Bill S-5 (Historical)

Financial System Review Act

An Act to amend the law governing financial institutions and to provide for related and consequential matters

This enactment amends a number of Acts governing financial institutions. It also amends legislation related to the regulation of financial institutions. Notable among the amendments are the following:
(a) amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act and the Trust and Loan Companies Act aimed at reinforcing stability and fine-tuning the consumer-protection framework; and
(b) technical amendments to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Bank of Canada Act, the Canada Deposit Insurance Corporation Act, the Canadian Payments Act, the Winding-up and Restructuring Act, the Office of the Superintendent of Financial Institutions Act, the Payment Clearing and Settlement Act and the Financial Consumer Agency of Canada Act.

Financial System Review Act

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Madam Speaker, to you, my wife Geri, and all members, happy Valentine's Day.

Madam Speaker, I will be splitting my time with the great member for Yukon.

I truly appreciate the opportunity to lend my voice to today's debate in favour of the timely passage of Bill S-5, also known as the financial system review act. While very technical, this is a critically important piece of legislation.

This bill is the right thing for Canadians and the right thing for Canada's economy. It builds upon and complements the range of initiatives our Conservative government has introduced and will continue to introduce to improve the security of our financial system and to strengthen consumer protection for Canadians.

Indeed, Bill S-5 supports those principles in many important areas, including modernizing, strengthening and clarifying the consumer provisions in the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, and the Trust and Loan Companies Act, as well as others.

Members can rest assured that our Conservative government understands the importance of protecting consumers and the importance of protecting the larger financial system. During the global financial crisis, we came to appreciate the very real consequences of poor financial sector regulations around the world, especially in the United States and in Europe.

In particular, we saw that the interconnected structure of global finance demands a comprehensive and effective regulatory regime able to prevent problems in one area from spilling over into others. We also saw that ignoring these problems may bring unpredictable and often catastrophic results to a country's economy.

For this reason, it is important to take into consideration the strength, effectiveness and security of the broader financial sector in the regulatory framework when we discuss the positive attributes of Bill S-5.

Our Conservative government recognizes the importance of a stable and well-functioning financial system to the overall Canadian economy. Indeed, Canada has received high praise for our well-regulated financial system during a time of global economic turmoil. Even the Toronto Star was forced to admit:

Canada has won international accolades after the World Economic Forum ranked its banking system as the soundest in the world....Canadian banks...have largely skirted the worst of the turmoil. Unlike in the United States and Europe, no banks collapsed or had to be rescued in Canada during this financial crisis.

The Irish Times declared:

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.

In my remarks, I would like to highlight the housing market in particular. The housing sector warrants particular attention in light of its role in the 2008 financial crisis and the ongoing pressures arising from the U.S. housing bubble that are still being felt by the American financial system and have slowed that country's economic recovery.

In order to protect our housing market from the worst excesses seen abroad, our Conservative government has acted repeatedly and decisively to ensure its stability, especially with regard to mortgage financing.

Mortgage financing plays a key role in providing a reliable source of funds for prospective Canadian homeowners. Prudent mortgage lending standards and mandatory mortgage insurance for high ratio loans allowed Canada to avoid the housing crisis that occurred in other countries, especially the United States.

Since 2008, our Conservative government has taken prudent and measured steps to ensure that this system remains stable over the long term while maintaining economic growth.

In July 2008, February 2010, and January 2011, we announced a series of sensible adjustments to the rules for government-backed insured mortgages. The measures include: reducing the maximum amortization period for new government-backed insured mortgages to 30 years; requiring a 5% minimum down payment, and a 20% down payment on non-owner occupied premises; lowering the maximum amount lenders can provide when refinancing insured mortgages to 85% of the value of the property; requiring buyers to meet a five year fixed rate mortgage standard; and withdrawing government insurance backing on home equity lines of credit.

These adjustments will significantly reduce the total interest payments Canadians make on their mortgages, promote long-term sustainable home ownership, and limit attempts by banks to repackage consumer debt into mortgages guaranteed by Canadian taxpayers. Taken together, they would go a long way toward strengthening the regulatory oversight of the mortgage insurance industry. Many of these improvements to the mortgage insurance guarantee framework have helped to encourage Canadians to use their homes as a way to save responsibly for their families and their futures.

This would help to ensure that Canada's housing market remains strong. It has been applauded by numerous commentators and economists. Credit Canada's executive director, Laurie Campbell, called the most recent moves a “step in the right direction because it means more money in consumers’ pockets ”.

An editorial in Waterloo's The Record added, “The federal government has done the right thing in tightening up the rules for mortgages in this country”.

In a similar vein, a recent Calgary Herald editorial applauded the government's proactive approach and added, “It's good to see the government continue to be vigilant on this file”.

Furthermore, as the Minister of Finance has said repeatedly, our government will continue to monitor the housing market very closely and take further action if it is necessary.

We all recognize there is always work to be done to ensure the continued stability of the Canadian financial system and that ongoing vigilance is vital. That is why we are pushing for the timely passage of the financial system review act. The bill would provide the framework that would benefit all participants in the financial services sector, not only financial institutions but, more importantly, everyday Canadians. It would maintain 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.

Bill S-5 would play a key role, together with other strong links we are forging in areas like mortgage insurance, in protecting consumers and building a more efficient, effective, sound and competitive financial system for all Canadians. Renewing the Canadian financial institution legislation on a regular basis has resulted in a robust and effective financial system that is aligned and responsive to developments in financial markets and the broader global economy.

In summary, I would encourage all members to join in our efforts to ensure the strength and stability of Canada's financial system and support the financial system review act.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague for Windsor West for reminding the House of that important piece of Canadian history.

There was a movement afoot from the unofficial prime minister of Canada, Thomas d'Aquino, chief executive and president of the Canadian Council of Chief Executives. He was saying that we must allow the banks to merge so they could be competitive and play on this larger marketplace. They were dying to jump into this sub-prime mortgage fiasco, but they were not really big enough therefore they should be allowed to merge.

There was a national campaign, “Purge the Urge to Merge”. People were crashing the shareholder meetings of the national banks trying to stop this runaway freight train of Canadian banks merging.

Had it not been for the sober second thought of the NDP in exposing this, as the official opposition was all for it, those banks would have merged and dove right into the big leagues in which they wanted to play. They would have brought upon our country the catastrophic outcomes that they exposed other countries to, specifically the United States.

