Bill S-5 (Historical)

Financial System Review Act

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 reinforcing stability and fine-tuning the consumer-protection framework; and
(b) 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 Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Winding-up and Restructuring Act, the Office of the Superintendent of Financial Institutions Act, the Payment Clearing and Settlement Act and the Financial Consumer Agency of Canada Act.

Financial System Review Act

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, as a former trustee of employee benefit plans, I concur that employee benefit funds and union pension plans are one of the largest single investors out there. In fact, over 50% of all of the trading that goes on at the New York Stock Exchange, and, in fact, the TSX, are employee benefit plans and union pension funds being moved around; the buying, selling and representing the beneficiaries of those plans.

One of the biggest things that has backfired in the Conservatives' zeal to keep lowering corporate taxes is that it has become obvious that businesses and corporations that are the beneficiaries of these lower taxes, such as the banks and the oil companies, are not reinvesting the money and are not paying it out as dividends to their shareholders. They are hoarding the money and stockpiling it. It is like Scrooge McDuck rolling around in his bank vault with all of his coins and dollar bills. They seem to be basking in all this dough.

The logic has not really played out. I understand their reasoning that if we allow businesses to make more profits they will reinvest and create more jobs. However, they have not been doing that. Their own analysts have been telling them that. The minister himself has expressed his frustration. They are not putting that money into circulation. It is not having the desired effect and, therefore, is a bit convoluted. It is Conservative pretzel logic that keeps this blind fundamentalist orthodoxy that lower taxes will trickle down to the average consumer. If anything, the companies that need help are not getting it because they are not paying taxes anyway if they are in dire straits.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Madam Speaker, I always appreciate the interventions by my colleague from Winnipeg. I also appreciate the history lesson. I do not disagree with the fact that maybe John Manley and Paul Martin were leaning toward a merger at the time. That had been discussed. I know we had an admission from my colleague, a former economist himself and a supporter of deregulation at the time, who saw the light.

However, I thought maybe Jean Chrétien and the 161 Liberals who were in the House at the time had something to do with that. I did not realize that the NDP had punched so far over its weight with the 19 members that it had, so I appreciate the history lesson from my colleague.

After the current government took power, it came forward with two changes, one being the extension of mortgages to 40 years and the other being the zero down payment, both of which led to the devastation of the banking industry in the United States. This was the road that the government began to take this country down.

With the implosion of the economy in the United States, does the member believe that maybe this was the first indicator? Those guys were sort of bailed out by the implosion that took place south of the border and perhaps, with further endeavours by the government, we would be in a similar situation as the United States now had the time period they had at the controls been a little bit longer. I ask my colleague for his comments on that.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, as I understand the question of the member for Cape Breton—Canso, I, too, remember the early days of 2008 when the current Minister of Finance was in complete denial that there were any clouds on the horizon. In fact, he was predicting surplus budgets. It was such a head-in-the-sand attitude that it led the opposition parties to come together and form the coalition that almost led to the defeat of that government. It was an irresponsible, reckless attitude.

It is galling to me to hear the endless praise heaped on the Minister of Finance. I do not recognize him as any kind of sorcerer. If anything, I see him as a road-weary magician pulling sedated bunnies out of a tattered top hat and thinking that he is impressing Canadians, when he is not.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Madam Speaker, the House leader earlier today said that this bill had to be passed before April. I seem to remember at the beginning of the session that the first priority of the Prime Minister was to appoint his buddies to the Senate: Fabian Manning, Josée Verner and Larry Smith. Rather than telling the Senate that we needed to pass this important banking legislation, he was putting his buddies into the Senate.

How long does he wait until he finally lights up and says this is important? It was November when he said that we needed to get this through the House. There are important things in this legislation that we have to look at, like tax evasion. Our country loses millions, maybe billions, per year by people who put their money in offshore paradis fiscaux, as we say in French. They are places where people can evade their taxes. This bill starts to address these things, but we have more questions, such as what the enforcement will be like.

