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

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, contrary to what my colleague mentioned a while ago, we played an important role in ensuring that the banking system would be a good system here in Canada because the NDP was the party that opposed the nationalization of the banks.

I want to speak to the bill, because it is extremely important, and to the changes that need to occur. I know my colleague recognizes that there needs to be some changes to the bill because his party supported one of our amendments which would have made it obligatory for the Minister of Finance to consider the net benefit to the Canadian economy as a supplementary criteria for approval.

I am just wondering if my colleague could speak to why this bill should have been dealt with at a House of Commons committee and not a Senate committee?

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, I give full credit to the member for her attempt at trying to rewrite history. The reality is that during the 1990s, when the debate was hot and heavy, there was a Liberal majority government. I believe the New Democrats had 13 members. The framework, I suspect, was likely not influenced by the New Democratic Party.

I can appreciate that there is this movement lately for the New Democrats to try to proclaim themselves as Liberals but I do not think they will fool Canadians. People will vote for the real thing as opposed to those who want to talk about good liberal policy. We will have to wait and see.

The banking industry as a whole and the regulations, which are important, are things on which the Liberals have a great track record. Not to give up hope, we hope to be able to continue to influence that, not only in opposition but also back in government some day, Canadians willing.

[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.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, I appreciate the comments from my colleague. Certainly there are some really good points with the bill and we do support the bill. However, we think there need to be some amendments, amendments which would talk about transparency. We know that the government is not quite supportive of transparency because we have seen all the hogwash that has been happening since the election of May 2011.

In any event, I want to touch base with my friend. This is an extremely important bill. Does he not think that it should have had more time for debate, that it should have had more time at committee, and that it should have gone to a House of Commons committee as opposed to a Senate committee?

Let us not forget that only three sessions, four hours to examine the bill, one session with officials from the Ministry of Finance and one session for witnesses, and a two hour session for a clause-by-clause review, is really not enough for a bill this size, not to mention the fact that some of the witnesses have been anonymous.

I would like him to talk about the process and the fact that this is an extremely important bill and has not had due respect.

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

Mr. Speaker, this process and the consultations have been in place since 2010.

The sunsetting clause, the sunsetting of the legislation this year, makes this important legislation to come to the House today, not only to ensure that we give it its due diligence, but to ensure that we pass it.

As for significant amendments to the legislation, as I said in my speech and has been said by members on both sides of the aisle, the banking system that we have in Canada is one of the best in the world. It is recognized around the world as one of the strongest banking systems there is. It is one of the reasons why we did not have to bail out the banks in our country as has happened in the United States, England and other countries around the world. It is very important that we continue along this line, without adding substantial amendments that the NDP would like to put in place.

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

Mr. Speaker, a couple of interesting points have been raised in the debates today.

I would like to get clarification from my colleague across the way. Traditionally a bill of this type would be generated and would come from the government. Why in this particular case is this a Senate bill? Why would it have been started in the Senate and taken this approach, this path?

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

Mr. Speaker, I have been listening to many of the speeches given as well as questions and answers in the House today.

I am glad the hon. member for Cape Breton—Canso stood up so that I could talk about his question. There are also some ideas he has been proposing on a 40 year mortgage, which he continues to throw out there. At the end of the day, he constantly forgets to mention the fact that it was this government that took the prudent steps to decrease the maximum mortgage period from 40 to 35 years down to 30 years, and also to lower the maximum amount lenders can provide when refinancing mortgages to 85%.

The other part the hon. member for Cape Breton—Canso constantly forgets is that he voted against all these changes that were made. I hope that, in the spirit of co-operation, he will stand up and finally support the Canadian financial sector and those Canadians in my riding who depend on common sense decisions, not just partisan rhetoric.

[Kevin Sorenson, Conservative, Crowfoot, AB]

Mr. Speaker, I want to thank my colleague from Alberta for the great speech he gave. I do not know if he had the opportunity to watch any of the NDP convention this past weekend. It seemed that when they were not attacking the oil sands of Alberta, they were attacking banks. If they were not attacking jobs and trade, they were attacking banks. If they were not attacking banks, they were attacking the oil sands in Alberta.

In fact, it was written in today's The Edmonton Journal that in this new leader's world, “the oilsands are to blame for all that is wrong with Canada's economy, full stop”. Also in the new leader's policy book, in dealing with banks and bank transactions, he wrote he would “make the implementation of a financial transition tax a key priority”.

Could my colleague explain to us the ramifications this would have on the economy now, where every individual who concluded a banking transaction would now be faced with an extra service charge so that big government could become bigger, and that big bureaucracy could become bigger? How would that hurt our economy?

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

Mr. Speaker, as we all know, the members from the other side, whether they are in the official opposition or the third party, have never seen a tax they did not like to implement, and have never seen a bureaucracy they did not like to increase.

At the end of the day, with the amendments that have been brought forward, the viewpoint of the leader of the official opposition and other members on that side is that we actually need to change our regulatory system. We need to move more to a nationalized system. We need to start taking over some of these banks so they can have more control. I think that is a very dangerous road to go down.

Our system has proven to be successful, the best in the world. I do not know why the NDP members would want to change this. It makes as much sense as their constant attacks on the oil sands in Alberta, which provide hundreds of thousands of jobs and billions of dollars of investment in our country.

All I ask is that the other side start looking at some of these things in the spirit of co-operation and what is best for Canadians, not just what is best for their—

[The Acting Speaker, Bruce Stanton]

Unfortunately, we have come to the end of the time allocated.

Resuming debate. The hon. member for Brossard—La Prairie.

[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.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, my colleague obviously understands the difficulties people are experiencing and the challenges ahead. We all know the importance of the bill. Therefore, I would like the hon. member to comment on some of the witness testimony.

Tyler Sommers said:

—Canada's big six banks have reported new record first quarter profits totalling $7 billion (up 5.3% compared to 2011) while raising banking fees and cutting jobs in the sector...

Duff Conacher from the CCRC explained:

Past government actions have been ineffective in ensuring Canada's big banks and other companies are not making excessive profits from gouging customers and cutting services and failing to lend to job-creating Canadian businesses.

Could he comment on how important it is for us to at least put in place the amendment the NDP has put forward, which talks about transparency and accountability?

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

Mr. Speaker, I would like to thank the hon. member for her question.

This is indeed a problem. As I was saying, I worked with banks before becoming a member of Parliament. I did business with people who worked in banks. Many of these people voted for me. Why? They did so because a balance is needed. Even the people who work in banks will say it: consumers are paying a high price. This is a problem, and what the hon. member said is completely true.

According to Duff Conacher, the coordinator of Democracy Watch and chair of the Canadian Community Reinvestment Coalition, past government actions were too little, too late to ensure Canada's big banks and other companies were not making excessive profits from gouging customers.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, I believe the member indicated he may have worked for a bank or was familiar with individuals who worked for one. I am unclear on that point.

If the member did work for a bank, what are his opinions on the user fees that are charged, for example, ATM charges, interest rates, withdrawal/deposit charges? Does he have a personal opinion that he could share with us?

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

Mr. Speaker, for clarification, I did not work for a bank. I am now in the House of Commons, but I used to be a corporate lawyer and I worked with banks. People who voted for me worked in banks, so I am familiar with what happens in the financial sector.

Even people who work in banks will tell us that there has to be a certain balance. When a bank is making billions of dollars in profit and it is gouging the consumers, people are not going to be happy. They understand that balance.

Unfortunately, at one point, they are even asking the government to regulate on some of those issues. We in the NDP are saying that interest rates on credit cards have to be capped and we have to put a cap on the excessive fees that banks charge.