I would ask my colleague to perhaps reflect for a moment on his own party's position on banking as it pertains to Bill S-5.

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

Mr. Speaker, the reality is that, in opposition, the Reform Party fought vigorously against the decision of the Chrétien government to maintain strong regulations around Canadian banks, the very regulations that kept Canadian banks from following the global trend and off the cliff like the lemmings in Europe, in the U.K. and in the U.S.

What did the Conservatives do in government in terms of the prudential management of banks? One of the first things the Minister of Finance did in 2006 in his first budget was to bring in 40 year mortgages with no down payments. This created the loosest approach to mortgage lending in the history of Canada.

Furthermore, in 2007, the Conservatives went further. Under the Liberal government, Canadians needed mortgage insurance if the down payment on their mortgage was less than 25%. In 2007, the Conservatives changed that and lowered the threshold to 20%.

Those were just some of the changes they made to create looser mortgages, looser regulations, which led to, among other things, what many economists are now referring to in Canada as a housing bubble, certainly a personal debt bubble. We have the highest level of personal debt in Canada today, which is $1.53 of personal debt for every dollar of annual income. That is the highest in our history and it is higher than that of our neighbours to the south in the U.S.

The February 4 edition of The Economist magazine states:

When the United States saw a vast housing bubble inflate and burst during the 2000s, many Canadians felt smug about the purported prudence of their financial and property markets.

It went further and cited the Prime Minister at that time boasting in 2010. It then states:

Today the consensus is growing on Bay Street... that [the Canadian Prime Minister] may have to eat his words.

The Economist then said that Canada's housing prices had doubled since 2002. This has coincided with a massive growth in our personal debt levels. We see a great increase in speculation in the housing markets, particularly in some hot markets, such as Toronto and Vancouver, among others, and we see this growth having occurred, in part, in a response to the deliberate decisions by the Minister of Finance to loosen up debt and mortgage regulations back around 2006 and 2007.

The government must be held to account for those decisions, which actually helped create what we hope is not a housing bubble that ends badly but is certainly a personal debt bubble that needs to be managed.

It is important to realize that the Conservative government cannot take credit for the prudential decisions made by the previous Liberal government, and that the current government must be held to account for some of the foolhardy decisions it made as a government to loosen banking regulations and to loosen mortgage rules early in its term.

I want to note a couple of other things about Bill S-5 because some of the changes would have an impact on Canada's incredibly strong banking sector and its role in the world. One change is requiring the minister, in order to approve foreign acquisitions by a Canadian entity, under certain circumstances, for instance if the foreign entity being acquired has equity of at least $2 billion and if the acquisition of the entity would increase the size of the Canadian entity by at least 10%.

Under those circumstances and conditions in this legislation, it would mean that the Bank Act would require the minister to approve the acquisitions of these foreign financial institutions by Canadian banks. That is a change. The previous rules simply required that the Superintendent of Financial Institutions, OSFI, would approve those within the public service, within the bureaucracy.

Recent deals that would have triggered this mechanism of ministerial approval would have been the Manulife John Hancock deal, the TD Commerce Bancorp deal, the BMO Marshall & Ilsley deal and Sun Life. There are other large acquisitions that have occurred in the last couple of years: Scotia Bank bought Banco Colpatria, Colombia's fifth largest bank, and it also bought the Royal Bank of Scotland's Colombia assets as well 20% of the Bank of Guangzhou.

I want to raise as a concern, that the government consider the politicization of these foreign investments by our Canadian banks and the potential risk to the capacity that we have in doing so. The fact is we now have some of the largest banks in the world that are world leaders in terms of governance and success. With the capacity to significantly increase Canada's influence in the world in terms of a very important financial services sector, this politicization could lead to some highly political and potentially bad decisions in the future which would limit the role of Canadian banks in the world.

I raise that as a concern and I look forward to questions from my colleagues.

The House resumed consideration of the motion that Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the second time and referred to a committee.

[Rob Merrifield, Conservative, Yellowhead, AB]

Mr. Speaker, it is a privilege to speak to Bill S-5, the financial system review act.

The bill has cleared the Senate and is now in the House. Some of my colleagues on the other side are asking why now and why so fast. It is not really fast. The consultation process started in September. We had to use that process to be able to get it to this place. Then we need to get it to committee and move it through so that it can actually be implemented by April of this year. That is very simple to understand.

We have a very strong and stable financial system in Canada. In fact, we came through the financial crisis with flying colours as a country, as did our financial institutions. Why? It is because we do these regular reviews. We ensured we made changes as we moved along and that nothing would be left on the back burner. We are actually moving forward and doing something with it to accommodate Canadians and their interests in the changing world in which we live.

Bill S-5 would make a number of improvements to key areas in the Canadian economy. The financial sector is very stable, and there are reasons for that. It is stable because of these mandatory reviews we are doing. It is also very big. We must realize that 750,000 people work in the system, all in well-paying jobs. It makes up about 7% of the GDP of this country. A lot is made up of the oil sands in my province, being 6% of the GDP in this country, and yet the financial institutions are larger than that and is doing very well.

The bill is not only big but also good. Why would it not be good when we have the number one Minister of Finance in all of the world? That is something that has never happened before to Canada. In fact, we are rated number one in the world in many different areas, especially in the field of financial management. In fact, the World Economic Forum has ranked Canada as having the soundest banking system in the world. Forbes magazine has ranked Canada number one in its annual review as the best country to do business with as we move forward. Bloomberg has recently listed our five big banking institutions in Canada as the world's strongest banks, more so than in any other country in the world.

There is a competitive environment in this place and opposition members do what opposition members do, they oppose.

I have a quote here from a past Liberal finance minister, the now president of the Canadian Council of Chief Executives, John Manley, who said:

Our financial system and institutions were tested during the financial crisis and have proved sound. Canada’s banking system is now widely viewed as the most stable and efficient in the world.

That is high praise from a former opposition individual who knows the financial system very well.

Last month, an independent financial stability board appeal review praised the government's swift and effective response to the global financial crisis. We did come through it quite well. In its review, it highlighted the resilience of the financial system that we have as a model for other countries to follow. As Canadians, we should be proud of that.