We can see that the priority of the government was to put its buddies in places of importance rather than pass important legislation. Now we are stuck with not being allowed to debate. There are 300 ridings in the country. Each MP was elected to speak for his or her constituents. Unfortunately, due to the lack of planning of the government, we are not able to do so.

Would my hon. colleague elaborate on this point?

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I thank my colleague for raising an important aspect of our financial institutions review that will not get the attention it deserves. That is something chartered accountants call tax-motivated expatriation. New Democrats call it a sleazy, tax-cheating loophole when people can put their money offshore so it is out of reach of the taxman. The former prime minister, unfortunately, was the undisputed champion of this when he closed down 11 tax havens with which we had tax treaties. He left one significant one, where the prime minister of the day happened to have 13 shell companies.

There has been an appalling lack of due diligence. We leave money on the table that should rightfully be paid in taxes. It is estimated that as much as $7 billion a year slip through the fingers of Revenue Canada due to these tax-motivated expatriations. Plugging these loopholes should be the simplest first thing that any minister of finance would do when trying to balance the budget. Yet when New Democrats introduced a bill to that effect, we were not allowed to introduce it in the House because, apparently, it would have the effect of increasing a person's taxes. Plugging a tax loophole Conservatives equates to increasing a tax and the bill was thrown out as being deemed non-votable for that reason.

There is a lot of work to do and we are not going to get it done because Conservatives keep ramming through legislation using closure. It is undemocratic and wrong. We should condemn them in the strongest possible terms.

[Deepak Obhrai, Conservative, Parliamentary Secretary to the Minister of Foreign Affairs]

Madam Speaker, it is a great pleasure for me to speak to this bill, especially after my friend for Winnipeg Centre has just given an empty lecture. He is very well known for his flowery words. I was quite pleased to hear my friend from Cape Breton join him in trying to praise what they had been doing. However, if we really look at what has happened, it is no wonder they are a smaller party than before because those members were totally out of touch with Canadians. That is why they find themselves in that corner.

I will correct what the member for Winnipeg Centre has said. He has been using his flowery words and theatrics to say that the bill has come from the Senate and that it is not needed. He forgets why we are debating the bill. To be clear, it is because of the regulations and financial safeguards that the government introduced for the country's financial institutions that have allow them not to be affected as other global institutions have been. It was because of strong regulations.

We have a bill that looks at financial institutions. This bill is a common sense thing. That is what I want to say for the member for Winnipeg Centre who was debating the bill and talking about shareholders.

I will be sharing my time, Madam Speaker, with my colleague for Calgary Northeast

It is natural when we have an act that contains dynamic factors toward financial institutions, that we have a sunset clause so we can come back and review what has happened. Therefore, we would have the best institutions and be able to change to meet the demands of the day.

The previous member talked about being a shareholder. He should be doing very well if he is one. He wants to make money from his investments. Talking about making money and investing by the anti-trade and anti-business party called the NDP, Lorne Nystrom was a strong financial critic. I was in the opposition when he was here. Today he is a big businessman. I met him outside in the corridor and he is doing trade. By the way, we heard all about trade with China. Members can talk to him.

There was talk about going to Shanghai, doing business with China and profiting. This is something I would think should be alien to NDP members. However, when it is time to make money, those members are right there. As the member said, he went to a shareholder meeting of a bank. Then he stands in the House and calls them gougers and all kinds of names. He is as shameless as anyone else when it comes to making money. That he is a shareholder of a bank is even more surprising.

Coming back to the act, after every five years, it has to be reviewed. It has a five-year sunset clause. We can then put the latest changes and address what is happening in the economy for the benefit of Canadians.

I was listening to a member from Winnipeg talk about ATM fees. The ATMs are used by thousands and thousands of Canadians because it is a wise, cheap and convenient alternative to going to the bank tellers. That is why it is so popular. The member did not recognize that.

