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

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, it is a pleasure today to speak to Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters. Essentially it is the Bank Act review.

The government has drafted a bill that largely follows Liberal policy that has been occurring over the last five years. This legislation was a result of recommendations that came from a white paper that was commissioned by the previous government.

The bill represents the statutory five year review of the Bank Act, and there is nothing in the bill, quite frankly, that is particularly contentious. The government avoided a number of controversial issues and has provided some important updates that we have been fighting for and in fact was an extension of what we were doing before.

The bill satisfies the obligations of the government to present statutory updates to the Bank Act every five years, so in essence, it is a rather rudimentary bill, almost administrative in nature. The last time this happened was in 2001.

Bill C-37 will ensure that financial institutions provide greater and more timely disclosure to consumers in areas such as deposit type of investment products and complaint handling procedures. I think that is probably music to the ears of most Canadians in dealing with their banks. The bill and this update will provide consumers with a lot more accountability and knowledge about what is happening with respect to their accounts and their activities with the financial institutions of their choice.

The Bank Act, in this particular review, also does something which I think is quite intelligent. It expands the definition in terms of what one defines as a large bank and one that is a medium sized bank, so as a result of an increase in assets, the definition and threshold will be increased from $5 billion to $8 billion. That is a sensible thing for the banks which could be credited as being one of the great success stories in Canada and are competitive internationally. Those banks hire a lot of Canadians and provide a lot of asset attraction with respect to private capital into Canada that can be invested in our country and used to create jobs, and hopefully, jobs that pay very well.

The bill also increases the use of electronic cheque imaging, which is a technology that will allow financial institutions to transfer cheques more efficiently. The bill also proposes to reduce the cost of mortgages for some borrowers by increasing to 80% the loan to value threshold above which mortgage insurance is required by the statute.

There are also some provisions that I hope the government takes into consideration. Because of the value of homes increase quite significantly, it would be wise for the government to start looking at CMHC grants and allowing the valuation of those homes to be bumped up quite significantly. I would personally recommend at least a 50% increase for the value of those homes, specifically in my area of Victoria, British Columbia, where house prices have increased astronomically.

People have been forced to buy homes, the value of which may be much higher than in most other parts of the country, but they are not able to access the CMHC grants that are available to most Canadians. A home of one size, all things being equal, may be equivalent to one in most other parts of Canada; however, the value of the home in a place like Vancouver and Victoria will be so much greater as to push that home above the ability of the individual to access CMHC grants. Most Canadians have made all of us very aware of this problem. I would strongly encourage the government to resolve this.

One of the things that the Canadian International Development Agency has done over the last year is moved the international development envelope from what we call project funding to what is called program funding. What does that mean?

Project funding would be something that we would do in terms of Afghanistan. We would fund a particular project such as the building of a school. We would probably do it through a Canadian NGO or an Afghan domestic NGO.

That is a very efficient way of ensuring that taxpayers' money is going to be used to help the people on the ground who need the help, but curiously, what has happened over the last year is that the government, and CIDA in particular, has moved to something called program funding. What it is doing is taking a large amount of money, $50 million, $60 million and even more, and giving it to a large organization.

What does that mean? It means we are giving $50 million to $60 million to a large organization such as UNICEF, the World Bank or the IMF, and we utterly lose traction and accountability with respect to those moneys. This is not an intelligent way for us to use taxpayers' money to help those who are less fortunate.

I would encourage CIDA and the minister to really take a close look at this. It does not mean that we do not have to invest in the international financial institutions. They have a very important role, but if we are going to take our international development envelope, the ODA, and simply take that money, divvy it up into rather large chunks of money and give it to very large international multilateral organizations, we lose traction, we lose accountability, and we lose the ability of Canadians and Canadian NGOs, and Canadian companies quite frankly, to execute those roles on the ground.

We have seen over the last few years a shift in our international development envelope. We are not giving money to Canadian NGOs, small NGOs and groups, particularly Canadians out there who are doing an incredible amount of work, but taking the funds from those groups that are very effective at getting work done on the ground, and instead giving it to these large black holes of large multinationals. We do not know where that money goes or what it is used for, and it utterly loses the connection between those Canadian dollars and our wonderful nation.

This is not an intelligent thing to do because not only do we lose accountability and the branding that identifies Canada as the country that has given those moneys but we also lose the effectiveness. I would argue, and I would challenge members to say otherwise, that the most effective way of using our international development assistance is through small NGOs, either international small NGOs that are working on the ground or Canadian NGOs.

Right now, Canadian NGOs can only compete for a paltry $20 million out of the $3.2 billion official development assistance envelope. Does that make sense? The fact is that from coast to coast, in our ridings, there are thousands of non-governmental organizations in our wonderful country, people who are committed, many of whom are volunteers and most of whom are doing an outstanding job on the ground. Those groups should be able to compete for the official development assistance envelope in a way that enables them to be able to carry out their duties on the ground, consistent of course with the objectives of our ODA.

That is a much better way of using Canadian taxpayers' money rather than taking moneys and plunking them into the World Bank where we completely and utterly lose the accountability and effectiveness of those moneys.

This is something that will require a sea of change on the part of the minister and I hope she understands this because one of the great frustrations, and I think all of us have seen this with respect to Afghanistan, is that we are missing the boat in Afghanistan. We are certainly doing a good job from the military aspect, and our defence forces and RCMP deserve enormous credit for the hard work that they are doing, but there are four or five things that we need to do, in my view, that will provide security on the ground in that country, and they are as follows.

First, a Loya Jirga is required in Afghanistan that will bring in those groups that have been disarticulated from the Bonn agreement and bring them to the decision-making table. Right now they are excluded and right now they have become part of the Taliban, warring against us.

Second, and the Minister of Foreign Affairs was just in Latvia along with the Prime Minister, we need to ask our NATO allies to invest in the training of the Afghan police. Right now they are being paid $70 a month. Their training is eight days. They are not equipped to do the job, so what has happened is that many of them are engaging in thuggish behaviour simply to put food on the table for themselves and their families.

What does this mean on the ground for our troops? It means that once they go out there and take out the Taliban there is nothing to come in after them which will enable our troops to be assured that security is going to take place. There is no effective constabulary force on the ground. Our troops are doing a yeoman's job, an incredible job, of removing the immediate threat, but there is nothing coming after they are done. Now, the Germans have been tasked to do this.

What I would ask the Minister of Foreign Affairs to do is to ask the other NATO allies to contribute money for salaries, money for training, and money for the equipment that the Afghans need. If we do that and build up an effective Afghan police force, then that will go a long way to providing the long term security the country needs. If we do not deal with that, we will have a major problem.

Third, we have a major problem with respect to an insurgency coming from outside Afghanistan. If the insurgency that is coming, particularly from Pakistan, is not dealt with there will be war without end. The border is porous. We know that. We cannot block that border off. It is too large, too wild, and too strategically impossible to block off.

What we have to do in my view is call together a regional summit of countries that will bring together the regional powers that will be dealing with the Afghan security. Only by doing this will we be able to address this problem of blocking off and reducing the threat from the outside.

Those individuals who are blowing themselves up as suicide bombers in Afghanistan and those groups that are shooting and trying to kill our troops, many of those, in fact the vast majority, are from outside Afghanistan. They are Pashtuns from Pakistan, Chechens, Tajiks, Kazaks and others, in addition to those from the gulf states. These people are flowing into Afghanistan, particularly in the south, and they are the ones who are killing our people.

