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.

Second Reading

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

Mr. Speaker, first of all, I am appalled to see that we are debating a bill here today that has to do with important institutions, yet this government is muzzling us once again. This is a very important bill and the government knows this. First of all, it introduced this bill in the Senate, where senators are unelected and where the NDP has no voice. What the government is doing is completely unacceptable. It is appalling. It is repulsive. I am at a loss for words.

[An hon. member]

It is disgusting.

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

Yes, it is disgusting. That is an excellent word.

To be more specific, we want to debate this bill because it concerns financial institutions. I would remind the government that we are supposed to examine this issue every five years. The mandate that has been given is very limited. We are examining some technical aspects, which are certainly important, but why not take this opportunity to review the entire financial system?

I would remind the government that in 2008, a crisis originated in the United States, and it came from the financial system, the banks. This bill does not address that issue. Why not address it? We are not even having any public hearings on this. Ostensibly as a study, 30 submissions will be tabled and 27 of them are not even public. There really is a problem with transparency—

[The Deputy Speaker, Denise Savoie]

I am sorry to interrupt the hon. member.

I would like to ask members to take their conversations to the lobby while members are speaking. Thank you.

The hon. member for Brossard—La Prairie.

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

Madam Speaker, I was saying that this was an opportunity for us to study the financial system and address our current problems, including problems facing consumers. In terms of the financial institutions, we see that the banks are making billions of dollars in profit, while consumer and household debt is at a record high. What is more, banks have a hold on consumers and impose as many fees on consumers as they want. We would have had the opportunity to explore ways to truly protect consumers. In that sense, this government has dropped the ball.

There is also speculation. We saw what happened in the United States. Why not study this issue more at length? Why muzzle the House? Now is the time to study this bill. Obviously it is going to be referred to the Standing Committee on Finance, but now is the time for us to talk about it and debate it for consumers and the people we represent, those whose voices were not heard in the Senate. The government is scared and does not want to talk. It does not even want its own members of Parliament to talk about something so very important. Our economy depends heavily on the banks and financial institutions. Why not talk about cooperatives? That movement exists. Why is it not addressed in this bill?

We are saying that the government lacks confidence and courage, and now, it is demonstrating a lack of democracy. This government is preventing its members and the opposition from talking about really important issues. Instead of allowing debate, the government is relying on 30 submissions that were received and examined in three weeks. They may have been debated in the Senate, but not here in the House. Why will the government not give us the opportunity to discuss such an important bill?

We know that consumer bank fees are ever increasing, and people are now in need of our support. This bill could be used to offer such support. I am certain that the Conservatives' constituents are also experiencing the same problem with bank fees. Why not have a real debate on this issue here in the House and find real solutions? Instead, the Conservatives are limiting the debate, pushing the bill through and refusing to talk about it.

This behaviour demonstrates a lack of respect for this institution. I am a new member but I find what the Conservatives are doing to be completely unacceptable. They are attacking democracy. They are saying that an agreement was reached with regard to the bill, but we did not agree on the way the bill was examined or on the public consultation, and we did not agree on the mandate to study what to do about financial institutions.

This was the time to do it. The government lacked courage, and I am ashamed of its behaviour.

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

Madam Speaker, I thank my hon. colleague for his speech on these issues.

He mentioned that the Conservatives are invoking closure on this bill. Yes, they are shutting down debate. It is true that the Conservatives have absolutely nothing to offer and always say the same thing.

We, on the other hand, have done an analysis, as the member did in his first speech and again here today. We discussed the issue and examined all the legislation, including increasing the equity threshold that indicates the degree of control over financial institutions up to $12 billion, which is not desirable in the current context.

So, I have a few questions for my hon. colleague from Brossard—La Prairie. First of all, what does he think of the Conservatives imposing this closure once again, even though they have nothing to bring to the debate? The NDP, on the other hand, has a great deal to offer. Also, what does he think of increasing financial institutions' equity threshold to $12 billion? What does he think of that? Does he think—

[The Deputy Speaker, Denise Savoie]

Order. The hon. member for Brossard—La Prairie.

