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.

Motion in Amendment

[Robert Goguen, Conservative, Parliamentary Secretary to the Minister of Justice]

Mr. Speaker, my hon. colleagues have discussed many of the important features of Bill S-5 which would strengthen Canada's financial sector to its advantage. I particularly appreciate my hon. colleagues' characterization of the financial system as being only as strong as its weakest link and for outlining some of the key areas where the government has acted, both within Bill S-5 and elsewhere, to strengthen those links that needed the most attention.

The banking sector has expressed its strong support for this mandatory legislation. For example, Terry Campbell, president of the Canadian Bankers Association has explained, “In Bill S-5, the government has stepped up to the plate and is proposing what we think are very needed clarifications”.

I also agree with my colleagues' emphasis on the importance of considering the health of the whole financial system as fundamental to the growth and success of the entire economy. With this in mind, I would like to dedicate my allotted time to considering one special crucial link in the system which Bill S-5 would act to fortify, and that is Canada's payment system.

Our payment system is the set of instruments, procedures and rules used to transfer funds among financial institutions, either on their own behalf or that of their customers. This is not to be confused with the various other payment instruments Canadians use, such as cash, cheques, debit cards and credit cards to purchase goods and services, to make financial investments and to transfer funds from one person to another. The two are not unrelated, however, because these payment instruments, with the exception of cash, normally involve a claim on a financial institution such as a bank, credit union or caisse populaire. Financial institutions therefore need arrangements to transfer funds among themselves, which is why the payment system exists.

In Canada, the national systems for clearing and settlement of payment are run by the Canadian Payments Association, also known as the CPA, a not-for-profit organization of federally regulated financial institutions. This system has served Canadian financial institutions and their customers well. However, in a world of ever-changing demands, technological innovation, increased global integration and competition, no responsible and effective government can afford to let such a system remain static. That is why Bill S-5 takes action to ensure that this system can meet the ongoing demands of an increasingly dynamic, innovative and globalized financial system. I must note that the CPA provided input on these measures through an open public consultation process and has told the House finance committee that it welcomes ”the incorporation of technical and housekeeping amendments to the Canadian Payments Act legislation to provide greater clarity surrounding our membership”.

It is clear that the payments landscape is changing. For example, since 1996 we have seen in Canada and abroad increasing cases where clearing and settlement systems do not include banks as direct participants. To better accommodate this development, Bill S-5 proposes to amend the Payment Clearing and Settlement Act to remove the requirement that there must be at least one bank involved. The new definition would allow more flexibility in establishing systems to clear such complex financial instruments as over the counter derivatives, or OTCs. This change has the added benefit of allowing the Bank of Canada to oversee the transactions of these complex financial instruments to help ensure they pose no systematic risk to the financial system. Not only is this prudent, it is also in keeping with Canada's commitment to our G20 partners that by 2012 our OTCs be cleared through central counterparties.

Bill S-5 also proposes to change the Payment Clearing and Settlement Act to allow the Bank of Canada to disclose information to other regulators of payment clearing and settlement systems and to coordinate activities across current federal and provincial jurisdictions as well as with foreign regulators. This would also help us meet our G20 commitments by ensuring that Canadian prudential and market conduct regulators have the authority, tools and information they need to maintain effective ongoing oversight over the Canadian OTC derivative market. Moreover, the information sharing would help all parties understand the potential risk in these linked systems, building upon lessons learned from the 2008 financial crisis and helping in our efforts with our international partners to prevent such instances in the future. Failing to form such links could actually delay our ability to link to foreign systems and undermine Canada's ability to meet the commitments all G20 nations made. This is a key fact for hon. members to consider when debating the timely passage of Bill S-5.

If that does not convince hon. members to get behind the bill, I will offer another good reason.

As many hon. members appreciate, Canada's credit unions are a valuable source of financial services in communities across the country. In recognition of the important role credit unions play, in budget 2010 our government created a new legislative framework for federal credit unions to accommodate growth and expansion of the Canadian credit union system, putting them on a more level playing field with other financial service providers.

Once implemented through regulation, this would enable those credit unions that choose to do so to extend beyond provincial borders and pursue business strategies that are not limited by provincial incorporation. This change would encourage competition among financial institutions and promote a more level playing field within the financial sector, supporting a stronger and more stable system overall. It would also give credit unions a way to expand their sources of funding and diversify their geographic risk exposure.

Bill S-5 supports these efforts by amending the Canadian Payments Act so that credit unions fall within the co-operatives class in the act rather than the bank class, giving federal credit unions a more effective voice in the CPA. I am pleased to report that this measure has been very positively received by the federal credit unions.

According to Credit Union Central of Canada, the national voice for credit unions across the country, these changes would help credit unions represent their members more effectively at the payments table.

In the words of David Phillips, president and CEO of Credit Union Central:

Placing the federal credit union in the cooperatives class will preserve and strengthen the credit union system's representation at the Canadian Payments Association. It ensures that a federal credit union will be represented by a director who can bring the perspective of cooperative financial institutions to CPA matters.

At the same time, credit unions would still enjoy the long-standing, well-understood and robust governance, liquidity and clearing and settlement frameworks that they use today.

For these reasons, I would encourage hon. members of the House to support the timely passage of Bill S-5. They can do so with the confidence that by making these important improvements to Canada's payment system they will be strengthening key links in Canada's financial system and better connecting it with the world.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Mr. Speaker, I am pleased to rise to speak to Bill S-5 to amend our financial system. I am a member of the Standing Committee on Finance, which examined Bill S-5.

A member across the floor mentioned the sunset clause. Indeed, this system should be reviewed every five years, but our problem with the government is that it is improvising on this issue. It passed this bill in the Senate with very little public consultation, then it used the date when this review is supposed to take place as an excuse for not accepting any of our amendments. This proves that the government did not take this bill seriously and did not do its homework.

As we all know, our financial system is very important. I am a notary and lawyer and, before I was elected, my clients included Canadian banks, some of them in Montreal. Our banking system is important to our economy. However, this bill overlooks consumers. People have to assume the cost of the banks' excesses, and this has not been taken into account at all.

Nor does this bill take the global crisis into account. I am not making this up. Many believe that the crisis originated in the financial sector, primarily in banks in the United States, which had an impact the world over. There was an opportunity to do something here, but once again, this government improvised and did not take the steps that should have been taken.

The members across the floor say that we on this side of the House are idealists. That is true, but we are also pragmatic. We proposed real solutions. It is true that this bill has little impact. It contains technical revisions and deals with minor administrative concerns. However, we are worried about one point: the acquisition of foreign banks by Canadian banks.

A system was introduced a few years ago, establishing the Office of the Superintendent of Financial Institutions, which is responsible for assessing these transactions. When a Canadian bank acquires a foreign bank, it affects our economy and our financial system. We want such acquisitions to be truly beneficial for our economy. The Office of the Superintendent of Financial Institutions should have been mandated to study such purchases and make recommendations, perhaps even give its approval. However, Bill S-5 puts this power in the hands of the minister. This poses a problem.

This power used to belong to the minister, but was given to the Office of the Superintendent of Financial Institutions in an effort to depoliticize the process and avoid having a minister be influenced by his connections or lobbyists and make a decision that would defy the financial system and what had been proposed. Now, the Conservatives, who claim our system is working, are in the process of reversing the decision and giving the power back to the minister.

Some of the ministers across the way have very close ties to lobbyists. The Minister of the Environment, to name one, does more to promote lobbyists than he does to protect Canadians in this regard. The concern here is what might happen with the Minister of Finance. Without pointing the finger directly at this Minister of Finance, putting this power back into the hands of a minister makes the decision very political and problematic. What is more, there is no requirement to provide public explanations. The Office of the Superintendent of Financial Institutions could say that a certain transaction is not beneficial to Canadian financial institutions and, without providing any explanation, the minister could ignore that decision and make his own decision.

The process is becoming very political and that is worrisome. What is happening in the United States is a result of the deregulation of the system. The Conservative government is doing the same thing here. That is one of our major concerns. We are being told that all we want to do is make proposals that will only delay matters. Yet the amendment we proposed was quite simple.

We did not have a lot of time to debate it because the government once again decided to move quickly and push things through.

We had asked the minister, when he makes a decision, that he not just look at the criteria that are good for the Canadian financial system—that is important and we would not take that away—but that he also look at the criteria that are good for the Canadian economy. Unfortunately, that amendment was rejected. It is very hard to understand why.