Coming back to this fact that this has been brought forward, it is because we are now coming to the end of the five year sunset clause. That is why we are debating it in the House. Whether it comes from the Senate or wherever it comes from, it is necessary and it is required by law for us to debate the bill. If we do not debate the bill and review the sunset clause, then the act would die and we would be unable to address the changes in the financial institutions. It is a requirement by law.

That is what we are talking about it, not about the NDP members crying about the Senate and everything else. Their argument is to abolish the Senate. It is a very great argument. I just love their argument. Why is there argument is wrong? Because they know under the Constitution it is not possible to do it. They know that very well. What is so great about a proposal which we know will never pass? That is the NDP, giving a proposal which will never pass.

If we look at other countries, Canada stands as a beacon of financial stability during the recession. We have heard about sub-prime mortgages and what has happened to the banks in America and in the European Union.

All the banks had to be saved, even the German banks, British banks and American banks. Did anything happen to the Canadian banks? No. Why? Not because of the party and not because it took credit, it is because we had sound financial regulations under which the Canadian banks worked. However, as things change, we want Canadian banks to going out and showing the Canadian strength, not what the member opposite calls about gouging and all these things.

If the Canadian banks are making profit in the world market, as the NDP's former finance critic is trying to do now with a business arrangement with China, what is wrong with that? As long as the Canadian banks are making money, they are paying their taxes and at the same time they are employing Canadians. That is a plus for Canada. There are jobs for Canadian. The NDP should understand that corporations make this happen.

We just heard from a member who talked about the teachers' pension plan and investments. Does the member think the teachers' pension plan will invest in a company that is losing? Absolutely not. How many pension plans of unions are invested in the banks, strong banks. We do not want weak banks in which to invest. Therefore, it is important that these financial institutions be accommodated.

The Liberal member mentioned 2008. The Liberals have their heads in the sand. In 2008 there was a recession. Did he not hear about the G20? It is a collective effort by the G20, which agreed to do the stimulus package so the world would not go into recession and that there would be jobs. Any time this government has presented anything, the opposition parties have opposed it. That is why the Liberal Party sitting at the corner.

At the end of the day, what happened? The Canadian economy withstood those shocks because of the sound financial input of this government.

The reduction of the GST, which was promised by the Liberals and has now been fulfilled by this government, gave extra money to companies to get across to consumers to spend money so the economy would move on, something the NDP members should learn and move on from the anti-trade and anti-business agenda so they can move forward.

We have an example with the 2008 recession. Where is Canada today, as it has been said by the Minister of Finance? I am really glad my friend from Winnipeg does not like the finance minister. If he did, I would be worried for the economy of Canada. It is his kind of business idea, so I am glad he made it very clear that he does not like the finance minister.

The Minister of Finance said that this government, since coming into power, and for my friend from Cape Breton—Canso, has created 600,000 full-time jobs for Canadians. Under your government, it would probably have been cutting transfers—

[The Deputy Speaker, Denise Savoie]

Order. The hon. member's time for debate has expired. I would remind him to address his comments to the Chair and not to members directly.

[Brian Masse, NDP, Windsor West, ON]

Madam Speaker, that was a rather surreal speech by the parliamentary secretary. I would like to return to some real facts that do matter to Canadians.

This is about fairness. That is the balance the Conservatives are missing with regard to their approach to the banking sector. We have seen an incredible increase in bonuses and salaries to CEOs of banking institutions. In 2009, the CEOs of the top five banks received salaries and bonuses of $8.3 billion. This is where Canadians are onside and understand there has to be a redirection of that balance.

I would ask the parliamentary secretary to address the issue of CEO compensation of $8.3 billion. In 2009, the bonuses increased by record amounts. How does that justify the increasing fees Canadians have to pay for services?

[Deepak Obhrai, Conservative, Calgary East, AB]

Madam Speaker, precisely what I want to tell everyone is the difference between that party and this party. Those members would like to interfere with the running of private corporations and put their own stamp on them.