No military solution will be able to resolve this. The Minister of National Defence understand this and the Chief of the Defence Staff understand this as well very clearly. So if we accept that as a fact, how are we going to address this?

Leopard tanks are required by the NCOs on the ground and they should get whatever they want. We must also provide other solutions. I know the government is seeking other solutions. This plan will address that: one, ensure the Aghans have the Loya Jirga and have the meeting with all groups, particularly those who have been excluded; two, train the Afghan police; and three, ensure that the development envelope is going to work.

Mr. Karzai's government is roundly known as being utterly corrupt. If the government is being utterly corrupt, we must, if we are giving moneys to him, which we are in the amount of $100 million a year, ensure that those moneys are going to be used effectively and wisely. That is our responsibility to the taxpayers and indeed to the Afghan people. Right now his government is corrupt and money coming in the front door is going out the back door into the hands of the warlords and drug dealers.

Fourth, with respect to the issue of the opium crop, we know the opium crop is the highest it has ever been. How do we deal with that? We can deal with that by transferring the opium into the legal production of medically-used narcotics. If we are able to transfer those moneys from that area to legal production, we will undercut the financial underpinnings that are being used right now to fuel the Taliban and the warlords. We have to do that. It is absolutely essential.

The last point is the development envelope. That is where the banks come into play; the international financial institutions that we are talking about today, in part.

Those international financial institutions must be able to ensure that the moneys are getting on the ground to the people who need it. The development assistance envelope is not functioning that way. Right now Afghanistan, as a post-reconstruction country, is receiving perhaps the least amount of any post-reconstruction country that we have ever seen.

The NATO countries that are not willing to contribute the troops can do a lot more by contributing moneys for international development. We have to ensure that the accountability is there. We have to give President Karzai the budget support that he requires and also have the accountability checks and balances to make sure that our moneys are being used wisely. Again, have the Loya Jirga and the regional summit to address the insurgency coming from the outside.

I see my time is almost up. Is that correct?

[Paul Szabo, Liberal, Mississauga South, ON]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mr. Speaker, Bill C-37 is squeezing CMHC out. CMHC is being forced to share this business.

If that happens, it means that CMHC will not continue to garner the money as it has been collecting in the last few years. It means that it will not have a large reserve fund. It also means that CMHC will not have the funds it needs to assist a lot of the co-operatives or social housing units that are now quite old and need repair and maintenance. These housing co-ops, these existing affordable housing units need the funds from CMHC to assist in maintaining their buildings. If CMHC does not assist, then some of these co-operatives and some of these affordable housing units may end up going bankrupt and, therefore, we would be shutting down on some of these affordable housing units.

If CMHC has no funding left because of the privatization that is in front of us, it will not be able to provide funds to assist some of these co-operatives that are now in need of taking more funds to subsidize some of the tenants. The tenants need quite a bit of subsidies as they cannot pay market rents. If the tenants were asked to pay market rents, they would not be able to afford some of these co-operatives. The co-operatives are looking to CMHC to fix the section 95 question but for CMHC to be able to do that it needs a pool of money.

As I said earlier, CMHC does have $5 billion at this point but it needs to spend those funds to help build affordable housing, to assist co-ops, to bring in more subsidized units and to maintain and repair some of the older cooperatives.

All of that is required and that is what we need to do, which is why I believe we should strike out the part in this bill that would commercialize or privatize CMHC.

[Alexa McDonough, NDP, Halifax, NS]

Mr. Speaker, as I make a few very brief comments on Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters, I want to congratulate my colleague, the member for Trinity—Spadina, who just pointed out some of the consequential matters that arise in relation to the proposed changes that the government has placed before the House of Commons.

I particularly want to commend her for drawing attention to the implications for affordable housing, which we desperately lack, in the bill that is before us, following on the appalling record of the previous Liberal government in having basically pulled the plug on any federal commitment to affordable housing.

I wonder if I might ask the member for Trinity—Spadina if she could explain, in perhaps a little bit more detail, what the implications are of the changes to the National Housing Act that will make the likelihood of affordable housing being made available to those fantastic numbers of people who are currently in crisis even less available to them than it is now.

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

Mr. Speaker, I rise before you to speak on behalf of Canada's banks. Yes, that is right, I am empowered to speak on their behalf. I am in fact their member of Parliament. Canada's major banks and most of the insurance companies all have their dazzling, beautiful towers in my riding of Trinity—Spadina. So does the Toronto Stock Exchange, at the fabled intersection of King and Bay.

I am their member of Parliament, so I must speak up on their behalf.

Technically they are not citizens and do not have a vote, although they have certainly bought plenty of influence with the government over the years. They have poured, I am told, thousands of dollars into the coffers of the Liberals and the Conservatives, though none to the NDP, I must admit, and none to my campaign in the last election.

However, I am fair. I represent every constituent. The banks are constituents. If we read their annual reports and corporate responsibility statements, we see that they all claim to want to be good corporate citizens. I am here to plead on their behalf, to encourage members to help them to be good corporate citizens, to consider the bank act amendments as a golden opportunity to help the banks come to terms with their role and to help further the role of government in fostering a healthy economy and economic opportunity, prosperity and security for every single Canadian.

That is what the banks say they want, so let us help them. Let us show them how they can do a better job and enshrine the right regulations in legislation to keep them from going astray of their ideals. Let us ensure they are guided to make the best possible investments, and investments in Canada, not in offshore tax havens.

Let us ensure that we protect the sovereignty of the financial system that is so important to our independence and role in the world. That would be good citizenship.

The banks have grown and prospered. Surely citizenship demands reinvestment in every geographic region, community and sector, and for all Canadians, regardless of income level.

My colleague, the hon. member for Winnipeg North, has already pointed to the problems in many communities. They have been abandoned by the big banks. They are denied fair and equal access to banking services. This is the result of mergers. We need to protect against this and help banks fulfill their duties as corporate citizens.

Bank charters provide a protected privilege, but Canadians are owed something for this privilege. Let us ensure availability and access. Banks used to pride themselves on the fact that it costs the same for services in Yellowknife as it does at King and Bay. My constituents demand it. Let us ensure that bank profits are fair and fairly taxed. That would help.

Let us look at credit card rates. As I said earlier, this bill is an opportunity for renewal and change in the way banks work with Canadians. Canadians, particularly low income Canadians, are gouged daily by ridiculously high credit card interest rates. The gap between the prime lending rate and the rate most credit cards charge has never been bigger. It is time to cap credit card interest rates to five points above the prime rate. Five points is quite a lot.

The prime rate today sits around 6%. At the same time, the banks are charging upward of 18% to 19% for credit card interest. It is time to reduce the interest paid on the almost $44 billion in credit card debt owed by average Canadians. That is right: $44 billion. That is higher than Brian Mulroney's record federal deficit in 1992-93. I would like everyone to remember that. A $44 billion debt is carried by average Canadians because of huge credit card interest rates.

The Liberals refused to protect consumers from outlandishly high credit card rates. They argued that there were lower credit card rates available elsewhere. However, far too often, lower income people who have poor credit ratings cannot qualify for these lower interest cards. This is the time for the government to take real action to protect average working families from high interest rates and real action to improve our national economy by improving the disposable income of average Canadians.

There is simply no justification for maintaining high credit card interest rates during this period of steady and declining interest rates, thus making the need to cap credit card rates at 5% above prime a necessity today.