When a Canadian bank takes over a foreign bank, some people think that this must also be good for the Canadian economy. Unfortunately, our amendment was rejected. It is very difficult to understand. I wonder what this means. I have to interpret this myself, because the government was not very clear on this subject. All that matters to this government is the financial system, not the Canadian economy. Yet they cannot be separated. It is important to discuss the financial system, but we must also discuss the impact that it can have on the Canadian economy. In a way, this shows that the government wants to hold on to power and wants to make a decision its own way, once again without explaining why it is moving in this direction. With this bill, the Conservative government is again showing its lack of transparency. It wants to politicize the matter and does not want to explain to Canadians what is happening in this regard. We asked for further information, but unfortunately we did not receive it.

I will now address another matter. We know that this bill had to be introduced. However, the government is once again being criticized for its lack of vision because it had a golden opportunity to reform the banking system. I do not think that this government can pat itself on the back for that. In addition to reviewing the banks and financial institutions, the impact on consumers should have been considered as well.

We now know that the government's job creation strategy is to give tax breaks to big business, including the banks. Does that create jobs? It remains to be seen. We do not believe it does, as indicated by the statistics on job losses and unemployment. Despite this, banks have not lowered their interest rates, even though the prime rate is at an historic low. And that is not all. After receiving tax breaks and making billions of dollars in profit, the banks are now increasing their fees.

Look at what is happening. Consumers have contracts with banks or have bank accounts. They borrow money and proceed as usual. It is a bit like the gas situation. We cannot get out of it. People are a bit dependent on the system, on the bank. The bank can do what it wants. Despite the fact that interest rates are very low, credit rates have not changed at all. Who is reaping the benefits? The banks.

Banks are increasing their fees and it is not consumers who are benefiting. That is what we are telling the government. The members opposite need to be aware of this because they too represent constituents who are consumers. The government must not be so single-minded. It makes for a very unbalanced approach. Once again, this is a problem that we have with the government, that it is too single-minded and is not looking at how what it is doing will affect the entire system, whether we are talking about tax cuts for large corporations or the banking reform that it may or may not implement. This affects consumers. We are asking the government to take a broader view of the situation and to look at what is happening in this respect.

If we were to ask any of the members opposite whether any of their constituents are being negatively affected by this, I think that they would say yes. We do not even need to ask. We simply need to look at the figures. The OECD will tell them, and so will economists. Household debt is a problem. It has reached a record high of 151% in Canada. This means that for every dollar a family earns, it owes $1.51. The record level of household debt is a problem. Yet, unfortunately, the government is not doing anything about it. This would have been a good time to do something, but unfortunately, once again, the government is demonstrating its complete lack of vision. This is a missed opportunity.

This government is bragging and saying that the system is working well and that everything is fine, but I think that the government must be really out of touch if it does not see that people are suffering. This would have been a good opportunity to help consumers and families. Unfortunately, the government did nothing in this respect.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Mr. Speaker, what an interesting debate we are having here, where the NDP are claiming to be Liberals and Liberals NDP. The leader of the NDP was a Liberal and the leader of the Liberals was an NDP. I am confused about it. I am just happy to be a Conservative.

Mr. Speaker, I am pleased to speak today to the House, and to all Canadians, on Bill S-5, the financial system review act. Bill S-5 would make improvements to one of the key components of Canada's economic success, our financial system.

Before I continue, I just want to remind members of the opposition that, unlike in Europe and the United States, not a single Canadian bank collapsed or had to be bailed out by Canadian taxpayers. The reason for this is our strong, stable and flexible financial system. Canada's well regulated financial system is universally recognized as one of the primary reasons for Canada's swift recovery following the global crisis.

Recently, an independent Financial Stability Board peer review validated this claim by praising actions taken by the Conservative government to ensure that Canada's financial system remains strong, enabling Canada to emerge from the global financial crisis in a position of strength.

In its review, the board highlighted the resilience of Canada's financial system, calling it a model for other countries around the world. The board's review said the strength of Canada's economy and its financial system meant that no Canadian financial institution failed or required government support in the form of a capital injection or debt guarantee during the global financial crisis. The report said:

The good performance of the financial system both during and after the crisis provides further evidence of its soundness and resilience.

As the board's report also noted, since 2008, the Conservative government has taken steps to make our financial system more stable, reduce systemic risks and ensure that we have the flexibility to protect the financial institutions when needed. The report went further, citing Canada as an example that other jurisdictions should emulate in developing financial sector policy.

Clearly, these sentiments are felt by jurisdictions around the world. A recent report from the United States congressional research service identified our financial system as a model for others to build on. It said:

... Canada’s supervisory system and regulatory structure have proven less susceptible to the bank failures that have loomed in the United States and Europe and may offer insight for U.S. policymakers.

British Prime Minister, David Cameron, praised our financial system. He said:

[Canada's] economic leadership has helped the Canadian economy to weather the global storms far better than many of your international competitors.

The praise goes even further. Numerous observers have noticed and paid tribute to Canada's well regulated financial sector. For example, over the past four years the World Economic Forum has ranked our banking system as the soundest in the world. Forbes magazine has ranked Canada number one in its annual review of best countries to do business. Five Canadian financial institutions were named to Bloomberg's most recent list of the world's strongest banks. That is more than any other country.

At the same time that our system is receiving international praise, we cannot be complacent. Bill S-5 would make necessary improvements to Canada's financial system so it would continue to be the envy of the world.

As Canadians, we are justifiably proud of our financial services sector, which employs over 750,000 people in well paying jobs, represents about 7% of Canada's GDP and is a leader in the use of information technology. We are the world leaders in this field. We aim to keep it that way. It is for this reason that the government has the long established practice of reviewing the statutes governing federally regulated financial institutions every five years. This mandatory review helps to maintain the safety and soundness of our sector.

How would this legislation accomplish these goals? Under the proposed legislation, certain larger foreign acquisitions of financial institutions would need the approval of the Minister of Finance. This merely reinstates some of the historical oversight provisions repealed by previous Liberal governments in early 2001. In practice, it would require ministerial approval if a federally regulated financial institution were to acquire a major foreign entity which significantly increased its assets by more than 10%.

This is a move supported, not only by industry stakeholders, but also by Julie Dickson, the Superintendent of Financial Institutions.

The legislation would also reflect the natural growth of the banking sector by increasing the large bank ownership threshold from $8 billion today, to $12 billion. This would have no impact on Canada's five large banks. They would continue to be subject to widely held requirements. This change would merely reflect growth in our financial sector.

Bill S-5 would also build on this government's proven record of improving consumer protection by making important changes to federal financial institution statutes. In particular, the bill would increase the maximum administrative penalty that the Financial Consumer Agency of Canada could levy from $200,000 to $500,000. It would confirm that Canadians, including bank customers, would be able to cash government cheques of amounts less than $1,500 free of charge at any bank in Canada.

The legislation would also demonstrate this government's continuing support for credit unions. Building on the federal credit union charter, Bill S-5 would amend the Canadian Payments Act so credit unions would fall within the co-operatives class in the act rather than the bank class.

Speaking to this change, the Credit Union Central of Canada, which is the national association of credit unions in Canada, had this to say:

Placing the federal credit union in the cooperatives class will preserve and strengthen the credit union system representation at the CPA. It will ensure that a federal credit union will be represented by a director, who speaks for the interests of cooperative financial institutions in CPA matters.

In short, this change would promote a level playing field within the financial sector, which would generate competition in the industry, which would ensure a stronger, more stable system overall. Bill S-5 would also include a number of technical refinements to ensure the effective implementation of what is referred to as a bridge bank tool. This would build on our government's commitment in the 2009 budget to strengthen the authorities of the Canada Deposit Insurance Corporation, to effectively preserve the critical functions of a financial institution in dire straits and to help maintain stability in the financial system.

I would like to finish by saying that it is constant improvements like those included in Bill S-5 that make Canada's financial system the envy of the world. Surely, even the members of the opposition can see that it is the routine fine tuning of Canada's financial institution legislation that would keep our financial system strong, stable and flexible for Canadians. On that note, I urge the members of the opposition to stand and support the swift passage of this very important legislation.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, I appreciate the opportunity to address Bill S-5, a very important bill. It has overwhelming support because there is no doubt that all of us recognize the importance of the banking industry.

I will take a couple of different perspectives, one dealing with the consumer's point of view and the other is a macro perspective with regard to borrowing money generally and how important our banking industry is.

First and foremost, from a consumer point of view, one of the things I have known over the years is that consumers of all ages are very dependent on our banking industry. We need to do what we can to protect the interests of consumers, and there is a lot that still can be done in order to address the needs of consumers.

