get this legislation through both chambers in the next 50 days in order to beat the April 24 sunset clause.

So on the one hand, I am impressed that the Conservatives have been, generally speaking, willing to implement the majority of Liberal policies that were waiting for them when they came to power last year. On the other hand, I am a little concerned that they are willing to implement some of them in such a piecemeal and rushed fashion and they seem to have so few ideas of their own in the legislative cooker.

Worse still, and this is perhaps the most important point, when the Conservatives do manage to dig an idea out of their own caucus, it is almost universally panned by everyone else. I do not think it would be a stretch to say that their so-called clean air act was a complete failure, and their reverse onus legislation has been called unconstitutional by the legal community.

Thank goodness for our financial institutions and the millions of Canadians who rely on them that this used Conservative government has decided to stick with Liberal policy on Bill C-37.

Let us hope that when the upcoming budget rolls around next month the Conservatives will remember a few other Liberal programs that they have ruthlessly cut. I am talking about literacy programs. I am talking about funding for Canada's struggling museums. I am talking about the GST visitor rebate program, without which our tourism industry will be at a competitive disadvantage with the rest of the world.

It is truly amazing that the Conservatives cut that visitor rebate program, making Canada the only OECD country that does not have such a program, depriving Canada of the convention business and of foreigners who come to this country as a consequence of that program. Experts have indicated that the government will lose more tax revenue by ending this program than it gained by cutting the program, and it has done so at a time when it is swimming in money. There was no need to cut that program, just as there was no need to cut literacy or status of women programs or museums.

The government is swimming in money but nevertheless has struck out and cut the programs that have provided assistance to Canada's most vulnerable. The Conservative government also struck out and foolishly cut programs like the visitor rebate program, which makes absolutely no sense. I remember this, because when I was doing expenditure review in the previous government the bureaucracy suggested that we cut the visitor rebate program, so I know where the recommendation came from. The Liberal government had the good sense to say no to the bureaucracy. The Conservative government simply followed what the bureaucracy recommended. That turned out to be an extraordinarily foolish and counterproductive move.

Returning now to the white paper that the Liberals commissioned in preparation for the five year review of the Bank Act, one of the most exciting things the Liberals were exploring in that paper was writing electronic cheque imaging into law. The bill states that banks will be required to use new technologies to better serve the needs of Canadians.

As it stands right now, the maximum hold period on a deposited cheque is 10 business days. That can be an excessively long time for some Canadians, especially low income Canadians who need access to those funds much more quickly in order to pay their bills and buy their basic needs. Bill C-37 will immediately lower this hold period to seven days, allowing Canadians faster access to their own money.

This can be done even faster. I am speaking specifically to electronic cheque imaging, which Canada's banks have already begun to implement. By adopting electronic cheque imaging, banks will no longer need to physically exchange copies of cashed cheques with other institutions. Instead, a captured electronic image of the cheque can be sent instantaneously to another financial institution.

Better still, when all of Canada's financial institutions have installed electronic imaging equipment in the next couple of years, the maximum hold on cheques will be reduced from seven days to a mere four days. Furthermore, I hope that as the technology advances we will be able to further reduce the maximum period.

A second aspect of this bill that I approve of is a provision for an increased disclosure regime that will provide Canadian consumers and businesses alike with the information they need in order to make the most informed investment decisions possible. Bill C-37 will ensure that the savings product disclosure regime is just as effective for the millions of online bankers as it is for branch customers. Strong competition and information disclosure are two of the best tools available to ensure that Canadian consumers' needs are being served well by our financial institutions.

As I have said, the official opposition will be supporting this bill. My colleague will expand on my remarks in terms of some other items contained in the bill. But I do hope that Canada's alleged new government will continue to use our ideas to their fullest and can refrain from returning to the dangerous incompetence of the previous Conservative government that was so damaging to Canada's economic well-being.

Perhaps I should expand briefly in my remaining time on that last comment. What do I mean by Canada's last Conservative government being damaging? There is a pattern here, in that Conservatives create deficits and leave those deficits for Liberals to clean up. The most glaring example in our recent economic history was the Mulroney government, which bequeathed to the Liberal government a $42 billion deficit. It took some time to clean that up.

Indeed, the Mulroney government received a credit downgrade in 1992. Since 1951, Canada had consistently had an AAA rating. Then, after a series of deficits that had us, according to the IMF, headed for third world status, the credit rating was downgraded in 1992. It took 10 years of the Liberal government cleaning up the Conservative mess to restore that credit rating to its AAA status.