I also want to speak about affordable housing and mortgage insurance, which is also part of Bill C-37. I noticed that deep within this bill are amendments to the National Housing Act, the act that legislates the Canada Mortgage and Housing Corporation.

The former prime minister, as part of his government-wide commercialization initiatives in the 1990s, steered through some amendments to the National Housing Act in 1998 that were widely opposed by affordable housing advocates and cities.

Those amendments limited the role of CMHC in working with municipalities and community based housing providers in developing innovative new ways to create desperately needed new affordable homes, while at the same time opening the CMHC mortgage insurance business to the private sector.

Mortgage insurance has been very lucrative as Canada's housing market has been secure for the most part. Because of the Liberal era restrictions on CMHC, the housing corporation has been generating huge surpluses without being able to spend those on new affordable homes. In fact, we know the surplus to be $5 billion. Basically, it is taking this money, billions of dollars in premiums, and paying out almost nothing. We know that affordable homes are desperately needed in cities across Canada.

What this bill does is further commercialize or privatize CMHC. That includes opening mortgage insurance business to even more private sector businesses. The problem with this is that it cuts into the lucrative and desperately needed revenue stream for CMHC. This stands, even though it has not been able to invest this revenue, which makes it almost impossible for CMHC to gain any more future dollars.

The current amendments appear to seek to further privatize CMHC, and we must oppose that. CMHC has made a lot of money in recent years and has been providing good service at a reasonable cost and every bit as efficient as the private sector. There is no reason that CMHC should be squeezed out or forced to share this business at all.

We should be able take the funds that are in CMHC and use those funds to build more affordable housing. It is good for our economy and it is good for Canada. We know that we need to invest and we need to change the previous Liberal government policy and allow CMHC to invest a portion of its mortgage insurance earnings into building affordable homes.

We heard earlier today that the affordable housing crisis is something that brings our country together. We are in a desperate situation and we must build affordable housing. We are seeing increased homelessness, massive housing insecurity and substandard housing which, in turn, is leading to a heavy burden on individuals and massive disruptions of communities and local economies and increased costs for government.

We also need to look into small business lending, at service charges and at huge profitability and ask if it might be time to look at the concentration in the financial district, a district that graces my riding. We also need to look at employment, as well as at the loan shops that are popping up in poor neighbourhoods. We need to look at all of those things.

We need to address the act and give it a total overhaul for the good of my bank constituents, for Canadians and for the country. We have the opportunity right now with Bill C-37 to reform the Bank Act and we should take this opportunity. We should not just tinker with the Bank Act. We need to reshape it to reflect current realities and future opportunities right here and now in Canada.

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 second time and referred to a committee.

Business of the House

[Rob Nicholson, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, I am pleased to confirm that the holiday season will be beginning in due course. In the meantime, we will continue with Bill C-37, the tax convention; Bill C-12, financial institutions; and Bill C-36, an act to amend the Canada Pension Plan and the Old Age Security Act.

Tomorrow we will begin the third reading of Bill C-28, budget tax measures.

We will continue next week with the business from this week, with the addition of Bill C-40, sales tax; Bill C-32, impaired driving; Bill C-33, technical income tax; Bill C-35, bail reform; and, of course, as is the tradition, as the member would know, it is great to get into a prebudget debate and that usually lasts about two days.

We have a busy agenda and I look forward to the cooperation of the hon. member. I am sure we will have further discussions on this.

Bank Act

[Pat Martin, NDP, Winnipeg Centre, MB]

My colleague from Nova Scotia, a Conservative, is agreeing with me. Now and then that Conservative member has the odd lucid moment I have noticed. It may be that in his home community he has suffered the same indignity as I have, that the corner banks are closing their doors, folding up their tents and abandoning us. They are bailing out. They have more investments offshore than they have in our own communities. We grant them a charter to exist and give them the exclusive monopoly to make a fortune on certain financial transactions and they refuse to live up to their end of the bargain. That is where I find fault. The little guy is not getting a fair shake from the big banks.

We create our own credit unions and we are left with the least profitable side of banking that nobody else seems to want. We seem to make it work. We are making it work in the non-profit sector through a vibrant credit union system throughout the land, but that is still no excuse. We cannot afford to backfill every place the banks have abandoned us, we simply cannot. No credit union can.

Imagine how devastating it is to represent an old established neighbourhood like mine and see 15 bank branches close their doors. There is another place in which they are failing to live up to their commitment. Right in the Bank Act it says that if a bank wants to close a branch, it has to have public meetings. It has to deal with the inconvenience to the long-standing customers. It has to help them find alternate banking services within a reasonable distance. One of the banks was even ordered to provide a van to drive seniors from the existing branch to the new branch, which was all the way across town. That lasted exactly four months. The van disappeared and the seniors at the Blue Bird Lodge in the inner city of Winnipeg are without service. It is just not working.

I am here to serve notice that the current Bank Act lets Canadians down. The Bank of Canada had Arthur Anderson as its auditor of record for the whole time of the Enron scandal. I have no confidence in that particular system.

I am very concerned though that Bill C-37 is a lost opportunity, because the very things that I point out as being urgent needs for the communities that I have cited I do not find anywhere in the hundreds and hundreds of complex amendments to complex acts in here.

I would urge the government to get back to the basics and listen to what Canadians are saying. They are sick to their stomachs. Get back to the people. Let us do what is best for ordinary Canadians for a change, not for whoever gets affected.

[Pat Martin, NDP, Winnipeg Centre, MB]

In New Westminster too, my colleague from New Westminster--Coquitlam tells us.

I do not know if Bill C-37 satisfactorily addresses the one compelling issue facing Canadians and that is access to banking services. This has led to the proliferation of payday lenders. Every single vacancy in every strip mall across the country is being filled with another Money Mart or Payday Loans, et cetera. Why? Because they can charge 1,000% to 10,000% interest per year. Show me another business enterprise that receives 1,000% interest. Selling coke for God's sake does not provide 1,000% interest. Prostitution or any other illegal activity does not provide 1,000% interest.

The province of Manitoba did a study on payday lenders in my riding of Winnipeg Centre. One case study documented 10,000% per annum interest on some of the loans as a result of a series of surcharges and fees and roll-over loans. No wonder the Hells Angels are involved. No wonder terrorists are looking to this kind of activity to launder money. I trace it back directly to the banks and the abrogation of their duties to provide basic financial services. By abrogating their duties, they left a vacuum for these rip-off outfits to spring up.

Without getting too over the top on what these reprehensible companies are doing in my riding, one thing they are doing is charging to cash cheques. If people knew their banking rights and if the charter banks were living up to their obligations, people should know that the banks have to open a bank account for them. If people have one piece of ID, even if they do not have any money, a bank has to open a bank account for them. It is in the Bank Act.

Yet poor, low income people do not know this, so they get maybe a government cheque and have no place to cash it because they do not have a relationship with a bank because the bank has abandoned their community. They wind up at a payday loan outfit where they are charged 3% or 4% of their social allowance cheque to cash it. It is illegal to charge to cash a government cheque. Another thing people do not know about their banking rights, and the present and past governments have made no effort to tell them.

Governments have allowed this burgeoning mini-industry of preying on the misery of poor people by taking a chunk of their meagre paycheques to provide basic financial services. I am not overstating it to say that it is morally and ethically reprehensible to be in the payday loan industry. It is morally negligent for the government not to police this industry and not to prosecute anybody who would exceed the usury laws in the Canadian Criminal Code and charge 1,000% per annum. They should be locked up. They should be led away in handcuffs. They should be dragged away in a paddy wagon and locked up, and the key thrown away because there is no lower form of animal in my view than someone who would prey on human misery by exploiting the poor and the desperate in the inner cities.