Quite often, government policies have had positive impacts and some have had negative impacts. The biggest negative impact, one for which the government can take full credit, is when it increased the length of a mortgage up to 40 years with no down payment. There was a great deal of concern when the government came up with that bold, some would suggest dumb, initiative because at the end of the day people are concerned about consumer debt and those types of obligations. Forty years is a great deal of time and it is a heck of a way to tie someone to having to make ongoing monthly payments.

When a government sets policies, it needs to be aware of the profound impact they will have at the consumer level. When we look at past consumer debt, we see that it has continued to grow. One of my colleagues mentioned that part of the problem was the type of employment. For many individuals it can be fairly difficult to get the type of full-time employment at the level of pay they were receiving previously and that has put a good number of consumers in very difficult positions. There are many individuals who have fixed incomes and there is a profound impact when banks make decisions that ultimately work against consumers. There are issues concerning credit card charges and banking fee charges at ATMs.

The industry has grown tremendously over the last decade or so and there needs to be more scrutiny on the types of fees that are being levied against consumers. We need to be aware of what is taking place and there should be open debate. I was encouraged when we heard that the Minister of Finance has some interest in terms of consulting with Canadians. However, to what degree he is actually listening to them is another issue. I suggest that we need to connect with average Canadians to get a better sense of the types of hurdles they face when they are in need of money and banking services. Whether they are simple chequing or savings accounts, mortgages, loans or lines of credit, these are all very important issues that affect the day-in and day-out lives of Canadians across our country.

One of the questions I asked the government was with regard to credit unions. I believe that credit unions have picked up a lot of the slack where banks have been falling short. The best example I can give of that is in Winnipeg North and constituencies across this land where bank branch offices are closing and quite often it will be some sort of co-operative or credit union that fills in. Most recently, the Assiniboine Credit Union was established in the traditional north end of Winnipeg.

When bank branch offices close, it has a significant impact on the community because banking is not really optional, especially for individuals who are on fixed incomes, in particular for seniors. Having access to a bank is very important.

When we talk about banking, insurance and the legislation we have now, we should try to highlight the alternatives to mainstream banking, the role they could be playing and what we might be able to do to enhance that role, whether it is further guarantees of deposits or whatever else it might be. The point is that the government needs to demonstrate some leadership on this issue.

I mentioned the macro level in regard to this bill. The actual money we have, the hard currency, coins and bills, is only a small percentage of the entire money supply that Canada has. A vast majority of that money supply goes through our banking and financial institutions, which is why we have a serious responsibility to monitor, regulate and ensure the long-term viability and integrity of our banking industry.

In my short time in the House of Commons, I have found it interesting how both the government and the New Democrats like to assume credit for things that I would suggest is not necessarily theirs to take. It was not long ago when banks around the world were crashing and collapsing. That was because during the 1990s a great deal of pressure was put on the banking industry around the world to lobby governments to deregulate. The argument was that it would provide more opportunities for the banks. Many countries bought into that and it was a heated debate here in Canada. I was at the Manitoba legislature at the time and it was very much a heated debate. I remember meeting with banking representatives who talked about the possibility of amalgamating into larger banks and the benefits of deregulation.

However, fortunately for Canadians, we had Jean Chrétien and Paul Martin, individuals for whom I have a tremendous amount of respect. Most important, it was a very strong majority government with a healthy minister of finance and prime minister at the time who said that we needed to protect the industry and that we needed to ensure those regulations were in place and maintained. That is the reason the banking industry today is the envy of the world.

Speaker after speaker from the Conservative side will acknowledge that Canada is the envy of the world when it comes to the banking industry as a whole. The only part they miss, because they want to assume some of the credit for that, is that it had very little to do with the current Prime Minister. The credit should be going to the former prime minister, Jean Chrétien, the minister of finance at the time, whether it was Mr. Paul Martin or the current deputy leader of the Liberal Party, and those individuals who are still here in the House who participated in that government. There was a great deal of pressure at that time to deregulate. If we a look at the position of the Conservative Party, which was the Alliance Party or Reform Party at that time, it opposed it. It wanted to move toward deregulation. I am glad the Conservatives have had that conversion and now they are very supportive of it.

I thought it was kind of a different type of twist when a New Democratic member of Parliament spoke earlier today trying to assume credit for the banking industry here in Canada, which was a real stretch of the imagination. However, at the end of the day, whether they like it or not, members of the NDP played no role in terms of ensuring what type of a banking industry we have here today.

Hopefully there will be other opportunities to provide comment on that particular issue, if the question does come up. I am more than happy to explain why it is I make that statement.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, I listened with great interest to my colleague's remarks today on Bill S-5.

First, in recent weeks when the Minister of State for Finance appeared before the finance committee, he acknowledged that in fact credit for the prudential strength of the Canadian banking system belongs to more than one government. He acknowledged that the stewardship of the previous Liberal government had contributed to the governance of the Canadian banking system, and I am being modest when I say that.

Would the hon. member agree that in fact the Liberal government of Mr. Chrétien and Mr. Martin was responsible for the decisions at the time in the nineties, which resulted in not following the global trend to deregulation, which led to the challenges and the disasters faced by other countries in their financial services sector and the resultant relative strength here in Canada? Would the hon. member agree it was those decisions during that period of time that helped us today?

[Greg Rickford, Conservative, Parliamentary Secretary to the Minister of Aboriginal Affairs and Northern Development]

Mr. Speaker, I want to take this opportunity to thank the constituents of the great Kenora riding for giving me the opportunity to speak on their behalf with respect to Bill S-5.

This is an obligatory and largely routine piece of legislation, but it is essential for the continued strength and security of Canada's financial system that our constituents rely on every day, be it to cash a cheque, to apply for a mortgage or to buy that first home.

As background for all Canadians, legislation governing federally regulated financial institutions is reviewed every five years by the government to ensure the stability of the Canadian financial system. The last legislative review was completed in 2007 through Bill C-37 in the 39th Parliament. In 2001, a similar review was completed with Bill C-8 in the 37th Parliament.

I should also let the House and our constituents know that it is crucial that today's act be passed by April 20, 2012. This is the legislated sunset date, and passage must be achieved by then to allow the Canadian financial system to function in the manner that it has been doing.

In September 2010, the present five-year review began. This was kicked-off with an open and public consultation process. The Minister of Finance invited all Canadians to give their views on how to improve the financial system. Throughout that consultation, many Canadians gave their ideas and suggestions on how to further reinforce and strengthen our financial system. Indeed, much of that comment is reflected within the financial system review act that we are debating today. To be sure, today's act takes into consideration the feedback from industry groups, consumer groups and other Canadians to make measured, technical adjustments to strengthen Canada's regulatory framework.

I would also draw the attention of Canadians to the fact that today's act has already been reviewed and approved by the Senate banking, trade and commerce committee as well as the House of Commons finance committee and the great work of those members. Both committees undertook a comprehensive and efficient review of this act. It included talking to organizations like the Financial Consumer Agency of Canada, the Credit Union Central of Canada, the Office of the Superintendent of Financial Institutions Canada, the Canadian Life and Health Insurance Association, the Canadian Bankers Association and the Canadian Payments Association. This was an impressive catchment of stakeholders.

I want to thank each of the witnesses who spoke on the financial system review act in front of both committees for providing their important input. I will note that witnesses, while acknowledging the act's technical nature, were very supportive of it overall. For example, the Canadian Life and Health Insurance Association declared, “Bill S-5 represents a welcome fine-tuning of the various financial institution statutes”.

At this time I will quickly review some of the initiatives taken in today's act.

Once more, even though the majority of these initiatives are largely technical, they are indispensable for the security of Canada's financial system. That is why today's act would make the following alterations: modernizing legislation to uphold financial stability and guarantee that Canada's financial institutions continue to operate in a competitive, efficient, effective and stable environment; improving the consumer protection framework, including expanding powers for the Financial Consumer Agency of Canada to better protect consumers; and reducing the red tape and regulatory burden on financial institutions.

Other measures contained in today's act include the following: clarifying that all Canadians, including bank customers, are able to cash government cheques under $1,500 free of charge at any bank in Canada; removing duplicative disclosure requirements for federally regulated insurance companies; offering adjustable policies in foreign jurisdictions, thus cutting their red tape burden; encouraging competition and innovation by allowing co-operative credit associations to provide technology services to a broader market; and improving the capacity of regulators to efficiently share information with international counterparts while respecting the privacy of clients.

There are more, but I want to emphasize that the significance of this act provides for a safe and secure financial system.