We must realize that as we went through the financial crisis in Europe there were many problems with a lot of the banks there, as well as south of the border in the United States. If we compare ourselves to our number one trading partner, there was a meltdown of the financial systems. Not one of the financial institutions in Canada failed. Not one failed or required direct government support in the form of cash injections or debt guarantees during the global financial crisis. That is something that did not and does not happen by accident. It happened because there was good management of the Canadian financial systems and it is directly related to what we are doing here today with this legislation.

In fact, the report stated:

This resilience, which was achieved in spite of Canada’s relatively complex regulatory structure, highlights a number of key lessons for other jurisdictions.

What are those lessons that Canada can teach other jurisdictions? The first is to be proactive with targeted macroeconomic policies supported by adequate fiscal space and flexible exchange rates that will help absorb the external shocks.

The second is a prudent banking system management so that we do not become over-leveraged, as has happened in Europe, the United States and other banking systems and sectors. This is particularly important if we are to go through a crisis, such as what is happening around the world. We hope that we are through it now and that we will not revisit it, although what is happening around the world should make us a bit cautious, particularly the debt crisis in Europe and perhaps some overspending in the United States that could impact us in years to come.

The third thing is the comprehensive regulatory supervisory framework that effectively addresses the domestic prudent concerns including, when necessary, adopting regulatory policies that go beyond the international minimum standards.

Those are three lessons that other jurisdictions can learn from.

As the board noted, since 2008, the Conservative government has taken significant steps to make our financial system more stable and to reduce systematic risk to Canadians and to the system. In fact, the first thing we did in the 2008 budget was to modernize the authorities of the Bank of Canada to support the stability of the financial system.

We came through it in glowing fashion, as far as our financial institutions, but in budget 2009 we suggested other changes. Just in case we were to run into problems with our banking system, we wanted to ensure we were able to capitalize our banks so that they would not go into receivership. This is very important. What it really allowed for was, if there was an injection needed into our banking system to sustain it, the Canadian Deposit Insurance Corporation would have the flexibility to do that. That is actually a very wise thing. We did not need it, thankfully, and, hopefully, we never will. A bridging institution was what we needed. In banking terms it is called a bridged bank. Bill S-5 includes a number of technical refinements to ensure that the efficient implementation of those bridged bank tools are there.

Budget 2011 also announced our government's intention to establish a legislative framework for covered bonds, which are debt instruments secured by high quality assets, such as residential mortgages. This bill would make it easier for Canadian financial institutions to assess the low cost sources of funding and help to create a robust market for covered bonds in Canada.

Let us look ahead. We have this five year review. It is very important that we do this review, mainly adding to some of the changes that we have made over the last number of years, chiefly technical. One of the changes that would actually make it a little stronger goes back to one of the changes that was made by Liberals in 2001. It would back that off so that any bank that invests in more than 10%--

[Costas Menegakis, Conservative, Richmond Hill, ON]

Mr. Speaker, I will be splitting my time with the hon. member for Yellowhead.

I stand today to speak in favour of Bill S-5, the financial system review act, at second reading. The bill, while largely technical in nature, is nonetheless a very important development as it is fundamental to ensuring the security and strength of the Canadian financial system. This is important not only because we depend on our financial system for day-to-day transactions like purchasing something from a store with a debit card or making a deposit in one's savings account, but because of the tremendous economic impact the financial sector has on the Canadian economy.

Indeed, Canada's financial sector is a key jobs driver providing employment to over 750,000 Canadians. This is especially important in my home province of Ontario and my riding of Richmond Hill where the financial services industry is a crucial part of the provincial economy.

The financial services sector employs nearly 400,000 people in Ontario directly. In addition, as noted by the Ontario minister of finance, the sector “supports an estimated 280,000 ancillary jobs, including in high-paying business service jobs, such as software design”. Its positive impact is especially important in the greater Toronto area where I live.

As stated by the Toronto Financial Services Alliance:

Toronto is the business and financial capital of Canada. It is the hub of Canadian commerce with a financial services infrastructure that has a reputation for safety, soundness and stability.

Toronto is home to the vast majority of Canada's largest financial services companies...and makes one of the largest contributions to the local economy.

In fact, according to Invest Toronto, the city's financial services sector contributes 13.2% directly and 7.9% indirectly to the GDP of the entire Toronto region. What is more, between 1999 and 2009 alone, the financial services sector added almost 70,000 jobs in the greater Toronto area, a cumulative growth rate of 42% or 4.2% per year on average.

Clearly, a strong and secure financial sector is vital to the economy and good, well-paying jobs in the greater Toronto area. The financial system review act would help to ensure the continued stability of the sector and the significant jobs and economic growth that depend on its health. It would accomplish this by undertaking a series of chiefly technical but very important modifications to the framework governing our already well-regulated financial system to further guarantee its stability.

I want to emphasize that these modifications and indeed this bill are the result of a mandatory process. Specifically, it is a direct product of Canada's long-established practice of undertaking mandatory five-year reviews of Canada's financial sector legislation. This review started in September 2010 when the finance minister initiated a public consultation process, open to all, where he sought the views of Canadians about our financial system. The regular review of the financial sector statutes allows the government to amend the framework so that the financial sector legislation and regulations continue to be as effective and efficient as possible.

Canada's practice of conducting such mandatory five-year examinations has been one of the key reasons we have maintained our reputation of having the safest and most secure financial system on the planet. Indeed, as we all recall, for four straight years the World Economic Forum has declared our country's banking system to be the soundest in the world. This has been a tremendous advantage for Canada and Canadians, especially during the recent global economic turbulence. While the United States, the United Kingdom and Europe has had to nationalize or bail out many of their banks, Canada's financial system has remained strong and secure.

Because of our resilience, Canada's financial system continues to be singled out as a model for other countries. As noted Toronto Sun columnist Peter Worthington remarked:

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

This is what the Irish newspaper, The Independent, had to say:

[Ireland's] financial regulatory system is in line for a radical overhaul, with the Canadian system being held up as a model.

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

Even U.S. President Barack Obama has admitted that Canada's system is far superior, noting:

Canada has shown itself to be a pretty good manager of the financial system in the economy in ways that we haven't always been here in the United States.

Finally, this is what Great Britain's Prime Minister David Cameron declared when he addressed Parliament last year:

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 economic crisis....Your economic leadership has helped the Canadian economy to weather the global storms far better than many of your international competitors.