I am no big fan of the big banks. We do not need to do a tag day for the big charter banks in this country, but we should be holding their feet to the fire and make them live up to their basic commitments, their basic obligations under the Bank Act.

Bill C-37 would have been an opportunity to remind the charter banks of their obligations. In the inner city of Winnipeg where I live and at the corner of Portage and Arlington where I had my campaign offices two elections in a row in two different vacant buildings there are six payday lenders on that one intersection within a half a block in any direction and they are open all the time.

For low income people in my riding, because these firms have been around for almost a decade, people carry their Money Mart card in their back pocket as if that is their ID. That is a poor man's credit card today which is a licence to cheat that person. It is not a credit card. It is not even an ATM card where people can get money using it. It is their identification because payday lenders are smart. They have nice clean tile floors, they are well lit and illuminated. People are treated with some dignity because they want to cheat them. People are sucked in that way, but that used to be the type of service that banks offered legally to neighbourhoods and communities. They were big clean places too where people could go with their paycheques and be treated with some dignity. All that is gone.

We have to remind our charter banks that there was a reason why we gave them the exclusive monopoly on certain very lucrative financial transactions and that was so that they would provide basic services whether we were in Plum Coulee, Manitoba or New Westminster, British Columbia, or in the heart of downtown Toronto, or wherever they are needed.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I am pleased to have this opportunity to enter the debate on Bill C-37. I thank my colleague for answering my questions and clarifying the view in the province of Quebec on some of these issues.

This is a massive piece of legislation affecting many consequential amendments and many pieces of legislation and acts. I may be proven wrong, but at first overview of the bill, I am afraid it may fail to address the single most compelling concern that we have about our financial and banking institutions and that is basic access to basic financial services for all Canadians.

I represent a low income riding in the inner city of Winnipeg. I can tell the House that there has been a flight of capital from the core area of the city of Winnipeg. My colleague from Western Arctic in his questioning of previous speakers told us today that there is a problem finding basic financial services in the rural and remote areas of Canada's north. This is a complex problem that is bigger than just an inconvenience.

In the core area of my riding of Winnipeg Centre, 15 neighbourhood bank branches have closed in the last five years. These branches have been there for 10 to 50 years. The bank that my parents banked at since 1948 when they were married and bought their first home also closed. This is a vote of non-confidence in the inner city.

Let me remind the House that our chartered banks are granted the exclusive monopoly on some very lucrative financial transactions, such as credit cards, in exchange for providing basic services to all Canadians even where that might not be the most profitable thing for them to do. That was the trade-off under which we granted their charters.

The Government of Canada should revisit these charters to ensure that our partners are in compliance with their obligations. In an era of record profits, I defy banks to justify why they are closing branches on every street corner in the inner city of Winnipeg. My colleague from Winnipeg North, who spoke before me, indicated that there had been 13 bank closures in her community.

Winnipeg Centre and Winnipeg North are venerable ridings with old established neighbourhoods full of hard-working people. These people trustingly trudged to the street corners year after year to cash their cheques at their banks. This is a thing of the past. I think it is a breach of trust. Banks have broken their contracts with Canadians because they are making record profits quarter after quarter. Every time we open the financial pages of newspapers we read about banks making record profits. We read in community newspapers about bank closures in the inner city of some major city or in rural Canada.

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

Not all my colleagues agree, but that is a matter for discussion.

This experience allowed me to learn a little about the mortgage market. People are being given mortgages at increasingly lower rates—with a 5% or 10% down payment, and less in some cases. It is easy to get a mortgage. One might wonder why insurance would be mandatory with a down payment of up to 25% when the minimum down payment might now be decreased to 20%. This is only normal evolution.

The purpose of the second measure is to readjust the levels of equity capital to allow sole ownership or to force wide ownership. In 2001, a new size-based ownership regime was implemented. Under the new regime, the equity threshold above which a bank is required to be widely held was set at $5 billion to capture the largest banks whose potential failure would have the greatest impact on the Canadian financial system and the economy.

Medium-sized banks with equity between $1 billion and $5 billion can be closely held, but are subject to a 35% public float requirement, unless a ministerial exemption is obtained. The threshold for small banks, which can be wholly owned by a single shareholder, was set at $1 billion to encourage new entrants.

Bill C-37 would therefore change the equity thresholds in order to account for the new reality of the considerable growth in the banking industry since 2001. The equity threshold allowing sole ownership would be raised to $2 billion, or doubled.

Banks whose equity varies between $2 billion and $8 billion must henceforth have a minimum of 35% of their voting shares listed on the stock market. Banks whose equity is greater than $8 billion must be widely held, which means that no single shareholder can hold more than 50% of the voting shares.

The last measure in this section involves increasing the limit, which is currently one third, on the number of foreign members permitted on the board of directors of Canadian banks. As announced in the Advantage Canada plan—which, I would remind the House, says almost nothing about the fiscal imbalance, but that is not the topic of my speech here today—Bill C-37 amends the Bank Act by proposing a new measure that would make the boards of directors of Canadian banks subject to a new Canadian quota.

At present, a minimum of two thirds of board members of Canadian banks must be Canadian residents. However, Bill C-37 would lower that threshold to a simple majority.

To justify this measure, the Conservatives argue that this new standard will foster the creation of international ties and open the Canadian banking sector to the rest of the world. Following the moratorium on all bank mergers in Canada, Canadian banks soon began acquiring foreign banks in order to increase their growth. Thus, a greater foreign presence on their boards of directors would allow Canadian banks to continue in that direction.

In closing, the Standing Committee on Finance still has a great deal of work to do on this. The Bloc Québécois will help with this work. For now, we support this bill in principle.

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

Mr. Speaker, I am pleased to address the House on the subject of Bill C-37, which we are debating today.

Every time it has to decide whether to support a bill or not, the Bloc Québécois considers its value for Quebeckers. If the bill offers real benefits for them, the Bloc Québécois supports it; if not, it does not.

We have examined Bill C-37 closely and, after weighing the pros and the cons, we have concluded that we support the principle underlying the bill.

What factors did we take into consideration in our analysis? There are several. First, the bill would implement mechanisms to transmit information to consumers, which would enable them to make more informed choices about banking services. Second, the bill would implement a regulatory framework to permit electronic cheque processing, which would reduce the time during which institutions hold cheques, thereby addressing an issue our citizens have often raised. I will come back to this later on.

Third, this bill would reduce the regulatory burden on foreign banks, credit unions and insurance companies, thereby making the regulatory approval régime more efficient.

We have also found a fourth advantage: Bill C-37 would change regulations governing mortgage loans, thereby enabling more people to take advantage of that financial tool. That is very good.

Last, the government would increase the equity threshold from $1 billion to $2 billion, thereby making it possible for a single shareholder to wholly own a bank, thus encouraging new entrants and promoting competition.

The Bloc Québécois supports the bill in principle, but we have some reservations. As members of the Standing Committee on Finance, my colleague from Joliette and I will work to ensure a number of things.

We will begin by ensuring that the regulations are changed, and we will make certain that those changes do not allow the kind of uncontrolled mergers and acquisitions we have seen before in the banking sector.

We will continue to insist that any change to the moratorium on bank mergers be in the best interests of the public, and not made just to satisfy the financial market. To that end, the Bloc Québécois will be ensuring that the Standing Committee on Finance will hear the appropriate witnesses. We will also be proposing the amendments that are needed for this bill to pass.