It is a system that has endured for Canadians during the recent global economic crisis that saw the failure of some of the best known banks around the world. Indeed, in recent years Canadians have recognized just how important a sound financial banking system really is for our country's economy.

Undeniably our system has been a model for countries around the globe. Canada proudly did not have to bail out, nationalize or buy equity stakes in its banks, in stark contrast to the U.S., the United Kingdom and countries in Europe. In fact the World Economic Forum has ranked Canada's financial system as the soundest in the world for four straight years. Our safe and secure financial system is envied the world over.

It was remarked in the well-known publication Forbes, “With no bailouts, it is the soundest system in the world, marked by steady and responsible continuation of lending and profits”.

Constantine Passaris, a University of New Brunswick economics professor, adds:

The financial tsunami of 2008 swept around the world with devastating economic consequences. Banks proved to be particularly vulnerable to the credit crunch that followed....

There is no denying that our Canadian banks proved significantly resilient....

The Canadian way is to record our national achievements in a low-key and understated manner. There is one economic achievement however, that has made the world stand up and notice. Indeed, in this case, we cannot hide from the international spotlight and we can proudly accept the global applause....

We appreciate these comments. Indeed, many of the financial sector solutions now promoted internationally are modelled on our Canadian system. With today's bill, Canada's financial system will remain secure and serve as a fundamental source of strength for Canada's economy moving forward.

The financial system is one of the most important aspects of Canada's economy and jobs, totalling approximately 7% of Canada's economy. What is more, it provides employment, good, well-paying jobs for more than 750,000 Canadians. Our financial sector also provides financing to the housing markets and other markets that rely on borrowing, and in that respect the financial services sector is a significant presence in the day-to-day lives of all Canadians.

The Financial System Review Act will help support a proven framework that benefits all Canadians who use or are impacted by the financial services sector.

The long established practice of regularly reviewing the financial institution regulatory framework is also a distinctive and positive practice that sets Canada apart from the world. Indeed, it has been vital to ensuring the stability of the sector. All Canadians would acknowledge the significance of frequently examining how we can better ensure our financial system's safety and soundness for the benefit of all Canadians. Today's bill accomplishes just that.

I encourage members to support today's bill and ensure it passes in a timely manner. I appreciate having the occasion to support this important piece of legislation.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Mr. Speaker, I am pleased to speak to Bill S-5, the financial system review act, at third reading.

As members are aware, the recent financial crisis tested the skills of many: policy-makers, regulators, bankers and investors. However, it also served to demonstrate the overall soundness of our financial system.

It was no accident that Canada escaped the worst of the global financial crisis with no bank failures or forced bailouts by taxpayers. Our legislative framework was built to withstand such shocks with high prudential standards, excellent regulation supervision, a flexible monetary system and good mechanisms to ensure financial stability.

However, when faced with such unprecedented market volatility in 2008-09, our government went further by acting quickly to improve this excellent framework, boost financial stability and ensure access to credit during a liquidity crunch.

Bill S-5 will build on the existing strengths of Canada's financial system and fine-tune a framework that has proven to be both efficient and effective. In the words of Canadian Life and Health Insurance Association Inc., Bill S-5 represents a welcome fine-tuning of the various financial institution statutes.

How will Bill S-5 achieve this? The bill will improve the ability of regulators to share information efficiently with their international counterparts. This will help fulfill our G8 commitments at a time when financial institutions increasingly operate on a global scale. It will ensure effective supervision and regulation across the borders.

Bill S-5 also proposes to improve the consumer protection framework, including enhancing the supervisory powers of the Financial Consumer Agency of Canada, FCAC, and increasing the maximum fine that would be levelled by the FCAC for the violation of a consumer provision of its act to make it consistent with administrative monetary penalties levied by other regulatory agencies.

The FCAC is mandated with ensuring that the federally regulated financial institutions adhere to the consumer provisions of the legislation governing financial institutions and their public commitments.

The FCAC is also the government's lead agency on financial education and literacy, and has moved forward with an array of excellent incentives in recent years. The agency has developed innovative tools to help Canadians, such as a mortgage calculator that quickly determines mortgage payments and the potential savings resulting from early payments. It has also created innovative online information to help consumers shop for the most suitable credit card and banking packages for their needs.

Our government believes Canadian consumers deserve accessible and effective financial services that meet the needs of consumers and operate in the public interest. That is why in budget 2010 we announced we would take action to prohibit negative option billing and require timelier access to funds.

The regulations will come into force this August and will require federally regulated financial institutions to obtain consumers' express consent before providing a new optional product or service. This will allow Canadians to receive all required information on the optional product or service to help them make the financial decisions that are best for their circumstances.

The regulations will also reduce the maximum cheque hold period for retail depositors and small and medium size businesses, and will provide retail depositors faster access to the first $100 deposited by cheque. Shorter cheque hold periods and faster access to funds will benefit Canadians by enabling them to manage their personal finances more effectively. After all, well-served and confident consumers contribute to the well-functioning financial markets and the economy.

Indeed, in the words of a recent Globe and Mail editorial:

Of the many things that frustrate the retail customers of Canada's federally regulated banks, one of the most egregious has been the practice of putting a hold of as many as seven days on deposited cheques. Now, thanks to new measures recently...announced...that upsetting practice and others are coming to an end.

[T]he government has shown a commitment to its promise to improve banking regulations in Canadians' favour. This is welcome news.

Similarly, in 2009, as part of the measures to improve access to financing, the government announced that it would bring forward measures to help consumers of financial products, including launching a task force on financial literacy.

The task force on financial literacy was mandated to provide advice and recommendations to the Minister of Finance on a national strategy to strengthen the financial literacy of Canadians. In support of the recommendations of the task force on financial literacy and delivering on a commitment from budget 2011, the government introduced Bill C-28, the financial literacy leader act. Bill C-28, a piece of legislation which I urge all members of the House to support, would provide for the appointment of a financial literacy leader who would collaborate and coordinate with stakeholders to strengthen the financial literacy of Canadians.

Canada's national strategy on financial literacy will support the excellent efforts under way throughout the country and empower Canadians to act knowledgeably and with confidence in managing their personal financial affairs.

I would be remiss if I closed without quickly reviewing other important initiatives in Bill S-5. They include: updating financial institutions legislation to promote financial stability and ensure Canada's financial institutions continue to operate in a competitive, effective and stable environment; improving efficiency by reducing the administrative burden on financial institutions and adding regulatory flexibility; promoting competition and innovation by enabling co-operative credit associations to provide technology service to a broader market; and reducing the administrative burden for federally regulated insurance companies offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements.

In summary, the financial system review act provides for a framework that will benefit all participants in the financial sector, financial institutions as well as all Canadians. It maintains the long-standing practice of ensuring regular reviews of the regulatory framework for financial institutions, a unique practice that sets Canada apart from almost every other country in the world.

In fact, U.K. Prime Minister David Cameron said it best:

In the last few years, Canada has got every major decision right. Look at the facts. Not a single Canadian bank fell or faltered during the global banking crisis.

He went on to say that our economic leadership has helped the Canadian economy to weather the global storms far better than many of our international competitors.

Clearly, this government recognizes that it must continually consider what regulatory changes are needed to ensure that the fundamentals of the Canadian economy remain sound, that consumers are well protected, and that Canada continues to be an attractive place to do business in today's competitive global economy. This is precisely what the government has done with this bill.

On that note, I urge members of the opposition to stand up and support the swift passage of Bill S-5. To vote against the bill would not just be a vote against the Canadian economy, but a vote against the Canadian consumer.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Madam Speaker, I want to be clear. This is report stage of the bill and not third reading as has been suggested by some members on the government side. We are now dealing with an amendment to the bill. It is a very wise and reasonable amendment introduced by my colleague, the member for Burnaby—New Westminster, and I thank him for that.

The amendment to Bill S-5 would delete clause 212 with respect to paragraph 39.1. This clause would give statutory immunity to the Office of the Superintendent of Financial Institutions in respect to any civil proceedings. This is an important amendment to which we need to pay attention. The immunity resulting from the deletion of this clause would negatively impact the office of transparency and accountability to the Canadian public. We should all be concerned about that. Time lost as a result of frivolous claims, as the government has suggested, does not justify such a radical measure.

In the process of trying to remain transparent, open, reasonable and independent, we need to allow that there will be the odd complaint and submission that may not end up to see the light of day or may not have basis. However, every Canadian who deals with the banking system or any government supervised and regulated system or bureaucracy should have the opportunity to bring their concerns forward. It is not up to us to decide what complaint is illegitimate until we have the opportunity to give those concerns a thoughtful review through reasonable process. My concern is the government is applying immunity to this office and to the officer simply because there are not enough complaints to warrant the attention.