Indeed, the financial system review act would build on and further reinforce Canada's sound and safe financial system with a range of important modifications. Specifically, the legislation would: modernize financial institution legislation to further assure financial stability and ensure that Canada's institutions continue to operate in a competitive, efficient and stable environment; provide important protection to consumers by boosting the powers of the Financial Consumer Agency of Canada; improve effectiveness both by cutting down on duplicative administrative red tape burdens on financial institutions and adding much needed regulatory flexibility.

The financial system review act contains numerous important measures that would make our financial system stronger which I would like to briefly highlight. They include: improving the ability of regulators to share information efficiently with international counterparts while respecting the privacy of Canadians; ensuring that Canadians, especially those who may be disadvantaged, are able to cash government cheques under $1,500 free of charge at any bank in Canada; promoting competition and innovation by enabling co-operative credit associations to provide technology services to a broader market; reducing the administrative burden for federally regulated insurance companies; and, offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements.

In summary, the financial system review act would further strengthen our already world-leading financial system by reinforcing stability in the financial sector, fine-tuning the consumer protection framework and modernizing the regulatory framework to adapt to new developments.

As I mentioned earlier, the financial services sector is of critical importance to the economic health and jobs in the greater Toronto area and indeed for all of Canada. That is why I strongly urge all members of the House from all parties to vote in favour of this bill, in favour of a strong financial sector, and in favour of the jobs it supports for Canadians.

I have appreciated the opportunity to speak to an issue important to my riding and to the economic well-being of all Canadians.

[Jinny Sims, NDP, Newton—North Delta, BC]

Mr. Speaker, there is no doubt that for every Canadian across the country the health of the banking sector is critical. The banking sector plays a critical role in all our lives, whether we are buying a house or applying for a credit card. Also, many of us get paid through our banks. Many people, not just those with a lot of money, have a vested interest in ensuring our banking sector is stable.

Knowing that a five year sunset clause was included in the legislation and knowing that the deadline for that review was April 20 this year, it interesting that my colleagues across the aisle would wait this long to table such critical legislation. Not only did they wait so long, but at the same time they tabled the legislation, they moved time allocation on it. Out of one side of their mouths they are telling us that this is critical and timely legislation and we must get it through the House. Out of the other side of their mouths they are telling us that they will not have open and transparent debate, where the opposition gets to take a look at the bill and could, and probably would, make some useful amendments.

I sat here for half an hour this morning and listened to the debate on the critical nature of the need to move time allocation. Once again, I would argue that time allocation is not needed. The bill requires thoughtful consideration because it would impact many Canadians. It would impact their savings as well as the homes in which they live.

Instead of us being given a reasonable amount of time to debate the legislation, the majority in the House once again used the duct tape approach of muzzling the voice of the opposition. Let me assure my colleagues that they might be able to move time allocation in the House, but we will send a message to our communities that we were not allowed to debate the bill in the thoughtful way we would have liked.

I am a new MP so the House will have to beg my forgiveness for saying this, but I was really taken aback this morning when a speaker on the government side said that the NDP opposing time allocation was like us bringing chaos into people's lives.

I am beginning to wonder what my colleagues across the way want. Do they want the opposition to just support any legislation they bring in? I am sure they would like that, but that is not the role of the opposition. If members of the opposition have things to say, we are immediately labelled, and some language is used that I find disturbing.

I am not a supporter of chaos, either in Parliament, in my personal life or back in my community. When I want to debate a legitimate piece of legislation, it is not because I want chaos. It is because I want to give thoughtful input as the representative of my community.

The government shows a lack of respect toward members of the opposition. I should not be puzzled by that; I should expect that. The legislation had its first unveiling in the Senate. It is a bill that would impact so many Canadians. I find it really disturbing that it was first put before an unelected, unrepresentative Senate. Why? What prevented that bill from being in the House first?

It also interesting to note that despite the patronage appointments and the payola that has gone into many of the appointments to the Senate, even that house commented that it had to look at a significant piece of legislation, with many technical components, and had concerns that with three weeks it did not have enough time and that the government was trying to rush the bill through.

We have until April 12, What is the rush? If the government knew it had until April 12 as the sunset clause, why did we not start talking about this last May, or June, or October, or November or December? Instead, we are today looking at this significant piece of legislation.

Despite all of those things, the NDP welcomes the review of the financial systems review act. We should be very proud of the banking regulations that are in place. It is because of those regulations that Canada was buffered from the worst aspects of the economic meltdown.

I also think there is an irony that has to be pointed out. We have a majority in the House that is absolutely committed to deregulation. When we look at almost everything else, like the gun registry, the Wheat Board and many of the other issues that have come before the House, they have all been for deregulation. Yet when it suits the Conservatives, they wax eloquent about the existing banking regulations. However, those regulations exist because of the work of some other governments. It was the opposition that prevented my colleagues across the way from deregulating our banking system at a certain time in our history.

When I look at the need to review the area of banking and banking regulation, I am also hit by what is missing from the legislation. I am not sure if members have read some of the newspaper articles and emails. There is nothing in the bill to limit and regulate user fees charged by banks.

Recently a senior citizen came to my constituency office. I have many of them coming in these days because they are getting very disturbed. This is what the senior citizen told me. She put her money in the bank, and when the bank wanted to automate and introduce the ATM machine, she started to use that thinking it would save the bank and her money. Remember, bank profits are very high now, yet there is always a threat of new user fees or increased user fees. This senior citizen is so puzzled because she believes she has saved so much money for the bank by it not needing the personnel in place, which I think is a huge mistake, and it being so automated. However, her fees keep going up.

This was an opportunity, with this legislation, for the government to start looking at regulating user fees that banks are gouging their customers. Some banks are even beginning to introduce fees for people to get their own money out of their bank accounts. At one time, it was only if they went to a different ATM. Now one of the banks has put out the idea that there could be user fees even if customers uses their own bank's ATM machines. That makes no sense. Canadians look to us to regulate things like that.

The other concern I have is the interest rates on credit cards. It is time the government put regulations in place that are tighter and more closely regulated to ensure banks do not charge the kinds of rates they are. People who put their money in banks are lucky to get 1% interest. With that money, the banks get to play with it and make money on it. On the other hand, if people use their credit cards, which are banking credit cards, banks charge interest rates from 12% up to 22%. If that is not gouging, I do not know what is. As far as I am concerned, a critical component that is missing in this is tackling the area of user fees for citizens who are being hurt by them. We also have to look at the rates banks charge for people who use those credit cards.