It is not as if that is an isolated example. Looking south of the border, we saw Bill Clinton running surpluses. Who has been running the huge deficits? George W. Bush and, before him, Ronald Reagan. Or we can look to Ontario. The pattern is always the same. It was the Mike Harris-Ernie Eves government that ran on a campaign of a balanced budget, but when that government lost and the auditors came in, what did it show? It was a $5.8 billion deficit. That is of some relevance here, because three of our most senior ministers were senior members of that government.

Conservatives, whether we are talking about Ronald Reagan or George Bush in the United States, or Brian Mulroney or Mike Harris in Canada, historically have run huge deficits. They have left those deficits for successive Liberal governments to clean up.

What has happened to this Conservative government? It has been bequeathed the largest surpluses in Canadian history. That is why it is particularly incumbent on the government to use that money wisely, but it has not.

As I said, the Conservatives have done the opposite of what Canada needs for a strong economy to take on the 21st century. They have raised income taxes. They have slashed research. They have slashed learning. They have slashed programs for Canada's most vulnerable, the literacy programs, women's programs and the museum programs, and they have done all that at a moment when they have been literally drowning in the hard-earned cash of hard-working Canadians.

That is where I will conclude my speech, by saying that I hope this new government will continue to use our ideas to their fullest and can refrain from returning to the dangerous incompetence of the previous Conservative government that was so damaging to Canada's well-being.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Speaker, I am pleased to speak to Bill C-37, an act to amend the law governing financial institutions.

I was glad to see that all the members of the Standing Committee on Finance delivered the bill back to the House in such an expeditious manner. We certainly look forward to continuing the debate here.

A vibrant 21st century economy requires, at its bedrock, a strong and well regulated financial sector that is not needlessly bound by red tape and yet, at the same, protects the interests of its citizens.

In many respects, Canada's financial services sector is the envy of the world. The expertise of our financial services sector is often sought out by our international friends. It has also helped our homegrown Canadian banks make real progress in expanding their services to other countries.

In fact, while our banks currently employ about a quarter million Canadians here at home, they now employ roughly 40,000 other people around the world. Indeed, this function of our banks, and at least as much our insurance companies, in taking on the world overseas in China, in India and in many other countries, is a very good thing for this country. Canada, as a whole, needs to take on the world. We need to compete with China, India and other emerging economic giants and, therefore, it should be core and central to government policy to prepare us for this new, highly competitive 21st century.

While our banks are certainly doing well, our government in the past year has been totally asleep at the switch. In terms of preparing Canada for the 21st century economy, I would contend that just as the government wasted a year when it came to the environment, cutting environmental programs until it woke up and looked at the polls, similarly, it has been totally asleep at the switch and totally wasted the last year when it comes to building a strong economy for the 21st century.

It is not a great puzzle what has to be done. We in Canada will compete with China and India, not through low wages, which is the last thing we want to do, but through good ideas, a highly educated workforce and research and training, which are all the things the government has cut.

We must also compete through lower income taxes and competitive taxation but the government raised income taxes.

At a time when the government has literally been swimming in money, with huge surpluses bequeathed to it by the previous government, it saw fit to slash funding for research, cancel programs for training Canadians and to raise income taxes. Those are all things that are the antithesis, the opposite of what has to be done in order to prepare Canada for the 21st century economy.

It is not as if our competitor countries have been standing still. We can look at what Australia has been doing. While our government insults China, Australia has been negotiating agreements with China. While Australia has reduced its income taxes, increased credits for low income Australians and made company taxes more competitive, what has our government done? It has raised income taxes. Yes, it has reduced the GST but that does nothing to make our country more competitive. While Australia forges ahead, Canada sits back and does nothing.

The United Kingdom is another example. It has ambitious targets for research and development over the next decade, backed by government support to achieve those targets. The European Union has even more ambitious targets for research. What do we do? We slash research funding.

I think this is totally irresponsible behaviour on the part of the government. When it is swimming in cash, it has no excuse for raising income taxes, no excuse for slashing research funding and no excuse for slashing support for training Canadians because it is only through well-trained, well-educated and innovative people that we will be able to take on the world, and the government has gone in the opposite direction.

I applaud our financial institutions for taking on the world and for showing success in Asia, but the government has to go beyond those successes that we see today. The government has to build a strong economy. It has to put in place policies that will create jobs for the future. The government, sad to say, has done precisely the opposite.

To return to the Bank Act, the five year review of the act is not something that happens overnight. In fact, it began more than two years ago, when the previous Liberal government began a consultation process and outlined what ground it expected the review to cover. While it is good to see good Liberal policy brought to this place--