Finally, this immunity, as suggested, would at best amount to an abdication of the superintendent's responsibility and, at worse, to covering up serious errors that could have been avoided.

The point of the amendment is to deal with the question of transparency and accountability. I urge all members opposite to consider the value of ensuring we do not dismiss out of hand any concerns that may be brought forward by Canadians in relation to the Office of the Superintendent of Financial Institutions.

My colleague, the member for Burnaby—New Westminster and finance critic for the opposition, sponsored this amendment. He also indicated early on, as we did at second reading debate, that the opposition would support Bill S-5. We have given it some serious consideration, we have examined it and there is nothing particularly untoward, although we think the amendment is needed to address a flaw that needs to be corrected.

We also introduced amendments at committee that we thought would add to the bill. My colleagues and I have spoken at second reading and at committee about the missed opportunity.

The law provided that we needed to have this review conducted by April 20 to comply with the Bank Act. We suggested on numerous occasions that this provided an opportunity for the government, if it were serious about important issues like consumer protection, to speak with Canadians about their concerns as they related to the Bank Act and to make changes that were necessary.

We brought up a number of things. Whether it is outrageously high interest rates charged on credit cards, or banking charges that continue to go up, or the various ways that within the system consumers are being nickel and dimed out of tens of thousands of dollars every year, there are ways for us in the House, through this review, to properly protect those consumers and ensure the financial institutions covered by the act are acting properly. Unfortunately, we missed that opportunity. I indicated to constituents who brought it to my attention that I was sorry the government missed this opportunity.

Also, I am disappointed that once again the government has not engaged in as fulsome a process of consultation as it could have. Frankly, the consultation was truncated. It was not transparent. The government did not hold public hearings. It was by invitation only. We heard the government had 30 representations. Some of those were not even made public, not even shared with us on the website. Some organizations voluntarily agreed that their submissions should be public and made them so, but the government held consultations that were kept private. That is unfortunate.

I do not think that is necessary. We can be much more forthcoming and trusting of Canadians. We can recognize that Canadians have a great deal to offer to discussions like this. We think to ourselves that the whole issue of financial institutions and the regulation of the banking system is technical and above the average Canadian's head.

If it had not been for Canadians understanding the consequences of the deregulation and of allowing foreign takeovers of the banking industry that was being proposed by the Martin government, if it were not for the outcry of Canadians, whom we in the NDP caucus and others try to represent in debate, we would have gone down a perilous track that would have seen us follow far too closely the problems we saw in 2008, and beyond, in the U.S., Iceland and in far too many European countries. There the banking systems have been deregulated. We have seen the kind of turmoil that has been created as a result of the lack of adequate oversight.

It is because I have that kind of confidence and faith in my constituents and Canadians to understand the value and technical nature of issues like this that I get perturbed by the government members or members of the third party who were once in government. They want to take credit for the nature of the banking system that has developed over the years. However, it was because of experience and the wishes of Canadians and their representatives in the House that it be strongly regulated and protected from the vagaries of global competition and foreign ownership and that it was in much more stable shape in 2008 and able to considerably weather the storm. Although let us not forget that the Government of Canada did spend $75 billion to buy mortgages that were threatened by Canada Mortgage and Housing.

We need to give Canadians more credit for their knowledge on issues as important as the Bank Act.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Madam Speaker, I am pleased to speak to the third and final reading of the financial system review act, Bill S-5.

I will begin by saying that Bill S-5 is important to the strength of Canada's financial system and I will briefly describe how it came about.

Every five years, the government conducts a review of the policy framework governing federally regulated financial institutions. The previous legislation review was completed in 2007. The present five year review was launched in September 2010 when the finance minister invited Canadians to share their views on improving our financial system by way of an open consultation process. This five year review process helps guarantee Canada keeps its status as a global leader in financial services and it maintains the soundness of the sector.

A key priority for our Conservative government is ensuring Canadians keep on having a strong and secure financial system and one that serves as a model for countries around the globe. Today's bill would ensure that continues to be the case. In fact, the World Economic Forum recently ranked Canada as having the soundest banks in the world for the fourth year in a row. Both in Canada and internationally, this strength has been widely recognized by independent observers.

Peter Worthington, noted Toronto Sun columnist, declared:

Canada’s banking system is now widely recognized as arguably the world’s best. No Canadians fear for their deposits as many Americans do.

An Ottawa Citizen editorial reads:

Our banking and financial system is the envy of the world. While the great money edifices of countries such as the U.S., Britain and Switzerland cracked at the beginning of the recession, Canadian banks stood firm.

However, as I mentioned earlier, this recognition stretches well beyond Canada's shores, as it is repeated around the globe.

David Cameron, Britain's prime minister, has heralded our system by saying:

In the last few years, Canada has got every major decision right. Look at the facts. Not a single Canadian bank fell or faltered during the global banking crisis. ... Your economic leadership has helped the Canadian economy to weather the global storms far better than many of your international competitors.

The Irish Times has applauded it by saying:

Canada’s policy of fiscal discipline and strict banking supervision was a reason why it was one of the world’s strongest performers during the recession.

The Economist, the renowned magazine, has recently asserted that “Canada has had an easier time than most during the recently global recession, in part, because of a conservative and well-regulated banking system”.

The financial ratings agency Fitch, when reviewing Canada's top tier AAA credit rating, focused its assessment on the fact that “Canada's banks proved more resilient than many peers thanks to a conservative regulation and supervision environment.

I share and welcome that high praise.

Furthermore, the financial services sector has a significant role in the health of the Canadian economy. Not only does it represent 7% of Canada's GDP, it is also responsible for over 750,000 good, well-paying jobs. It also plays a distinctive, indispensable function in fuelling the growth, nurturing financial stability and safeguarding savings, all of which are necessary for the success of Canada's economy.

Today's bill would contribute to the continued strength of Canada's financial system. Indeed, the mandatory five year review that shaped today's bill is key to helping set apart Canada from almost all other countries. This practice makes certain that the laws governing our financial system are reviewed and updated on a regular basis, ensuring they are responsive to an ever-changing global marketplace.

In a similar vein, the global financial crisis of the past few years has underlined why a stable and well-functioning housing market is necessary for the financial system and overall economy.

While Canada's financial system remains sound, well-capitalized and less leveraged than its international counterparts, our government proactively acted to bolster the stability in our housing market by adjusting our mortgage insurance guarantee framework. This included reducing the maximum amortization period for government-backed insured mortgages with loan-to-value ratios greater than 80% from 35 years to 30 years.

As well, we withdrew government insurance from home equity lines of credit and lowered reduced borrowing limits in refinancing.

Independent observers and economists have roundly applauded such adjustments. For instance, a recent Waterloo Region Record editorial said, “The federal government has done the right thing in tightening up the rules for mortgages in this country”. A Calgary Herald editorial added, “...the right direction...it is good to see the government continue to be vigilant on this file”.

Without a doubt, our Conservative government is working hard renewing many key fundamentals of our financial system and strengthening it with new tools.

Through the financial system review act, we are modernizing, fine-tuning and harmonizing the existing framework to ensure it keeps the high level of performance. Canadians know and understand that the present framework that has made our financial system the soundest in the world functions well.

That is why the financial system review act seeks to build on, not rebuild, that solid foundation with a proposed legislative package that includes measures to: better focus financial institutions legislation to support financial stability and guarantee Canada's financial institutions keep operating in a competitive, effective and stable environment; fine-tune the consumer protection framework, including further improving the Financial Consumer Agency of Canada's powers; and reduce the administrative red tape on financial institutions to enhance efficiency and add regulatory flexibility.

Other measures contained in today's bill include: increasing the capability of regulators to effectively share information in a timely manner with international counterparts while respecting privacy laws; guaranteeing the right to cash government cheques under $1,500 free of charge at any bank in Canada to all Canadians; enabling co-operative credit associations to provide technology services to a broader market to promote competition and innovation; and much more.

I am happy to note that many public interest groups have given their strong endorsement of today's bill. For instance, the Canadian Life and Health Insurance Association declared:

It is important that legislation be periodically reviewed so that it keeps up with the changing environment.

The industry welcomes a number of measures outlined in...[the financial services review act].

Today's bill would strengthen stability in the financial sector, improve the consumer protection framework and modify the regulatory framework to new developments. It provides for a renewed structure that will benefit all Canadians.