I know some people will say that people should not use credit cards. However, in today's reality some people live from paycheque to paycheque. They often end up having to spend on their credit card, hoping they can pay part of it back if they get some money coming in within the following month. I am talking about just a few people. A lot of people survive like that and not because they go out to buy some big fancy toys or go on big holidays. They are trying to make ends meet from month to month.

I would be the first one to argue that if we are getting into luxury items, then we are looking at choices. I am talking about credit cards people are using because they have no other choice. They need that flexibility to survive. Because of that, I feel the scope of this bill is really limited and needs to be widened.

I was also interested in finding out what kind of consultation occurred. I heard that 30 groups were consulted. For a country the size of Canada, only 30 groups were consulted, and 27 of those were anonymous. What kind of consultation is that? Was this consultation open and transparent?

One thing I do not like about anonymous submissions, or whatever, is people get to say whatever they want and they are never held accountable. I have a primary rule that if I get something that is not signed, I put it aside. The government has had consultations with three groups, three groups for a country the size of Canada on an issue as important as banking.

The other area we do not often talk about is the co-operative banks in our communities and how we need to support them and find ways to do that. The co-operative banks in my area do an amazing job of giving back to the community in many different ways. I am a bit saddened that this is not being addressed in the bill.

Once again, Bill S-5 is being used by the government as a prop to hold up the banks. It is being rushed through the House. From what I have read, the profits of banks has increased incredibly. It has not really gone down. We should take a look at the consumer debt, which is at a record level of 151% of disposable income. I want every one of us in the House to take a second to comprehend that. Consumer debt is at record levels of 151%, which is so high.

It is because this debt level is so high that we are becoming increasingly concerned about some risky mortgage lending practices and home equity credit lines by banks and other lending institutions.

Currently, if I go through websites or look at some of the mail that comes through my door, it is clear that a person can actually get his or her house financed fairly easily for up to 90%. That is an advantage for some, but in the long term it is also the basis for potential instability. Right now our interest rates are fairly reasonable and low, as many would say, but if they were to go up by even half of 1%, that would put many of these people in jeopardy.

To avoid the kind of housing slump that happened in the United States, surely we should be taking the time with this legislation to put protections in place. When we take a look at our regulations, we absolutely must take our time.

Mr. Speaker, how much longer do I have?

[Ray Boughen, Conservative, Palliser, SK]

Mr. Speaker, I am pleased to have the chance to address the House in support of Bill S-5, the financial system review act. For the information of Canadians and members of the House, the financial system review act is a mandatory and routine piece of legislation.

To ensure the stability of the financial sector in Canada, the statutes that govern federally regulated financial institutions must be reviewed every five years, a long-standing practice that has carried over from previous governments. As I mentioned previously, it deals with federally regulated financial institutions and, for clarity, those include domestic and foreign banks, trust and loan companies, insurance companies and co-operative credit associations.

The last similar legislative review was completed through Bill C-37 in the 39th Parliament. Prior to that, a similar review was completed in 2001 through Bill C-8 in the 37th Parliament. As with the previous five year reviews, there is a timeline for the process to be completed, as the sunset date for the financial institutions statutes is April 20, 2012. The present five year review, which has led to today's bill, commenced in September 2010 when the finance minister launched an open and public consultation process that asked all Canadians to submit their thoughts and ideas on how we could best improve Canada's financial system to make it even more stable and secure.

During the consultation process, I understand that many Canadians provided their feedback and much of that is seen in today's bill. Moreover, the public consultation process itself has been praised. For example, the Canadian Life and Health Insurance Association told the Senate banking, trade and commerce committee during its study of the bill, “The consultation process was very positive and reflected the technical nature of this review”.

The financial system review act, while largely technical, would take important steps to help guarantee that Canada's fiscal system is securely regulated and remains strong and stable for the sake of our economy. Among the bill's highlights are measures to: First, bring up to date financial institutions' legislation to support financial stability and ensure that Canada's financial institutions continue to operate in a competitive, well-regulated and secure environment; second, better protected consumers with an improved protection framework, including reinforcing the powers of the Financial Consumer Agency of Canada; and third, improve effectiveness by reducing unnecessary administrative red tape on financial institutions and adding prudently regulated flexibility.

Again, today's bill is tremendously important in supporting the continued strength of our economy, the main priority of our Conservative government and an area where we are getting results. Indeed, while there are challenges ahead, Canada's performance during the recent global downturn has been strong when compared to other industrialized countries. First and foremost, since our government introduced the economic action plan to respond to the global recession, Canada has recovered more than all of the output and all of the jobs lost during the recession. Some 610,000 more Canadians are working today than when the recession ended, resulting in the strongest rate of employment growth by far among all G7 countries.

Furthermore, about 9 out of 10 positions that have been created since July 2009 have been full time and more than three-quarters of the jobs created over this period have been in the private sector. Fortunately, Canada has fared far better than the U.S. in this regard. Indeed, Canada's unemployment rate has been lower than that of the U.S. since October 2008, a phenomenon not seen in nearly three decades.

On top of Canada's solid performance on jobs, the real gross domestic product is now significantly above pre-recession levels, the best performance among the G7 nations. It is clear that Canada has weathered the economic storm relatively well. It is also clear that this resilient performance in a climate of global uncertainty has not gone unnoticed.

Both the International Monetary Fund and the Organisation for Economic Co-operation and Development forecast that we will be among the strongest economic growth in the G7 over this year and next. Forbes magazine has ranked Canada number one in its annual review of the best countries in which to do business. Three credit agencies, Moody's, Fitch, and Standard & Poor's, have reaffirmed their top ranking for Canada. Most significant, for the fourth year in a row, the World Economic Forum rated Canada's banking system as the soundest in the world. That is something we would reinforce with today's bill.

Clearly, this is a solid performance in volatile times and it will serve this country well. Indeed, in the recent words of Scotia Bank's chief economist, Warren Jestin, “When you look at what exists in Canada, this is still the best country in the world to be in.

To truly understand the strength behind this performance, we need to consider the hard work that took place through the actions that our Conservative government took to pay down debt, lower taxes, reduce red tape, promote free trade and innovation and ensure a stable financial system.