The Bloc Québécois will also be stepping up the pressure on the federal government to adopt the necessary measures to protect people’s savings, in particular by appointing a federal ombudsman for the financial sector. The ombudsman will have the powers needed to defend the public based on Canadian banking law and thus enable members of the Canadian public to exercise their rights without having to go through the endless and tedious legal battles that the banking institutions wage. We therefore believe that this is a flaw that must be remedied, and we will be working to persuade the federal government to create such an ombudsman position.

That is our stand on the bill that is before us. Nonetheless, it might be worthwhile to consider the context here and recall why we are dealing with this bill today.

Every five years, to ensure that the banking system has a degree of flexibility while remaining stable, the government must hold consultations leading to the review of the financial institutions statutes.

October 24 was the date on which the financial institutions legislation expired. The government extended the sunset date for the legislation to April 24, 2007, so that Parliament could examine the matter.

Bill C-37 follows on the document entitled “Proposals for an Effective and Efficient Financial Services Framework”, released in June 2006, and the document entitled “Advantage Canada” published by the government at the time of the latest economic and fiscal update. Unfortunately, that document says nothing about the fiscal imbalance. We understand, of course, that this is not the topic of debate today, but I find it hard not to mention this serious omission in the economic update.

The object of Bill C-37 is to put in place new mechanisms to improve the efficiency of the Canadian financial system. There are three main components to this bill. The objectives of those components are, first, enhancing the interests of consumers; second, increasing legislative and regulatory efficiency; and third, adapting this regulatory framework to new developments.

I would now like to analyze the bill in more detail. Of course, I will come back to the three components I have listed.

The first component is enhancing the interests of consumers. This bill provides for a set of measures, the first of which is to improve the rules for disclosing information to consumers.

In order to allow consumers to make informed choices among their investment vehicles, the government will raise the standards concerning disclosure of charges, obligations and penalties relating to different accounts and investment vehicles. That is important because people often make that comment to us, as well as people with savings who are making choices. Later, when they realize the consequences, the charges and the penalties associated with their choice, they are often angry and feel that they have been betrayed by their financial institution. In fact, they were not in a position to have the full details of the information that would have allowed them to make proper choices.

The government will require those institutions to clearly disclose that information by means of the Internet, in all their branches, and in writing for any person who makes that request.

In the same vein, there is a second measure. This one will change the regulatory framework to enable the introduction of electronic imaging in the processing of cheques.

This bill will establish a regulatory framework to enable the introduction of electronic cheque imaging to facilitate processing and reduce the hold time in banking institutions.

That is a good example—I mentioned it previously—of the necessary evolution of the Banking Act. It is understandable that with the development of new technologies, the regulatory framework must also evolve to enable the use of digital imaging in processing cheques. We will have a legal financial framework for that, thanks to this bill.

Another measure involves the reduction of the time that banking institutions can hold a cheque. Following publication of the 2006 financial institutions legislative review, the government made a commitment to reduce cheque hold times to make life easier for small businesses and other Canadians.

Bill C-37 gives the superintendent the power to set cheque hold times. 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.

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.

In addition, the government wants all users of the payments system—including, obviously, 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.

In my opinion, this need for faster processing of cheques may be seen quite concretely in the explosion of small businesses that cash cheques quickly and that are proliferating throughout our towns and villages. This clearly shows that there is a need and that people want to use the money available to them quickly, but that they cannot do so in the standard banking institutions, because their money is held for several days.

Probably everyone has already experienced something like this. It has happened to me personally to make a withdrawal and for it to be drawn on my line of credit instead of on my regular account, even though the money was in my account. The money was simply being held while waiting for the necessary checks to be made. It is a bit frustrating when we pay interest on funds that are already in our bank account. This is a real problem and if these delays can be reduced, it will be to the great advantage of consumers. So I was talking about the first objective, pertaining to consumers.

The second objective is to increase legislative efficiency. In this section, a first measure consists of lightening the regulatory burden on foreign banks so as to facilitate their access to the Canadian market and stimulate competition. This measure arises from the concerns expressed during the consultations pertaining to the review of the Financial Institutions Act. The Canadian market is already fairly open to foreign competition in the banking field. But certain problems were raised concerning the regulations governing foreign banks doing business in the Canadian market.

Bill C-37 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 streamline the regulatory approval regime. This measure is designed to simplify the process pertaining to routine transactions not having any implication for public policies. Thus the power to approve or refuse certain operations or transactions will be transferred from the minister to the Superintendent of Financial Institutions.

The Bloc Québécois is really concerned about this and it is a part of the bill that will need further study in committee to ensure that only decisions that have no public policy implications are put in the hands of the superintendent. In other words, we will not agree to any hint that the minister is allowing operations with public policy implications to be de-politicized.

The purpose of the third measure is to loosen the federal framework governing cooperative credit associations. In order to make it easier for new associations to emerge, the government will reduce the number of establishments needed to constitute a cooperative credit association to two.

At the present time, 10 cooperative credit associations are needed to form an association under the terms of the Cooperative Credit Associations Act. However, in light of the new commercial possibilities offered by retail associations and the continued consolidation in the credit union system, the current requirement places too high a threshold for new entry. A lower requirement would add flexibility to the federal framework for the credit union system, improve the system’s capacity to adapt to new developments and enable it to better serve consumers and mall businesses.

That was in regard to the second aspect.

There are a number of measures as well in the third aspect. The first consists of increasing from 75% to 80% the loan-to-value ratio for which insurance is mandatory on residential mortgages.

Mandatory insurance on mortgages with high loan-to-value ratios was instituted more than 30 years ago—quite a while ago—as a precautionary measure to ensure that lenders were protected against fluctuations in property values and possible defaults by borrowers.

The threshold was originally set at 66.7% or a two-thirds ratio. It was then increased to three-quarters or 75% following the Porter Commission in 1966. Markets have obviously continued to evolve ever since and we know, first, that lenders’ risk-management practices have improved considerably and second, regulatory risk-based capital requirements have been implemented. Financial markets have evolved and stabilized, and the supervisory framework for financial institutions under federal government regulation has been strengthened considerably.

It seems that restriction no longer plays the same prudential role it once did and, accordingly, a legal requirement by which borrowers must contract mortgage insurance at a fixed loan-to-value ratio of 75% could mean that some consumers are paying more for their mortgage than is justifiable on a prudential basis.

I know that because this summer I bought a house in Verdun—which is one of the most beautiful places in Quebec, and even Canada, as everyone knows.

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

Oh, my colleague from the Liberals asks if that is not terrible, in a mocking way.

No one is saying that it is terrible to make a profit. We are talking about whether or not those profits are then used to serve Canadians. Surely the Liberals have some interest, finally, in serving Canadians. Did they not get a lesson at the polls? Did they not realize from the spanking they got that in fact it was time to start listening to Canadians and stop ignoring the everyday needs of Canadians right across this country?

I do not expect much from them. I have tried in the House on numerous occasions to get the former parliamentary secretary for finance to listen to these concerns so that he might get through to the former minister of finance, but it was impossible. We tried on numerous occasions to get the former government to actually address the concerns of enormous profits in the face of absolute negligence at the community level, but to no avail.

We are starting fresh. We are hoping that the Conservatives understand this issue. I am not going to give up just because the Conservatives and the Liberals so often seem like two peas in a pod. I am not going to give up, because there is too much at stake. What is at stake, in fact, are the health and well-being of communities that desperately need access to financial services.