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

Madam Speaker, I would like to thank my colleague for the question. With respect to the first part of his question, I admit that the government's latest gag order leaves me speechless. Closure has become systematic and that proves that the government is making things up as it goes along. The government says that the bill has to be adopted quickly, so why did they not introduce it sooner? Why did they wait so long? Why use closure to move the bill forward rather than take the time to discuss it? This is about financial institutions and a system that is very important, not only for consumers, but also for the country's economic system. During the global crisis in the United States, we saw that the financial system can affect the whole world. Canada weathered the crisis fairly well because we have a good system, but we still have to study it.

With respect to my colleague's second question, the threshold was raised from $5 billion to $8 billion after the events of 2007. The matter should be studied. There is a problem. The holdings have increased, and a certain level of participation is being granted—

[The Deputy Speaker, Denise Savoie]

The hon. member for Marc-Aurèle-Fortin.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Madam Speaker, Bill S-5 contains new elements that nobody is talking about. The government talks about stabilizing the financial system. Bill S-5 fails to address a number of new products such as commercial paper, derivatives, aggressive tax planning and offshore accounts—an invitation to tax evasion. What does that mean for stability? What about the holds on cheques and the credit card interest rates that consumers are concerned about? My question is for my distinguished colleague, the member for Brossard—La Prairie. Should these issues not be thoroughly debated?

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

Madam Speaker, I want to thank the hon. member for the question. My colleague, who is also a member of the Standing Committee on Finance, knows full well that these issues are very important. The government is losing billions of dollars in revenue. Speculation is allowed in certain transactions and that is a problem. We have to study the situation more at length. It has a profound impact on our economy, and on the money that taxpayers are losing. What is more, it destabilizes our system. There are certain ways to do things and to work. We must study the bill, but unfortunately the government is closing the door yet again.

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Madam Speaker, I want to ask my colleague a question. He is the vice-chair of the finance committee and works very hard in that role.

He said there were groups or organizations that were excluded from the discussion on this bill in the Senate. Could he identify those individuals and organizations that were excluded and that he would want to be part of the discussion at the House of Commons finance committee?

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

Madam Speaker, I want to thank my colleague, who does excellent work as the chair of the Standing Committee on Finance. He is one of the rare Conservatives to do good work.

The official opposition is not in the Senate. That is why we are criticizing the fact that the bill is coming from the Senate instead of from the House of Commons. The Conservatives say there were debates and discussions in the Senate. Were we there? No. Were there public discussions on this issue? No. Submissions were sent, but there was no general consultation. The Senate's mandate was very limited. There were consultations on the technical aspects, but there has been no debate in the House on the big ideas. This is where we should discuss the direction we want to take with a bill.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Madam Speaker, I will be sharing my time with the parliamentary secretary, the hon. member for Kamloops—Thompson—Cariboo. I am pleased to have the opportunity to speak in support of Bill S-5, the financial system review act.

I note from the outset that while this is mandatory and routine legislation, it is vital to the continued strength and security of the financial system that Canadians depend on daily.

By way of background, the government reviews all legislation governing federally-regulated financial institutions every five years to ensure the stability of the Canadian financial services sector. Indeed, the last review was completed in 2007.

I should also mention that it is imperative that today's act be renewed by April 20, the legislated sunset date to allow the continued functioning of Canada's financial institutions.

The current five year review began with an open and public consultation, a process that began in September 2010, when the Minister of Finance invited the views of all Canadians on how to improve our financial system. During that consultation, a diverse group of Canadians engaged in the process and provided their thoughts to help further strengthen Canada's financial system.

Much of that feedback is reflected within today's bill. Indeed the financial system review act takes into account the feedback from consumer groups, industry groups and other Canadians to make targeted, many large and technical alterations to strengthen Canada's regulatory framework. Furthermore, I would also note that the bill has already been reviewed by the Senate and, in particular, the Senate Banking Trade and Commerce Committee.

The committee engaged in a detailed and timely review of the act, hearing from groups ranging from the Credit Union Central of Canada, the Canadian Life and Health Insurance Association, the Financial Consumer Agency of Canada, the Office of the Superintendent of Financial Institutions Canada, the Canadian Bankers Association and the Canadian Payments Association. We thank all the witnesses who appeared before the committee and shared their thoughts on the financial systems review act.