To start with, our government paid down significant amounts of debt when times were good and kept our debt to GDP ratio well below our G7 counterparts. As a result, when trouble hit, we had the ability to respond.

The International Monetary Fund projects that Canada's net debt to GDP ratio for the last year will come in at just under 35%. A net debt to GDP ratio of under 35% is excellent considering that these rates for other G7 nations are much higher. In contrast, Germany is projected to be over 57%, the United States and the United Kingdom at over 72%, France at 81%, Italy at 100% and Japan just over 130%.

Along with this strong fiscal performance, we introduced the tax relief required to create jobs and growth in all economic conditions. In 2007, prior to the impact of the financial crisis, Canada passed a bold low tax plan that helped to brand Canada as a low tax destination for business investment. This low tax plan, along with our sound and safe financial system, plays and will continue to play a crucial role in supporting economic growth and jobs.

Our Conservative government is under no illusions that our work is finished. Major challenges remain both here and around the world. As we know, the global economic outlook remains highly uncertain and the situation in Europe is still very fragile. The changes facing our global economy are far from over and Canada will not be immune.

Despite solid job creation since July 2009, too many Canadians remain unemployed. That is why our Conservative government's main focus will be the continued implementation of the next phase of Canada's economic action plan to support jobs and growth as we prepare for budget 2012. That includes today's bill, which would help to ensure the continued strength and security of our financial systems.

Once more, we will continue to focus on improving the well-being of Canadians by sustaining the economic recovery, eliminating the deficit and making investments that will fuel long-time growth. I strongly urge all members to support and vote in favour of this important legislation and help it progress in a timely manner to passage.

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Mr. Speaker, I thank the parliamentary secretary for that important reminder. Of course, he has been a point man in addressing many of these concerns. He rightly points out the excesses that happened in the United States, of government intervention, that contributed to the failure of institutions that people relied on and made unstable commitments to mortgages that were not sustainable and were not backed by real assets.

The changes that are being introduced in Bill S-5 are ones that would improve our system. They would make a very good system better.

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Mr. Speaker, I must have missed something in that member's question. I am not sure how it relates to the banking bill that we are discussing today, Bill S-5. We know that this particular piece of legislation covers a whole range of issues that are important to our financial regulation. It would respond to changes to the financial sector and a rapidly changing global market, it would ensure access to banking, it would level the playing field and promote co-operation, it would enhance the supervisory powers of the Financial Consumer Agency of Canada and it would improve efficiency.

So I am not sure where the member opposite was coming from with that particular question.

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Mr. Speaker, I would first like to advise you that I will be sharing my time with the hon. member for Palliser. I am pleased to enter the debate today and speak to Bill S-5, the financial system review act.

Today's act is important to Canadians because it would ensure the continued strength and stability of our financial system. That is a system that we all depend on every day, whether we are making a deposit at our bank, making at a purchase a store with a credit card or using a mortgage to buy a family home. Specifically today's act, while largely technical in nature, would reinforce stability in the financial sector. It would fine-tune the consumer protection framework and adjust the regulatory framework to adapt to new developments.

Bill S-5 would provide for a well-regulated framework that would allow Canadians to rest assured that our country's financial system will remain the safest and most secure in the world. Indeed, as many Canadians may know, for the fourth year in a row, Canada was recently ranked as having the soundest banks in the world, by the World Economic Forum.

Most Canadians are aware of this, and are justifiably proud. They are pleased that Canada did not go through the kinds of crises that many other developed democracies in the western G7 countries did, many of which had to nationalize banks and make huge taxpayer investments. Many consumers in other nations went through financial chaos because of a collapse in the financial system.

We are very fortunate to have the sound regulatory regime we have here in Canada. Before continuing, I would like to provide a bit of background on today's act and how it came before us today in the House.

In Canada our financial sector legislation is subject to a full review on a five year cycle. It covers all federally regulated financial institutions, including domestic and foreign banks, trust and loan companies, insurance companies and cooperative credit associations. This five year review practice sets Canada apart from almost every other nation in the world. It ensures that the laws and regulations by which our financial systems are governed remain at the forefront of the global financial system.

We are especially fortunate in Canada to have a well-regulated financial system, something that has been widely observed in recent years. The world itself has recognized Canada as a leader, as our banking system has been ranked the soundest in the world.

As the American magazine Newsweek wrote recently:

Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it's Canada.

Similarly, the Brookings Institution, a well-known American think tank, recently declared:

....the Canadian banking system has long been regarded by the IMF as a paragon of international best practices. The World Economic Forum recently ranked it the soundest in the world. And it looks better with every passing day....the overall system has remained solvent and solid amid the current global crisis.

I think this is something most Canadians are justifiably proud of, or at least pleased with. Even though we have gone through our challenges in Canada, we have not faced the crises that other nations have.

Even the president of the World Bank has noted that our strength is a model for the world, saying:

Canada's experience offers lessons to others, especially its strong financial and regulatory environment that is helping it manage the shocks of the downturn, particularly in the banking sector.

As the past few years have shown, international praise for our system is well founded. While Canada's financial system was not immune to the impacts of the global financial crisis, Canada's banks stood firm, bolstered by sound risk management and supported by an effective regulatory and supervisory framework.

In fact, Canada was the only country in the G7 that did not step in to bail out its major banks in the aftermath of the 2008 financial crisis. This Canadian resilience matters.

A strong financial sector plays a fundamental role in supporting a strong economy, and not just in times of crisis. As members know, and I think Canadians understand, the focus of our government is jobs and the economy. It is protecting Canada's prosperity and future employment environment that will maintain the tax base that we depend on and provide the services that Canadians look to us for.

Workers, retirees and pensioners count on a strong financial sector for the security and the growth of their deposits and investments and to maintain the standard of living that they worked so hard to build. Financial consumers rely upon it for competitive financial products to keep their mortgages or other household financing affordable. Business, large and small, also depend upon it for access to competitive financing to help them to invest and to grow.

The financial crisis highlighted the importance of evaluating the overall size of financial institutions, the intricacy of global linkages, and the impact those factors have on stability and the best interests of our financial system. The crisis also led to extensive changes in the regulatory framework, ensuring that Canada's financial sector remains the soundest in the world.