My colleagues on the Liberal benches seem take some glee in the profits that banks make. The Royal Bank's total profits for this year are over $4 billion, as I understand it. The question we are asking is whether there is any way we can keep some of those profits in this country.

Why does so much of those bank profits go off to tax havens in the Barbados where banks do not have to pay any taxes on them? We have just dealt with that debate. Why are some of those profits not put back into the communities that were loyal to the banks over the years, instead of the banks up and abandoning communities?

I do not know if the members in the House who are smiling and laughing during this debate have any understanding of what it is like when an entire community loses every one of its banks, of what it is like to see 10 bank branches close in the space of a decade. I am not talking about just one riding, I am sure, but I can sure talk from personal experience, from the point of view of people in Winnipeg North, a community of older, inner city neighbourhoods.

I am talking about a huge area, if anybody knows Winnipeg, from the tracks to Inkster Boulevard in the north end and from Red River to McPhillips Street. If people know Winnipeg at all, they will understand that I am talking about a large, populated area, which has many small businesses, many families that are not wealthy, and many seniors who are not wealthy, who do not have cars to drive to the suburbs, who may find it difficult to access buses, and who do not have computers in their tiny apartments. Some of the people in my constituency do not even have phones, so access to a bank branch is a rather important necessity. It is a bread and butter issue that is part of one's day to day living and working experience.

We have seen communities like Winnipeg's north end deserted by banks. I want to see that addressed in this bill. I want the government to care about that situation. I would like to see some attention given to this matter.

This is the opportunity.

Back in 2000, when we agreed on the bill that set in motion the five year review with the opportunity to make changes as necessary, we put in place in that legislation, and we agreed with it, the Financial Consumer Agency of Canada, its purpose that of overseeing financial operations from the point of view of consumers, protecting consumer interests and speaking up when necessary. It was a place for consumers to take their concerns and have them addressed and it had some powers to oversee bank decisions in terms of branch establishments and closures.

We discovered through this whole process of bank closures that in fact the bill we supported back then did not have enough teeth in it to ensure that the Financial Consumer Agency of Canada could actually hold a stick over big banks to make sure they were following some due democratic process in terms of communities they were serving. Those communities were loyal to them for decades, sometimes for over 100 years, before the banks up and abandoned entire communities. When the last bank branch turned off its lights and closed its doors in this particular area of my riding, Winnipeg's north end, the community had to do something.

I want to say that one big bank left a branch at the edge of that geographic area I described, and that is the Bank of Nova Scotia. We continue to work with that bank to make sure there is a good liaison between the bank and the people so that in fact that relationship stands us in good stead and that no corporate decision from Toronto will lead to the closure of that bank branch as well.

For this huge area, there are no banks. There are no branches. When faced with that alternative, the community did the right thing. The people of community stood up and said, “If the banks are not loyal to us, then we will not be loyal to them, and we will take things into our own hands”. Thank goodness for that kind of determination, perseverance and community spirit, because over the last several years that spirit, that perseverance and that determination have allowed for the establishment of an alternative community financial services centre.

That development occurred just a few weeks ago and officially opened on November 16, and in fact it is one way in which our community has been able to overcome this kind of neglect and abandonment by the big banks. I am here today first of all to give kudos to people in my community who made this happen and to actually acknowledge the fact that it did not happen because of some decision from government. It did not happen because of largesse from either government or the business community. It happened because local community members decided to fight back. They fought back until they got something, not everything, but something that will take the place of all those banks.

I want to acknowledge all of those people who fought so long and hard to get this centre, which is something that needs to be said in the context of this review of the Bank Act. It happened because of people like Jerry Buckland from the Winnipeg Inner-City Research Alliance. It happened because of his work and his studies, repeating the information over and over again and producing studies, including “The Rise of Fringe Financial Services in Winnipeg's North End”, “Fringe Banking in Winnipeg's North End”, and “There Are No Banks Here: Financial & Insurance Exclusion in Winnipeg's North End”.

Those studies clearly show that as the banks left, payday lenders moved in, and people were left at the whim of an unregulated sector. Fortunately, I believe and I hope, the government is moving on the legislation to actually close the loophole with respect to payday lenders and fringe financial services, but the point needs to be made that in fact there are still so few alternatives for people who have been left high and dry by our financial institutions.

It is important to recognize the work of a community like my own when it fights back and wins, so I want to acknowledge the work of Jerry Buckland, who helped produce all these studies, along with Nancy Barbour, who has since passed away and to whom we owe an enormous debt of gratitude.

We had hoped that in this legislation today there would be some amendments to put some teeth into the agency that is there overseeing consumers' interests. That does not appear to be in this package.

We had hoped that somehow the government would have realized the importance of emulating an initiative in the United States. We often point to initiatives from across the border, but in this case it is one that we should look at and consider seriously, and that is a community reinvestment act that requires big banks that choose to leave a community to put money made from that community back into that community to help with economic and social development.

That is an innovative proposition that needs to be seriously considered in this country. We need to ensure that there is some way to give back to the community that which has been taken out of it through long time loyalty to banks and the contribution to the kind of enormous profits we are seeing today.

Study after study has talked about consumers' interests in this regard. I want to reference a speech by Murray Cooke, who is with the Centre for Social Justice. He writes:

In terms of finance, we need to ensure that not only business has access to capital, but we need to ensure that all Canadians, including those living in rural and small town communities, including disadvantaged groups no matter where they live, have reasonable access to finance and basic financial services. While this is an issue of social justice, I think you could appreciate that there are also wider economic benefits involved in allowing and encouraging everyone to be economically active rather than economically marginalized.

On that note, it is important to point out, again, the impact of the government's decisions in closing Status of Women offices and shutting down programs that were helping in this regard. I refer specifically to a program entitled “Money & Women” , which was organized by the North End Women's Centre in Winnipeg in the heart of my constituency. It works on a daily basis with women to ensure they have the financial knowledge, information and expertise to handle their own banking, to access banking services and not to become dependent on payday lenders.

This is a valuable service that is no longer available because of the government's heartless cuts. This is a case of government money helping a community to help itself. It was a case of money going through a program and an organization to women directly to help them manage their finances and put themselves on a stronger financial footing.

How in the world can that be described as money for bureaucracy and money for administrative purposes? This is money that goes directly toward the benefit of women, and the government has totally denied women that opportunity. Shame on it for that kind of heartless, disgusting cutback that gets at the very soul of the community and the very heart of an individual's desire to play a meaningful role in society today.

People in my community and everywhere do not want to be a drain on society. They do not want to stay on social assistance if they do not have to. They do not want to be dependent on anyone. They want to be independent and they want to manage their own affairs. Surely the most important thing government can do is provide the resources to help people help themselves, to give them the tools through literacy, through bank projects, through volunteer initiatives that help people to help themselves.

I cannot think of a single reason, from the civil society point of view or any perspective from a civilized society, why the government would take that program away. I cannot understand why the government wants to resort to the law of the jungle and the survival of the fittest. I thought it was against people staying on welfare and being dependent on the state. I thought government was about giving people the tools they needed to help themselves. Yet it is taking away the very things people need in order to participate fully in our economy so they can get a job, pay taxes and contribute to this country. It is beyond any kind of understanding and comprehension.