The witnesses, while keeping in mind its technical nature, were very supportive of the act overall. For instance, the Canadian Life and Health Insurance Association said, “Bill S-5 represents a welcome fine tuning of the various financial institution statutes”.

I will briefly outline some of the measures taken in the act at this time. Again, while the majority are largely technical, they are necessary to ensure continued stability and security of Canada's financial system. That is why the act will make changes to the following: update legislation to promote financial stability and ensure that Canada's financial institutions continue to operate in a competitive, efficient and stable environment; and fine tune the consumer protection framework, including enhancing the powers of the Financial Consumer Agency of Canada, to protect Canadian consumers and improve efficiency by reducing the red tape and regulatory burden on financial institutions.

Other measures contained in the act include reducing the administrative red tape burden for federally-regulated insurance companies and offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements. We certainly know, with the growth in the insurance industry, especially our Canadian insurance companies, that around the globe these are vitally important. I would also clarify that Canadians, including bank customers, would be able to cash government cheques under $1,500 free of charge at any bank in Canada, which is another key point, It would improve the ability of regulators to share information efficiently with international counterparts, while respecting the privacy of clients. It would also promote competition and innovation by enabling co-operative credit associations to provide technological services to broader markets.

The importance of the legislation and the need to keep Canada's financial system safe and secure has been made very clear with the recent global economic crisis and the demise of some of the world's most well-known banks.

Canadians recognize how fortunate we have been in recent years, due in large part to our sound financial system. Without a doubt, Canada's system has been a model for countries around the world. We did not have to nationalize, bail out or buy equity stakes in banks like the U.S., the U.K. and around the rest of the EU. In fact, for the fourth consecutive year, Canada is ranked number one for having the soundest banks in the world by the World Economic Forum.

The prominent business magazine, Forbes, recently stated, “With no bailouts, [Canada's financial system] is the soundest system in the world, marked by a steady and responsible continuation of lending and profits”.

As recently reported by the Toronto Star, a new report from the United States Congressional Research Service underlined how well Canada's system was regarded. 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.

Our safe and secure financial system is envied around the world. As the Consumer's Council of Canada has declared, “we have been identified internationally as having the best banking regulations in the world”. Canadians are no doubt aware of the troubled financial systems that have recently crippled other countries, leaving significant instability in the financial sector, housing market and economic marketplace. Many of the financial sector solutions now being promoted and adopted around the globe are modelled on the Canadian system that serves us so well.

Through today's bill, Canada's financial system would continue to be a fundamental source of strength for our economy and would remain secure for Canadians who rely on it daily. Today's legislation is also significant because it would support one of the most important drivers of our economy and jobs, the financial services sector.

Our financial sector plays a vital role in financial stability, safeguarding savings and fuelling the growth that is essential to the success of our Canadian economy, representing about 7% of Canada's GDP. Even more, this sector employs over 750,000 Canadians in good, well-paying jobs. Our financial sector provides stability to the housing market and other markets requiring significant borrowing. In that respect, the financial services sector also plays a significant part in the daily lives of Canadians.

The measures in the financial systems review act would provide for a framework that would benefit all participants in the financial services sector, financial institutions, as well as Canadians. The long-standing practice of assuring regular reviews of the regulatory framework for financial institutions is a distinctive practice that sets Canada apart from almost any other country in the world, a positive practice that is vital to the stability of this sector.

All Canadians should recognize the importance of regularly considering how we can better ensure the safety and soundness of our financial system. Today's legislation does just that. I encourage all members to support this important legislation and see that it progresses to the finance committee in a timely manner.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Madam Speaker, in his speech, the hon. member spoke a lot about how Canada's financial system is setting an example for the entire world and how it is completely effective. That is wonderful, but it is not because of the Conservatives. They have always supported deregulation. And that is what they are doing now: they are deciding not to regulate certain elements.

With regard to derivatives, a Montreal exchange handles only derivatives. How does the hon. member define derivatives? Does he even know what a derivative is? What does he think about aggressive tax planning that opens the door to tax evasion? How is it that we cannot regulate all this, and that Bill S-5 does not address these issues?