We recognize that, to remain a global model of stability and ensure the soundness of the financial sector for all Canadians, routinely reviewing what regulatory changes are necessary to foster competitiveness is essential.

The financial system review act upholds the long-standing tradition of ensuring standard reviews of the regulatory framework for financial institutions to keep a stable and secure financial sector. For that reason, I urge all members to support for all Canadians today's bill and the continued safety and security of our shared financial system.

[Dean Allison, Conservative, Niagara West—Glanbrook, ON]

Madam Speaker, I want to remind the House that it was this Minister of Finance who, when pressed about imposing taxes on all financial transactions around the world, led the charge in telling governments around the world that would not be a good idea in financially difficult times. Therefore, we certainly trust this Minister of Finance to do the right thing, not only in the interests of this country but also around the world.

I am grateful to have this opportunity to lend my voice to today's debate on Bill S-5, the financial system review act.

In many ways, today's act can be seen as fine-tuning an already mature, stable and sophisticated financial system. As members are aware, our financial sector has been the envy of the world during the recent worldwide economic crisis and this legislation continues to build on and enhance an already strong system.

By way of background, I would note that the government reviews all legislation governing federally regulated financial institutions every five years, to ensure the stability of the Canadian financial services sector. Today's act is the product of the latest five-year review, which began in September 2010 with an open, public consultation. It is imperative that this act be passed by early April as there is a sunset clause in the existing legislation. The four principle acts that govern the financial sector, the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act and the Cooperative Credit Associations Act, all have their sunset dates renewed for five years.

Bill S-5 also contains changes to federal statutes such as the Financial Consumer Agency of Canada Act, the Office of the Superintendent of Financial Institutions Act, the Bank of Canada Act, the Canada Deposit Insurance Corporation Act and the Canadian Payments Act.

Not so long ago Canada's financial system was considered too conservative and small to be doing business on a global stage, but not any more. Now Canada is recognized and celebrated beyond our borders for having a strong and stable financial sector. As we all know, over the past four years the World Economic Forum has ranked our banking system as the soundest in the world. Forbes magazine has ranked Canada as number one in its annual review of the best countries to do business. The IMF as well has heralded Canada's financial system and its oversight. It states:

The Canadian banking system was able to withstand the international crisis well, and the authorities have continued to monitor risks closely.

We can be rightfully proud of the reputation we have in this area, but that does not allow us to rest on our laurels. We must constantly update our regulations, and Bill S-5 reflects our government's commitment to this effect. Growth in the industry necessitates constant diligence within our regulations and laws.

Canada's financial sector is now operating on a truly global scale, diversifying its customer base and taking best practices to countries around the world. The Prime Minister's recent tour of China promoting our economic ties there provides an excellent and timely example of this outward growth and the Canadian financial system's increasing influence in that Pacific economic superpower. While in Beijing recently, the Prime Minister announced the conclusion of negotiations toward a Canada–China foreign investment promotion and protection agreement. This agreement is a treaty designed to promote Canadian investment abroad through legally binding provisions as well as to promote foreign investment in Canada. By ensuring greater protection against discriminatory and arbitrary practices and enhancing predictability of the market's policy framework, the agreement allows investors to invest with greater confidence. Canada has consistently supported strong, rules-based investment through the negotiation of such agreements. Once fully implemented, the Canada–China foreign investment promotion and protection agreement will facilitate investment flows, contributing to job creation and economic growth in Canada. China is now Canada's second largest merchandise trading partner and our third largest export market.

Trade in financial services has been a key part of that growth and can be expected to grow continually in the years to come. Direct investment between Canada and China has increased substantially in recent years and there has been progress with respect to portfolio investment, as well as under China's qualified domestic institutional investor and qualified foreign institutional investor programs.

Just as they are doing elsewhere in the world, Canada's financial institutions are increasing their presence in China. For example, Scotiabank recently won a bid to purchase a key stake in a bank, a major Chinese financial institution with more than four million customers. In 2010, the Bank of Montreal became the first Canadian bank and one of only three North American banks to incorporate in China. In 2010, Sun Life Everbright more that tripled its reported gross life insurance business in China through its 19 branches. The company provides insurance, covering over nine million customers. In 2011, Manulife announced licences for its joint venture, Manulife-Sinochem Life Insurance Company, to enter five new cities in China, bringing its total presence to 49 cities across 12 provinces with a total population of 350 million people. Last year, the TSX opened offices in Beijing to advance Canada's capital markets. Last year, Power Corporation of Canada purchased a 10% stake in the China Asset Management Company, the country's largest asset manager.

Chinese financial institutions are also coming to Canada to invest because of our pro-trade environment. Indeed, last year, the China Investment Corporation announced the opening of a Toronto office, representing the first permanent foreign location for this huge Chinese financial institution. In the words of the president of the China Investment Corporation:

There are countries with comparable economic characteristics to Canada, but with a lot less friendly environment. In our dealings with the Canadian government, various parts of the government, with the business people, we feel that it’s a lot more congenial to our investments.

Canada's financial services industry is merely one example of an industry whose horizons have broadened significantly. As the Prime Minister's recent visit made clear, these efforts are reaping results.

Here at home, we are making the necessary adjustments to foster this growth. That is why today's bill would reduce the administrative burden. For example, federally regulated insurance companies offering adjustable policies in foreign jurisdictions would be relieved from providing duplicate disclosure requirements.

In the years to come, though it is already an attractive place for trade and investment, Canada will become an increasingly attractive choice for trade and investment, including financial services.

Being a prime choice for trade and investment does not happen easily, but here in Canada it happens for several reasons. First, we have relatively solid economic fundamentals compared to most of our peers, especially among the G7. Over 610,000 more Canadians are working today than when the recession ended, resulting in the strongest rate of employment growth by far among the G7 countries. Even better, nine of ten positions created since July 2009 have been full-time positions, with close to 80% of those being in the private sector. Real GDP growth is now significantly above pre-recession levels, the best performance in the G7. We have also reduced red tape, and we continue to promote free trade through not only our tariff changes but also our free trade agreements.

I am proud that our Conservative government has signed free trade agreements with nine countries and that we are in negotiations with an additional 50 countries, including India and the European Union. As chair of the Standing Committee on Foreign Affairs and International Development and a former member of the international trade committee, I have seen first hand how these trade agreements strengthen our economy and provide Canada with a greater voice on the global stage.

I am also proud of our low tax plan, which has resulted in Canada now having an overall tax rate on new business investment substantially lower than that in any other G7 country, and below the average of the member countries of the OECD. This low tax plan is about making Canada a strong destination for investment and jobs, not driving businesses and jobs away with massive tax hikes like the NDP proposes.

Bill S-5 will ensure that our financial system remains a critical element of our success and maintains its place in the ranks of global leaders.

If we look at what the government has been doing over the last number of years, as I mentioned earlier, lower taxes and reduced red tape have been important. Nonetheless, there have been many other things that the Prime Minister and the government have done, including trying to resolve border issues with the president of U.S., for example, so that our goods can flow more freely across our borders. I also mentioned the additional places to sell our goods through the variety of free trade agreements, as well as our continued commitment to maintaining a strong and stable banking system.

As we look at these things there are also R and D investments that we continue to make. We realize that the way we are going to move forward is by being able to commercialize some of these R and D opportunities.

We realize that a strong financial sector is not only important to business but also equally important to all Canadians, who depend upon it for jobs and for their daily financial transactions.

I encourage all hon. members to support this important legislation and see that it is passed.

[Scott Brison, Liberal, Kings—Hants, NS]

Madam Speaker, it is a pleasure to rise today to speak to Bill S-5.

This legislation does not make significant changes to the Canadian banking system. In fact, the Canadian banking system is probably, if not the most, among the most prudentially sound banking systems in the world.

That is something all of us as Canadians recognize as being important to our Canadian economy. I believe it is good for Canadian jobs. It is good for our role in the world and our influence on the world. The growth in the scale and success of Canadian banks compared to other banks in other countries, in other banking systems, in recent years has been remarkable.

It is important to recognize why that is the case. While I agree with the Conservatives when they say that the World Economic Forum and other international fora recognize that Canadian banks and the Canadian banking system are among the best in the world, where I differ from them is on the genesis of why that is the case.

The reality is that during the 1990s, when the global trend in the U.S. and Europe was to go to rampant deregulation, it was the Canadian government that said no, that refused to follow the lemmings in other countries off the cliff.