Let me get back to the Bank Act. Another fundamental issue for people around the Bank Act has to do with disclosure. It has to do with access to information and accountability and transparency. I know the bill touches on this issue of trying to deal with some of the numerous briefs that were presented during the development of the white paper.

Bill C-37 falls far short of what is needed. It by no means addresses the real concerns of Canadians. Let us remember, we are talking about a very complex world that provides to citizens a dizzying array of products, choices and services, yet we are doing nothing to ensure that people get the full information they need.

Some very important suggestions were made on that front. I think about the role of Democracy Watch. I think about the role of the consumer advocacy groups and others that have tried to get the now government, and the one before it, to consider the idea of citizen participation, citizen boards as a vehicle for ensuring the proper flow of information between big financial institutions and consumer groups and individuals so people would be fully aware of what was happening and would have some say when there were those possibilities for decision making.

Bill C-37 fails Canadians on some key issues. We need to stop and reflect on what is missing in the bill, what Canadians heard during the process and how we can make a better bill.

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

Mr. Speaker, this is an interesting debate for Canadians. This is a very major policy area that requires thoughtful deliberation and thorough debate.

I want to start by saying that we on our side of the House have no intention of speeding up the process around deliberations on this bill. Bill C-37 is a momentous moment for us, so to speak. This is the culmination of a review of our financial institutions that happens every five years. This is the moment when we actually reflect on how we are doing in terms of the Bank Act, what problems are outstanding and where we can still make a difference.

This is not a routine matter. This is not a quick overview and a resolution of a few outstanding issues. This is the time when we consider what is going on in the banking world and how we fix it. How do we change it? How do we make it better from the point of view of Canadians?

We are here today to talk about Canadians and whether or not they are served well by the Bank Act, whether they are served well by financial institutions, and let me tell members that coming from a community that has seen most of its banks up and leave in the space of less than 10 years, I can say that Canadians are not served well.

We look to this process and this legislative review opportunity to make changes that are necessary, so the first thing I want to do today is take some time to go over some of the situations my colleagues and I have experienced and that need to be addressed. I will say at the outset that while the issues in the bill may be necessary and while we may support them, my question is, just as it was for the last bill, where is the rest of it?

Where are the issues that Canadians have brought to the table? Where are the solutions to the problems that Canadians have identified? Why are we in slow motion in terms of an area that is so fundamental to the life of communities everywhere and to the health and well-being of Canadians?

This debate is not meant to be a boring, staid sort of dry discussion over technical details. This debate should be about whether or not the bill reaches out to deal with problems that Canadians have raised with the government and whether or not the government, once and for all, in fact is prepared to deal with some very serious situations.

We are at a moment when Canadians are feeling that their needs and concerns do not matter one bit and that all this government, like the past government, wants to do is defend the big banks, the big financial institutions and their profits.

Speaking of profits, let us look at the final quarter bank profits this year. Let us look at the fact that, by all accounts, on average we are dealing with record level profits for all major banks. Looking at some of the statistics, I see that for the Royal Bank in the last quarter profits were up by $1.4 billion, I believe.

[Pierre Paquette, Bloc, Joliette, QC]

I am very pleased to participate in this debate. It might seem very technical, but it is extremely important, especially for consumers and all of our fellow citizens. We do business with financial institutions every day, especially with banks and near banks. Although these are private enterprises, they are for all intents and purposes public services.

Bill C-37 introduces certain changes to the banking system while ensuring its stability. The government is required to undertake consultations every five years to update legislation governing financial institutions. October 24 was the deadline for consultations on legislation governing financial institutions, but the government extended the application of these laws to next April 24 to enable Parliament to study the issue more thoroughly.

Bill C-37 follows the June 2006 publication of a document entitled 2006 Financial Institutions Legislation Review: Proposals for an Effective and Efficient Financial Services Framework, as well as Advantage Canada, which was recently published by the government during the economic and fiscal update. A lot of work went into drafting this legislation. Bill C-37 would implement new mechanisms to make Canada's financial system more efficient. This bill is aimed at achieving three key objectives. As I said earlier in my question to the minister, those objectives are to enhance the interests of consumers, increase legislative and regulatory efficiency, and adapt the regulatory framework to new developments. This is a sector that has seen a lot of technological, financial and service development over the past few decades.

On the whole, we are quite happy with this bill, because it meets a real need. Obviously, a number of things will need to be discussed in committee, and I will talk about those in my speech. We will therefore vote in favour of Bill C-37 at second reading, but we reserve the right to improve the bill, with the help of the other parties in this House, so that it better meets its objectives, which the Minister of Finance outlined earlier.

I spoke earlier of three key objectives. The first is to enhance the interests of consumers. This includes three main elements. The first consists in improving the system of disclosing information to consumers; the second consists in amending the regulatory framework to provide for the introduction of electronic cheque imaging; the third consists in reducing the hold period on cheques.

The first element of this first objective consists in improving the disclosure regime. As the minister has said, the intent is to help consumers make informed decisions about investment vehicles by providing them with more specific, more extensive, more easily accessible information. The government is therefore proposing higher standards for disclosure of charges and penalties that apply to various accounts and investment vehicles. It will also require institutions to clearly disclose this information on the Internet. Today, many Canadians use the Internet for their financial and banking transactions, paying bills and looking for information. Of course, not every household has Internet access yet, so this information will be available not only online, but also in all branches. That way, anyone who needs information will have access to it.

The second element of this first key objective of enhancing the interests of consumers is amending the regulatory framework to provide for the introduction of electronic cheque imaging.

Bill C-37 will establish a legislative framework for electronic imaging in order to facilitate cheque processing by financial institutions and to reduce the hold period on cheques. I believe that the technological developments to which I referred earlier, particularly in the area of financial management, make it possible to use this new tool.

The third element in the first key objective of enhancing the interests of consumers also results in shorter hold periods by financial institutions on cheques.

As we know, following the publication of the 2006 Financial Institutions Legislation Review, the government undertook to reduce hold periods on cheques in order to make life easier for everyone, particularly SMEs and the public.

A hold on a cheque makes our life very difficult. When we receive a cheque, we deposit it and have bills to pay or debt payments to make. We realize that our money or our assets are on hold. They are frozen, in today's language, by the bank for 10 days, even in the case of cheques from major companies or the government. The solvency of the issuer of the cheque is not in question. To manage risk and security, a hold is placed on these cheques for 10 days.

With Bill C-37, the Superintendent will have the authority to establish the hold period on cheques. In the white paper, it is recommended that the hold period be reduced to a maximum of seven days, and then five days once electronic cheque imaging, about which I spoke earlier, is implemented.

Cheque holds not only affect consumers who need to access funds to pay their bills and make debt payments or simply to do their everyday shopping, they also affect small and medium-sized businesses that do not always have a large cash flow margin. They need that cash flow to pay their suppliers and employees and to operate their businesses from day to day. They often do this out of the funds they deposit into their bank accounts from day to day.

I think that this is something that everyone will be pleased to see. As I said earlier, the 10-day maximum hold period for funds deposited is a source of irritation to virtually everyone.

As well, the government would like to ensure that the efficiencies that will be gained through the Canada Payments Association initiative to change the payments system to facilitate electronic cheque imaging will be shared by all users of the payments system, including consumers.

We certainly cannot object to this first objective and the corresponding elements, but in our view it does not go far enough.

I am sure that some of my colleagues in all parties in this House regularly receive letters from consumers these days, as I do, saying that they have been victimized by the practices of banking institutions, and in particular the big banks, and who feel that they simply have no recourse. Starting a legal battle against a financial institution that is a billionaire several times over is something that most of our fellow citizens cannot do. We need to find solutions for this problem so that consumers have some assistance in seeking remedies against financial institutions.