The financial system review act will build on these reforms and fine-tune the efficiency and effectiveness of the framework. It will improve the ability of regulators to share information efficiently with their international counterparts. This will help fulfill our G20 commitments at a time when financial institutions increasingly operate on a global scale. It would ensure effective supervision and regulation across borders.

Today's act also proposes to better protect consumers, chiefly by enhancing the supervisory powers of the Financial Consumer Agency of Canada, FCAC. The agency is mandated to ensure that federally regulated financial institutions adhere to the consumer provisions of the legislation governing financial institutions and their public commitments. It is also the government's lead agency on financial education and literacy. It has advanced an array of excellent initiatives in recent years.

I think, in terms of financial literacy, Canadians are starting to pay attention to something they more or less took for granted for many years. I think we have all had a wake-up call as to how important it is that our institutions are on a solid basis and that they are managed in a very secure way.

It 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.

I know that our government is concerned about the consumer debt in Canada, as well as in the U.S. We are advising Canadians to get a handle on debt and live within their means. Sound financial management is as important for our families as it is for our institutions. The innovative tools developed by the Financial Consumer Agency of Canada, such as a mortgage calculator, help Canadians accomplish those objectives.

The FCAC has also created innovative online information to help consumers shop for the most suitable credit card and banking package for their needs. There is a competitive marketplace out there. We hear a lot of talk from our colleagues opposite about the government telling the banks what fees to charge for services. However, there is competition between the institutions. This is a tool developed to help Canadians determine where they would get the services that fit their own needs best.

The financial system review act proposes to improve consumer protection by increasing the maximum fine that could be levied by the FCAC for violations of a consumer provision of the act. It would increase the maximum penalty to $500,000, from $200,000.

Finally, the financial system review act would build on the government's ongoing actions to cut red tape by reducing the administrative burden on financial institutions and adding regulatory flexibility. This would include scrapping duplicative disclosure requirements.

These measures will support a well-functioning financial system, meeting the needs of Canadians and supporting our future economic prosperity.

Today's legislation is extremely important because it concerns one of the key foundations of the global economy. Canadian's financial sector plays a pivotal role in fostering financial stability, safeguarding the savings of Canadians and fuelling the economic growth that is essential to our standard of living.

Mr. Speaker, I appreciate the opportunity to speak to this important piece of legislation. I hope all members will support it.

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, I will be splitting my time with the fine gentleman and MP for Burnaby—New Westminster, who does a fantastic job on this file and many others.

I rise today to speak to Bill S-5, which looks to update the legislation relating to banking and financial institutions in Canada. Anyone who follows my interventions in the House will know that these issues are very close to my heart as the NDP consumer protection critic. I think it is very important for parliamentarians to have an opportunity to review legislation that relates to the banking sector.

Banks are vital to the Canadian economy. Canadian banks directly employ a quarter of a million people across the country and pay almost $1 billion in payroll taxes each year. They also spend around $15 billion on services and goods within the economy, thereby indirectly supporting even more jobs. Moreover, banks and other financial institutions provide a vital service to the economy as a whole. They provide lending services for individuals to buy homes and for businesses to invest and expand.

It is important to ensure that Canada has a world-leading system of banking regulation to allow our banks to stay strong and support the economy as we continue through a time of global financial uncertainty. Therefore, I will be supporting the bill at second reading to ensure that this important legislation gets the attention it deserves at committee.

Unfortunately, as has so often been the case since last year's election, the government is more interested in ramming through legislation than in the process of debate, which is the hallmark of Canadian democracy.

First, we again find ourselves limited in the amount of debate we can have on an issue before the House. By my understanding, the government has now shut down debate 16 times in just 80 sitting days and 4 times in the last 12 days. The bill would amend 13 pieces of existing legislation, including the Bank Act, all of which relate to the direct functioning of our economy, and yet the government is trying to push this review through without the dedicated analysis that these changes warrant.

Debate in this chamber is not just for show and it is not just some inconvenience for the government. It is fundamental to the proper functioning of our democracy. It allows various points of view representing the geographic, cultural, linguistic and social diversity of our great country. Being part of this legislative process is too important for us to continually have time allocation imposed.

Second, the bill was introduced in the Senate rather than here in the House of Commons before democratically elected representatives. Then, just as the case here, the bill was pushed through the Senate's legislative process without proper review. In fact, the whole process took just three weeks.

This is the second major economic issue the government has pushed to the Senate in order to marginalize the ability of democratically elected parliamentarians to take part in important debates. The other was the study of price differentials between the U.S. and Canada.

It also worries me that the government failed to widely consult on these changes before introducing this review. Given the important role of the banking sector in our economy, I find it disturbing that there were no coordinated national public consultations with consumer groups and small businesses to try to understand how the banking system could be improved from their perspective. In fact, the government's little publicized online review solicited only 30 submissions and 27 of those respondents opted to remain anonymous. While there may well be some important details to be drawn from these submissions, I find it highly doubtful that we can hope to understand the full range of opinions and debate on how to update our banking legislation from such a small sample size.

I will talk in detail about some of the issues addressed in this legislation, specifically those relating to my own area of focus, consumer protection.

As our consumer protection framework currently works, various government departments are responsible for consumer protection for specific issues. This makes it very difficult for consumers to know where to go when they are confronted with a consumer problem. Depending on the type of issue to be resolved, a consumer may be required to work with Industry Canada, Health Canada, or Transport Canada, or even with the Financial Consumer Agency of Canada, FCAC, if the issues relate directly to banks and financial institutions.

Ending this confusing framework would have gone a long way to ensuring that Canadians have more confidence in their day-to-day dealings with financial institutions. However, the government refuses to move in this direction, and so what is it offering consumers? First, this bill would extend the definition of consumer provisions in regard to financial institutions to include agents and affiliates of banks that offer financial products. This would extend the scope of entities that come under FCAC's consumer protection provisions, which I support. It would also increase the ability of the government to introduce regulations and deferred legislation, giving the government the opportunity to introduce further consumer protection measures in the financial sphere. Furthermore, the bill would increase the maximum fine that FCAC can levy on financial institutions from $200,000 to $500,000.

All of these changes should be welcomed, but with some caveats. The increased ability to introduce consumer regulation is only noteworthy if the government utilizes that ability; otherwise, it is simply a nice talking point. The same can be said for increasing the maximum fine the FCAC can levy. When this bill was first introduced in the Senate, various stakeholder pointed out that FCAC very rarely levied its current lower maximum penalty. Given this fact, increasing the maximum penalty seems to be somewhat of a toothless change. In effect, these changes, while welcome, seem much more powerful in theory than in practice.