Private corporations are accountable. The member should understand how a private corporation is run. As the member's friend from Winnipeg said, the CEOs are accountable to the shareholders as to how much compensation they receive. They are not accountable to the NDP. The shareholders put money into the banks. The NDP did not put any money into the banks. The shareholders are the owners of the banks. They will decide the amount of compensation for the CEOs.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Madam Speaker, my friend from Calgary is right with regard to the government seeing the global economic downturn coming in 2008, but the government saw it in the rear view mirror. It certainly did not see it out the windshield. While every economist was telling the Conservatives that it was coming, that it was inevitable, they did not see a problem. They said things were going to be wonderful. At that time the government had a surplus budget and a balanced budget, and we know what happened. Forgive Canadians if they do not have a great deal of confidence in the government's ability.

I will ask my colleague to use some foresight. What does my colleague see as the next big issue the government will fail to recognize?

[Deepak Obhrai, Conservative, Calgary East, AB]

Madam Speaker, let me say in very clear and certain terms that the Canadian public makes the decision because it affects them. Canadians responded in the last election to how we handled things in 2008. Canadians gave us a majority government and those members are sitting in the corner because Canadians did not trust them.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Madam Speaker, there has been a lot of revisionist history in the chamber this afternoon over which parties believe in a strong banking system in Canada, which parties want to nationalize the banking system, and which ones want to fully deregulate them.

Maybe the member could give us a bit more history and remind us which party stood up for a strong banking system in Canada.

[Deepak Obhrai, Conservative, Calgary East, AB]

Madam Speaker, it was the proud record of this government under the present Prime Minister. The Canadian people gave this government a majority for that.

[The Deputy Speaker, Denise Savoie]

Before I recognize the hon. member for Calgary Northeast, it is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Rimouski-Neigette—Témiscouata—Les Basques, Science and Technology; the hon. member for Alfred-Pellan, Pensions; the hon. member for Avalon, Government Loans.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Madam Speaker, I am pleased to have this opportunity to address Bill S-5, the financial system review act. I would like to take a moment to say a few words about how this bill came to be before the House.

This bill is the outcome of the mandatory five year review of the framework that governs federally regulated financial institutions, which began in September 2010. Such regular reviews help to ensure that Canada remains a global leader in financial sector stability.

I would also note that this bill needs to be passed and its supporting legislation renewed by April 20, 2012 to allow financial institutions to carry on with their business and provide the services that Canadians depend on.

I was pleased to hear in some previous speeches in the House that members opposite are willing to send the bill to committee for further study. I hope they will support swift passage of the bill.

I want this piece of legislation, as technical as it is, to be understood by ordinary Canadians so they know how it affects them in real terms. Key measures in the bill are aimed at protecting consumers of financial services, building on important consumer protection actions our Conservative government has taken in recent years.

I will briefly explain the rationale for these initiatives while providing a bit of context. Throughout our time in office, our Conservative government has aggressively focused on helping Canadian consumers identify and take advantage of the best possible financial products and services for their needs. For example, in the next phase of Canada's economic action plan, we will further strengthen Canada's financial system by moving forward on the recommendations of the Task Force on Financial Literacy and announcing the government's intention to appoint a financial literacy leader. We will be enhancing consumer protection by banning unsolicited credit card cheques and developing measures related to network branded prepaid cards. In doing so, we are making a strong system even stronger.

Canada has many advantages that have mitigated the impact of ongoing global economic turbulence. For instance, Canada has a prudent and well-regulated banking system, ensuring that our lenders demonstrate responsibility and restraint. The result is Canada did not suffer a single bank failure or need to bail out any of its financial institutions.

As the Toronto Star said, “Unlike in the United States and Europe, no banks collapsed or had to be rescued in Canada during this financial crisis”. On the contrary, Canada's financial system remains strong, based on effective risk management and supported by a very effective regulatory and supervisory framework.

Some of the remarks I have heard in the House in relation to Bill S-5 allege that Canada's fortunate position during the global financial crisis was in spite of our Conservative government's policies, not because of them. What they say is that as Conservatives we tend to shy away from regulations in favour of competitive markets when it comes to the financial sector. Let me be clear on a couple of points.