A few minutes ago I proposed that an ombudsman be appointed who would have more power so that he or she could take on a case and go to bat in court for consumers who have been harmed—or who think they have been harmed—by banking practices, so that consumers would not have to use their own funds to defend themselves.

I think that we need to consider, in committee, how we can achieve the ultimate goal of giving consumers more power in their dealings with financial institutions, in terms of compliance with banking legislation but also their rights as consumers.

I would add that the minister’s answer was not what I was looking for. Helping consumers to make informed choices involves more than just handing out more information.

Financial institutions are more familiar with the ins and outs of the financial system and the money market than consumers are. That is in fact why we have given consumers specific rights, to protect them, because the seller always has more information about what it is selling than the buyer does.

I think that the committee will have a lot of work to do in this regard. As I said earlier, we will be voting for the bill on second reading precisely so that we will be able to do that job. In recent days, I have assured some of my fellow citizens that the Bloc Québécois is eager to do this.

The second objective deals with increasing legislative efficiency. Obviously, this is a motherhood issue. There are three key elements. The first involves reducing the regulatory burden placed on foreign banks to facilitate their entry into the Canadian market and stimulate competition; the second is to streamline the by-law approval process; and the third is to refine the federal legislative framework for credit unions.

The reason I am interested in the first element of this second objective, increasing legislative efficiency, is that this measure, which will reduce the regulatory burden, is a response to the concerns expressed during consultations on the review of the Financial Institutions Act.

The Canadian market, as we know, is extremely concentrated and dominated by five major banks. Any legislation that aims to promote competition is desirable, in our opinion.

I know that, in the past, laws have been passed to promote competition, but we have to acknowledge that they have not produced many results up to now.

Moreover this is what caused the Standing Committee on Finance—I do not recall exactly in which month—in its report on bank mergers in 2004, to be extremely reluctant to lift the moratorium on bank mergers. A market that is already concentrated, with a merger of two large banks from among the five largest, would end up being even more concentrated. And when you have concentration, you have an oligopoly, and an oligopoly means that consumers are extremely short-changed.

This is the present situation in the Canadian banking system. I could give my region as an example. In the Joliette region, there are relatively few banks, so we are more or less at the mercy of those that are there. We do not have an unlimited choice.

Therefore a measure that would promote the introduction of foreign banks into the Canadian market is welcome. In that regard, as I mentioned, Bill C-37 would 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.

I do not need to define near banks but for the benefit of our audience, I will say that they are companies that offer financial services of a banking nature. 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 loans.

So this is an interesting measure. We will get a better idea, as the committee studies the bill, of the scope of these measures designed to increase competition in the Canadian market. As I said, previous legislation did not produce many results.

The second element is the streamlining of the regulatory approval régime. This measure is designed to simplify the process pertaining to routine transactions not having any effect on public policies. So Bill C-37 wants to transfer the power to approve or refuse certain operations or transactions from the minister to the Superintendent of Financial Institutions.

This is one aspect of the bill we would like to address in committee and study in depth because we have to ensure that only decisions that do not impact public policy, as provided for in the legislation, are in the hands of the superintendent. From that perspective, the criteria and characteristics will be extremely important. How do we define a transaction or an operation that has no affect on public operations?

The Bloc Québécois will not allow the minister to depoliticize operations that will have an impact on public policy. Those have to stay in his hands and also be subject to a democratic debate.

The third aspect has to do with relaxing the federal framework governing credit unions. This is a request that has been made a number of times by the Standing Committee on Finance. 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.

However, in light of the new commercial possibilities offered by retail associations and the continued consolidation in the credit union system, the current requirement places too high a threshold for new entry. A lower requirement would add flexibility to the federal framework for the credit union system, improve the system’s capacity to adapt to new developments and enable it to better serve consumers and SMEs. As I was saying earlier, the major banks are in the process of leaving several regions in Quebec and Canada and, generally speaking, credit unions are picking up the slack. In Quebec, we are well served, but this is not the case in all the Canadian provinces.

The last objective includes all the other measures—and there are three. The first is to increase from 75% to 80% the loan-to-value ratio for which insurance is mandatory on residential mortgages. The second is to readjust the equity threshold above which a bank is required to be widely held and below which it can be more closely held. The third consists in increasing the limit, from one third to a minority, on the number of foreign members of the boards of directors of Canadian banks.

I will quickly outline what these measures entail and what the Bloc Québécois thinks of them. We agree with the first measure, which consists in raising the loan-to-value ratio requiring mortgage insurance from 75% to 80% for residential mortgages. The mortgage market has changed dramatically and is now much better known. Mandatory insurance for high loan-to-value ratio mortgages was introduced over 30 years ago as a prudential measure to ensure that lenders are protected against fluctuations in property values and associated defaults by borrowers. The last time the threshold was increased was following the Porter Commission in 1965, when it was raised from 66.7% to 75%. The market place has changed since then. The risk management practices of lenders have improved significantly. Regulatory risk-based capital requirements have been implemented. Capital markets have changed and matured. The supervisory framework for federally regulated financial institutions has been strengthened significantly

The restriction may therefore no longer serve the same prudential purpose. As a result, a statutory requirement for insurance set at 75% loan to value ratio may mean that certain consumers are paying more for their mortgage than is justifiable on a prudential basis. It is also preventing some Canadians from owning their own homes, whereas they could afford to own a home if the ratio were increased to 80%.

The second measure adjusts the equity thresholds that allow banks to be wholly owned or force them to be widely held. In 2001, a new sized-based ownership regime was implemented. Under the new regime, the equity threshold above which a bank is required to be widely held—I will come back to this definition—was set at $5 billion to capture the largest banks whose potential failure would have the greatest impact on the financial system and the economy. This was another fear that the Standing Committee on Finance had expressed in its report on bank mergers.

If a major bank were to go bankrupt in Canada, in such a highly concentrated market, how would the Canadian economy be affected? To ask the question is to answer it. The result would be disastrous. We therefore have to make sure that these banks are on extremely solid financial ground.

Under the 2001 regime, medium-sized banks with equity between $1 billion and $5 billion can be closely held, but are subject to a 35 per cent public float requirement (unless a ministerial exemption is obtained). Thus, there is at least some distribution of assets. This ensures that, if one of the shareholders is having difficulties, the financial institution itself can overcome the difficulties. Furthermore, the threshold for small banks, which can be wholly owned by a single shareholder, was set at $1 billion to encourage new entrants.

The intent of Bill C-37 is to change the equity thresholds in order to adjust to the new reality of the considerable growth in the banking industry since 2001. Thus, the equity threshold for sole ownership, that is, a single shareholder, would be raised to $2 billion. Furthermore, banks whose equity varies between $2 billion and $8 billion, rather than between $1 billion and $5 billion, must henceforth have a minimum of 35% of their voting shares listed on the stock exchange. Lastly, banks whose equity is greater than $8 billion, rather than $5 billion, as in 2001, must be widely held. Of course, this is nothing new to anyone here, but once again, for our viewers, a widely held company means that no one shareholder can hold more than 50% of the voting shares.

Finally, to account for the reality that Canadian banks are purchasing more and more foreign banks, the minority would be increased, which means that the voting majority on the board of directors must be Canadian citizens, not necessarily by birth or nationality, but Canadian citizens, nonetheless.