In Canada, the Chrétien government, with Paul Martin as finance minister and Jean Chrétien as Prime Minister, was under immense pressure to follow the global trend of deregulation. They said no to that. They disagreed with that because they did not believe it was in the interests of Canadian bank customers, in the interests of Canadian small business or in the interests of ultimately the prudential strength of Canadians banks to do that. The decision was made not to deregulate at that time, and thank goodness that was the case.

It is important to realize that there were many members of the Reform Party or the Canadian Alliance Party. I forget what it was at that point. They were in fact opposed to the government and the decisions at that time.

I will be the first to offer a mea culpa from my perspective, because there were times when I was critical of the government's caution at that time. I will be the first to admit that when I criticized the government for its caution at that time, I was wrong. I will admit I was wrong, and I will not take credit personally for the decisions made by the Chrétien and Martin team at that time. I was wrong; they were right.

I just wish that at some point the folks on the other side, who were also wrong at that time, would admit that they were wrong and Mr. Chrétien and Mr. Martin were right. I do not take credit personally for the fact that some very strong and sound decisions were made by the Chrétien and Martin government, because I was criticizing those decisions at the time.

Again, I was wrong. Mr. Chrétien and Mr. Martin were right and the Liberal government was right. All I am saying is that when the government speaks of, and boasts of, the prudential strength of Canadian banks and our reputation in the world, it ought to do the same thing, have the same journey I have gone on where we embrace our inner honesty and expunge our inner hypocrisy, and we feel so much better. It is completely cleansing.

Let us look at what happened in the nineties. The reality is that the Chrétien and Martin government did the right thing by not following the global trend of deregulation.

There are some other reasons why Canada is doing well and our financial services sector is doing well. Part of it is that there is a massive global trend for commodities, and we have a lot of commodities in Canada: oil, gas, mining. Just in mining finances, 80% of all the mining transactions, financings, in the world over the last five years were transacted in Toronto.

I was in Calgary last week. I met with some oil and gas finance companies and some oil and gas companies. Calgary is booming in terms of oil and gas financing.

None of us in this House, not even the Conservatives, can legitimately take credit for putting the oil and gas under the ground or the minerals or potash under the soil. The Conservatives cannot say they put the oil and gas under the ground in Alberta or the potash under the ground in Saskatchewan. We all know they did not put the oil and gas off the coast of Newfoundland and Labrador. That was Danny Williams.

The reality is that we have to be honest with each other about why we are doing well as a country. Two of the reasons are that we have a strong banking system and we have become the global centre for mining and for oil and gas transactions. That is all very good.

In this bill, specifically, one of the changes the government is making is the decision that takeovers of foreign banks by Canadian banks will be subject to not public servant scrutiny in some cases but will go to the minister's office. The minister's office will make the determination, depending on the size of the transaction and the size relative to the Canadian bank's assets. It will not be OSFI, as an example, in the public service that will have the decision to make; it will be the minister's office.

I can understand the rationale from some perspectives. The government may see that as an extra level of precaution in terms of the minister's office, but I have a concern. I raised this at committee, the politicizing of these transactions. We know Canadian banks have been very acquisitive in recent years. We have seen the Bank of Nova Scotia buy all the Royal Bank of Scotland's assets in Colombia and more recently a significant retail bank in Colombia. The Bank of Nova Scotia bought 20% of the Bank of Guangzhou for $700 million in China a few months ago.

We are seeing that happen, and that is generally a very positive news story in terms of those head office jobs that will be here in Canada and the opportunity for us to strengthen our influence, financially and in business around the world. However, I want to see these transactions judged based on prudential strength, not on politics and other issues. I think we have be careful with that.

Another thing, when we are talking about the banking system, is that one of the biggest concerns we have is the level of personal debt Canadians are carrying right now. There is $1.50 of debt, on average, for every $1.00 of annual income in Canadian families. That is at a record high. That is actually higher than that of our American friends, who are less indebted personally than Canadians today. Canadian families have the highest level of debt. It is higher than the personal debt levels of Americans.

We have historically low interest rates today. People are struggling just to get by today. A lot of people have lost their full-time jobs. They have seen their full-time jobs replaced by part-time work. We have seen a bifurcation of the Canadian economy where for people who are in Alberta or Saskatchewan, which have a lot of natural resources, it is a very different kind of economy than if they were in Ontario or Quebec or the Maritimes.

The reality is that one of the reasons why we have seen growth in personal debt is not that Canadians are going out and buying big screen TVs and boats, as the Minister of Finance said when he blamed personal debt levels on Canadians' profligate spending on big screen TVs and boats. It is not that. It is that a lot of Canadians have lost their full-time jobs, which have been replaced by part-time work.

The other factor is that the government has sent signals to Canadians and in fact has changed the rules and regulations around lending to actually encourage Canadians to take on more debt. In his first budget in 2006, the Minister of Finance brought in 40-year mortgages with no down payment, for the first time ever in Canada.

The government has to take some responsibility for the growth in personal indebtedness and the degree to which Canadian citizens and families are leveraged financially today, because it changed the rules in 2006 to 40-year mortgages—

[Stella Ambler, Conservative, Mississauga South, ON]

Madam Speaker, I am pleased to speak in support of Bill S-5, Financial System Review Act, at third and final reading.

As members may recall from the second reading debate, today's bill is the result of the long established practice of reviewing legislation governing federally regulated financial institutions every five years. This practice sets Canada apart from almost every country in the world and ensures the safety and stability of Canada's financial system. This practice has also been praised as an important reason that Canada's financial system remains the soundest in the world.

Earlier this year, the independent Financial Stability Board praised this practice when it said:

...a review of all legislation to ensure that it is current, contributes to stability and growth of the financial sector and, by extension, allows Canada to remain a global leader in financial services.

The present five year review process began with an open and public consultation in September 2010 when all Canadians were invited to provide their views on how to best improve our financial system.

Before continuing today, I want to recognize and thank the members of the House finance committee for their timely review and support of today's legislation. During the committee's consideration, representatives of groups appeared, ranging from the Credit Union Central of Canada, the Financial Consumer Agency of Canada, the Office of the Superintendent of Financial Institutions Canada and more. We thank all the witnesses before the committee for taking the time to appear and give their thoughts. I will note that the witnesses were united in their belief that keeping Canada's financial system safe and secure was a very important goal.

Without a doubt, Canada's financial system is important to our economy and jobs as well. In fact, it employs over 750,000 men and women in good, well paying jobs and represents about 7% of Canada's overall economy. What is more, Canada is a world leader in this field and a model for the world to look to, especially during the recent economic turbulence.

We did not nationalize, bail out or buy equity stakes in banks like the U.S., the U.K. and Europe. In the words of Constantine Passaris, professor of economics at the University of New Brunswick:

The Canadian way is to record our national achievements in a low-key and understated manner. There is one economic achievement however, that has made the world stand up and notice. Indeed, in this case, we cannot hide from the international spotlight and we can proudly accept the global applause for our Canadian banking system.

At the end of the day, Canadian banks proved resilient in the aftermath of the 2008 financial crisis. Furthermore, they remain solid financial institutions capable of serving as the catalyst for the economic recovery. Indeed, they are a global beacon and a role model for exemplary banking in the 21st century.

It is little wonder, then, that over the past four years the World Economic Forum has ranked our financial system as the soundest in the world. The financial system review act would help ensure Canada continues to have a financial system so safe and secure that it remains a model for other countries around the world.

As I mentioned earlier, in order to keep the legal framework of our financial system up to date, Canada reviews this legislation on a five year cycle. Ordinarily this review cycle is sufficient to keep pace with new developments. However, faced in 2008 with the deepest and most wide-reaching financial and economic crisis since the Great Depression, our Conservative government took more immediate action.

Between 2008 and 2011, we took important steps to make our financial system more stable, reduce systemic risks and ensure we had the flexibility and power to support financial institutions during a crisis. Our actions included enhancing the power of the Bank of Canada to provide liquidity to financial institutions, expanding the tools available to the Canada Deposit Insurance Corporation for resolving a troubled institution and taking proactive steps to protect and strengthen the Canadian housing market.

Our approach proved effective as the Canadian financial system remained a rock of stability through the global financial crisis and won international praise. In the words of the Irish Independent:

The Canadian system has won praise worldwide, with US President Barack Obama among its fans.

The Canadian system is undoubtedly an excellent model....

Our government has not been sitting on its hands. Instead, we have improved many key elements of our financial system and strengthened it by adding new tools. Therefore, it will not shock members to learn that, in public consultations done in advance of today's bill, most agreed that a major overhaul was not needed. That is why the financial system review act focused on minor yet significant refinements of the system, not a major overhaul.