First, it is true that we tend to favour less government intervention where possible, but we keep a close eye to ensure the system remains strong, thanks to the work of the hard-working, world's best finance minister that we have.

Second, our Conservative government, under the leadership of the Prime Minister, recognized early on that prudent regulations and supervision were necessary in the financial sector. In fact, we witnessed that other nations had to massively intervene in their markets as a result of under-regulation, and effectively nationalized their financial institutions.

Let me be blunt. Canada has emerged from this financial crisis as the only true free market financial system in the world. Indeed, Canada's strong economic and fiscal fundamentals have been recognized internationally. Today our country has the world's soundest banking system, as ranked for the fourth year in a row by the World Economic Forum. In fact, our five Canadian financial institutions were recently named to Bloomberg's list of the world's strongest banks, more than any other country.

Before I focus on our Conservative government's commitment to consumer protection, I want to address another aspect of the bill.

Bill S-5 gives authority to the minister to approve the acquisition of major foreign entities by federally regulated financial institutions where that acquisition would increase that institution's assets by more than 10%. Some in this House during earlier debates have suggested this could politicize the process. In fact, this is a historical oversight provision that was repealed in 2001. We are merely restoring that authority. There is a good reason for that. We understand that a regulatory and oversight balance is necessary to keep our markets healthy.

Let us say, for example, that a Canadian bank or federally regulated institution acquires a foreign company that increases its assets by more than 10% and that foreign company then succumbs to poor conditions in its market, a collapse of that economy or sector of that economy. That would have a negative impact on a significant portion of a Canadian bank's holdings and our Canadian markets would be affected by extension. That is why we feel it is prudent to have these risky acquisitions reviewed before they go ahead, to ensure that they are in the public interest.

Julie Dickson, the Superintendent of Financial Institutions, had this to say about this decision:

It’s now being moved back to the Minister of Finance, and we fully support that decision. It makes sense for the Minister of Finance to ultimately have the ability to approve. It’s just going back to the way it used to be.

Alec Bruce, a noted Times & Transcript columnist, gave the following insight:

When our banks top up their foreign holdings in this environment they do, in fact, chance importing this contagion to these shores, and injecting it into the arteries of the country’s economy....It’s not too much to ask....

Let me reassure all members that this Conservative government has an ongoing commitment to ensure that consumers are protected in their dealings with our financial institutions. That is why our government has an entire agency working to protect and educate consumers of financial services. It is the Financial Consumer Agency of Canada, FCAC. The agency does its part to help inform financial consumers in Canada by developing plain language educational material on a wide range of financial products and services. It has developed innovative approaches, such as a mortgage calculator that quickly determines mortgage payments and the potential savings resulting from pre-payments. It has also introduced online tools that help consumers shop for the most suitable credit card and banking package for their needs.

The agency has created two new tip sheets to help Canadian consumers looking for ways to save money. One is on choosing the right banking accounts and the other is on keeping service fees low. Recently the agency has been instrumental in lending its support to Financial Literacy Month, that being November, which featured 200 events and outreach initiatives across the country.

We have a steadfast commitment to improve the financial knowledge of Canadians and that commitment includes this bill. The proposed legislative package before us includes measures that would strengthen the consumer protection framework, including increasing the maximum fine the FCAC can levy for violations of a consumer provision from $200,000 to $500,000, and would guarantee that any Canadian has the right to cash government cheques up to $1,500 free of charge at any bank in Canada.

Our Conservative government believes that Canadian consumers deserve accessible and effective financial services that meet the needs of consumers and that operate in the public interest. By enacting the financial services review act, we would further ensure that our financial system remains a competitive Canadian advantage and that consumers receive the highest possible standard of service. It is the level of service that Canadians deserve and have come to expect.

I ask all members of the House to support Bill S-5 to ensure that our financial sector remains strong, stable, secure and a model for other countries to follow.