I will briefly highlight one such key element in today's bill that has attracted some attention.

The financial crisis highlighted the importance of evaluating the overall size of financial institutions, their global linkages and the impact these factors have on financial stability, and the best interests of Canada's financial system. As a partial response to lessons learned, today's bill proposes to reinstate an existing ministerial approval for select foreign acquisitions of financial institutions.

I will provide historical background. In 1992, the government of the day amended the legislation to allow federally regulated financial institutions to own a foreign subsidiary or to hold a substantial investment in a foreign institution with the approval of the minister. In 2001, the requirement for ministerial approval and review by the Department of Finance was repealed and oversight was limited to the Office of the Superintendent of Financial Institutions.

However, since 2001, the global banking crisis has highlighted new risk factors that support greater oversight to keep our financial systems secure. As such, we are reinstating some of those historical oversight provisions that were repealed in early 2001. This would simply add ministerial approval if a federally regulated financial institution acquires a major foreign entity which increases its assets by more than 10%. The criteria that the minister could consider are hard-wired in the legislation, that being the stability and best interest of the financial sector. The timeline for approval is also hard-wired. The legislation requires the minister's consideration in 30 days or it would be deemed approved. In effect, the minister has 30 days to deny or ask for an extension. This would likely apply only rarely. In fact, since 2004, there have been only a small number of cases where the proposed legislation would have applied.

I would note that the reaction from academics, bankers and the Superintendent of Financial Institutions herself have been quite supportive of the provision. For instance, Michael King, professor of finance at the Ivey Business School said:

This kind of a rule is actually one of the reasons why Canadian banks weathered the crisis so well over the years.

Canadian banks have done well. And it’s helped the Canadian economy to have such stable banks.

Our Conservative government believes that modern and effective regulation is important for consumers and for a prosperous economy. By enacting the financial system review act, we will ensure that our financial system remains safe and secure. That is why I ask all members of this House to support Bill S-5.

[Jean Rousseau, NDP, Compton—Stanstead, QC]

Madam Speaker, I believe that the amendment is perfectly relevant because the clause would grant immunity to people who have power over extremely important legislation in Bill S-5.

Once again, senior bureaucrats would hide behind the iron curtain that the Conservatives are erecting to thwart anyone who does not agree with their party. I support this amendment, and I would like my colleague to explain why the House should agree to it today.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

moved:

Motion No. 1

That Bill S-5 be amended by deleting Clause 212.

Madam Speaker, I am pleased to rise in the House to talk about our amendment, which seeks to delete clause 212 of Bill S-5, which reads:

The Superintendent, any Deputy Superintendent, any officer or employee of the Office or any person acting under the direction of the Superintendent, is not a compellable witness in any civil proceedings in respect of any matter coming to their knowledge as a result of exercising any of their powers or performing any of their duties or functions under this Act or the Acts listed in the schedule.

This clause is a concern for us. This aspect of the bill gives the institution immunity with regard to the transparency of its decisions. This is something that affects us and with which we disagree.

When we talk about Bill S-5 in its ensemble, I would like to say that the NDP is supportive of Bill S-5 and will be voting in favour of the bill. However, I would like to mention our concerns about the process regarding the bill and the results that are before us today.

The government is obliged to make revisions to the Bank Act and revisions to financial institutions on a regular interval. It is very important for the government to actually look at the situation of the banking industry in our country, look at its impacts on ordinary families and to hold a broad degree of public hearings to come forward with a bill that provides those substantial revisions to the Bank Act while protecting the fundamental stability of our financial institutions. The government has failed to do that.

The NDP has been the foremost advocate of maintaining strong and rigorous financial accountability around our banking system. Members will recall the many times when the previous Liberal government and the current Conservative government talked about weakening those regulations we ensured that we had rigorous accounting within our banking system. It has always been the NDP that has stood foremost for stability in our banking sector and ensuring at the same time that there are rigorous regulations that apply.

It is because of the defence that the NDP has mounted in the House of Commons that we continue to have stability in our financial institutions. When we compare it to some of the others around the world, when we look at what happened in Iceland and the meltdown that occurred in the United States, we can understand the risk that comes when the government moves to reduce regulation in our banking sector.

We certainly are the strongest proponents in the House of having rigorous regulation governing our banking sector. Anyone on the other side who doubts that only need look at Hansard over the past few decades to see that tradition which we have established in Parliament.

We also believe in protecting the public interest and the interests of ordinary families. The way Bill S-5 was brought forward, the fact that very few were even aware that these revisions to the Bank Act were taking place, the fact that the bill originated in the Senate, that it was brought forward in the House at a late time and had to be adopted in April did not allow for rigorous analysis of our current banking sector. That simply did not happen.

The finance committee did have some hearings. I want to get back to some of the comments that were raised in the few hearings the finance committee had on the subject. However, the reality is, when a bill is brought forward at a late date, when the deadline is a fixed date in April when the bill has to be adopted, although the NDP has co-operated, we have raised concerns about how remarkably late and how few public hearings could be held into what is such an important matter. Some of the witnesses who appeared before finance committee raised these issues as well.

The coordinator of the Canadian Community Reinvestment Coalition flagged the fact that with record first quarter profits we have seen in the banking industry, banking profits are up 5.3% compared with 2011. These profits have occurred while raising bank fees and cutting jobs in the sector. The coordinator of the Canadian Community Reinvestment Coalition also said that past government actions have been ineffective in ensuring Canada's big banks are not making excessive profits from gouging customers, cutting services and failing to lend to job-creating Canadian businesses. This view was also shared by Option consommateurs in Quebec. Jean-François Vinet said that the bill does nothing to protect consumers from criminally high interest rates on credit cards.

This is why we object to how the government has brought this bill forward at a late date, in a scattered fashion, without any real intent to get public feedback on revisions to the Bank Act.

It is the end of March and this bill needs to be adopted within a few weeks' time, and yet, there are issues around how ordinary families are impacted by the Bank Act and by the government's failure to take action. We feel that is profoundly unfortunate.

We are not talking about a situation that is unimportant. Under the Conservative government, we see that Canadian families are experiencing a record level of household debt, a level of debt that we have never seen in our entire history. People might say that Tory times are tough times. It is very true that under the Conservative government, Canadians are poorer, when we look at the high debt levels and the real wage reduction that Canadians have experienced over the last year or two.

It is a matter of broad concern to us that while Canadian families are struggling under a record level of debt, the government did not choose to bring forward in a public way revisions to the Bank Act to allow Canadians to have their say on what is happening with the current structure of the Bank Act and financial institutions and how current levels of high interest rates are impacting them.

Bank of Canada Governor Mark Carney warned that the ratio of debt to income will rise within Canada from an already alarming record 153% that was reached last year. Many think it will approach the landmark 160% hit by the United States before the United States tipped into crisis more than three years ago.

We are talking about a crisis level in household debt. We are talking about a crisis level in how Canadian families that we represent in communities across the country from coast to coast to coast are coping with these record debt loads. A not unimportant element of those record debt loads is the high interest rates that are charged by the financial institutions.

Bill S-5 originated in the Senate and was brought to the House of Commons at a late date and after very little public input. The finance committee was not allowed to conduct the kind of public hearings that could lead to changes in the Bank Act. As the few consumer representatives that were able to come before the finance committee stated very clearly, nothing in the revisions contained within the bill deals with the fundamental questions that we have been raising in the House on what Canadians are feeling form coast to coast.

Every single member of the NDP caucus is acutely aware of the crisis levels of household debt. We have raised the issue in the House, and yet the government does not seem to think it is important. These record levels of household debt, unparalleled in our history, that Canadian families are experiencing seem for the Conservatives to be a normal manner of living.

Given the profound job loss that has been experienced over the past few months, the tens of thousands of jobs lost and the reduction in real wages that Canadian families have experienced, we think that the government should be looking to help Canadian families.

We brought forward a series of amendments in committee to address some of the issues that we felt were not being addressed by the process around Bill S-5. I have already mentioned the lack of public input, the late date at which the entire process was begun, the late date by which the government brought the bill from the Senate to the House of Commons, allowing for scant debate.

Understanding as we all do that there is a fixed deadline when the bill has to be passed, we endeavoured to bring forward a series of amendments. Every single one of those amendments was refused by the Conservative government. We think the Bank Act revisions should be treating Canadian families—

Speaker's Ruling

[The Deputy Speaker, NDP, Denise Savoie]

There is one motion in amendment standing on the notice paper for the report stage of Bill S-5. Motion No. 1 will be debated and voted upon.

I shall now propose Motion No. 1 to the House.