This bill is missing a change that would have incurred no cost for the government and massively increased the clout of both the consumer and small business protection regimes in Canada, namely, mandating that banks must be part of the Ombudsman for Banking Services and Investments complaints resolution process. OBSI offers a fair method for consumers and small businesses to address complaints to banks that cannot be dealt with by a bank's in-house complaint mechanism.

However, under the government's watch, both RBC and TD have been allowed to leave the OBSI system and instead use a Bay Street law firm to settle complaints. That law firm has been hired by the banks, and as the banks' customer its first priority is to please its clients, not to offer a proper method of redress for consumers and small businesses. This is simply unacceptable and the government should step in and mandate that banks use an impartial investigative process.

Moreover, there is nothing in this bill to look at the fees and charges levied by banks. I have heard from hundreds, if not thousands, of Canadians regarding ATM fees, credit card interest rates and current account charges. Banks obviously need to make a profit and be viable, but when we compare this bill to, say, the amendments tabled by Illinois senator Dick Durbin in the U.S., we can see there is room for discussion and debate on these issues.

In terms consumer or non-consumer related issues, this bill has some changes requiring some vigorous debate. For example, this bill would require Canadian banks to gain ministerial approval if they wished to purchase foreign entities. It would also increase the value a bank must reach before it is required to have its shares widely held, and it would allow Canadian financial institutions to sell their shares to foreign institutions ultimately owned by foreign governments.

I could go on and on about the importance of this subject and the debate that we need to continue to have, but I know my time is running out. In summary, if the government refuses to listen to these groups and insists on passing this bill in its current form, then at best this bill will have little positive change and, at worst, could end up doing more damage than good.

The House resumed consideration of the motion that Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the second time and referred to a committee.

Second Reading

[Cathy McLeod, Conservative, Parliamentary Secretary to the Minister of National Revenue]

Madam Speaker, it is a privilege to rise today in support of Bill S-5, the financial system review act.

While Bill S-5 is albeit largely a technical bill, it represents an important piece of legislation as it will help guarantee the ongoing security and strength of Canada's financial system, a vital sector of our economy. Today's bill would accomplish this by making a series of alterations to the various pieces of legislation governing Canada's financial system, including the Canadian Payments Act, which I will speak to in greater detail a little later.

Before doing that, I want to underline that today's legislation is mandatory and routine. This is as result of a long-established practice in Canada of engaging in mandatory five year reviews of our financial sector legislation. I will note that this latest five year review process began formally in September 2010 when our Conservative government launched a public consultation process open to all Canadians. Such mandatory five year reviews have helped to ensure that Canada has a well-regulated financial system. Indeed, it is the safest and most secure in the world.

As most members know, for four straight years Canada has been ranked by the World Economic Forum as having the soundest banks in the world. What is more, our well-regulated financial system is widely admired throughout the world.

In the words of a recent Ottawa Citizen editorial:

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.

As I mentioned earlier in my remarks, I would like to speak to elements of the financial system review act that address Canada's payment system, something Canadians interact with each and every day. Indeed, every year Canadians make 24 billion payments, worth more than $44 trillion. These payments allow us to run our businesses, sustain our household and allow governments to fund essential programs.

Canadians use various payment instruments to purchase goods and services, to make financial investments and to transfer funds from one person to another. These instruments include cash, cheques and debit and credit cards. Except for cash, payment instruments have traditionally involved the claim on a financial institution, such as a bank, credit union or caisses populaire.

Financial institutions, therefore, needed arrangements to transfer funds among themselves, either on their own or on behalf of that or their customers. A payment system is a set of instruments, procedures and rules used to transfer these funds. In Canada, our national system for the clearing and settlement of payments is run by the Canadian Payments Association, or the CPA, a not for profit organization of federally regulated financial institutions.

Clearly, no economy can properly function without a reliable and secure system of payments. However, the payments landscape is changing. For example, experiences in Canada and abroad since the 1990s demonstrate that clearing and settlement systems do not always include banks as direct participants. That is why 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 would allow the Bank of Canada to oversee such systems that could pose systemic risk to the financial system.

Canada's leadership in reforming the global financial system through mechanisms, such as the G20, is well-known and a source of great pride for Canadians. One important Canadian commitment to our G20 partners is that all OTCs be cleared through central counterparties by 2012. This is an important step to ensure the resilience and stability of our financial system.

To meet our G20 commitments, it is imperative that Canadian prudential and market conduct regulators have the authority, tools and information necessary to monitor and regulate the Canadian OTC derivatives market on an ongoing basis. This means coordinating activities across current federal and provincial jurisdictions, as well as foreign regulators.

Bill S-5 proposes a change to the Payment Clearing and Settlement Act to make it clearer that the Bank of Canada can dispose information to other regulators, the payments clearing and settlement systems. This information sharing would help all parties understand the risks inherent in these link systems. Furthermore, failing to form such links could delay our ability to link to foreign systems and impinge on our ability to meet our G20 commitments.

This is the kind of evolutionary change that demonstrates the importance of regular reviews of our legislative framework to maintain Canada's leadership in financial services.

Bill S-5 would make another important and much needed change to the payments landscape. As hon. members know, Canada's credit unions are an important provider of financial services. More than five million Canadians and business owners are grassroots shareholders of co-operative financial services in Canada. One in three Canadians is a member of a credit union or caisse populaire.

In recent years, our Conservative government has shown its support for credit unions by supporting a federal credit union charter to accommodate growth and expansion of the Canadian credit union system. This would enable those credit unions that so choose to reach beyond provincial boundaries and pursue business strategies that are not constrained by provincial incorporation. It would also give credit unions a means to diversify their source of funding and spread their geographic risk exposure.

In that vein, in order to give federal credit unions a more effective voice in the Canadian Payments Association, today's bill would amend the Canadian Payments Act so that credit unions would fall within the co-operative class in the act rather than the bank class. At the same time, credit unions would still employ the long-standing, well-understood and robust governance, liquidity and clearing and settlement framework in use today. While it may sound like a simple technical change, it is an important one. This change would continue to promote a level playing field within the financial sector which would foster competition among players and ensure a stronger, more stable system overall.

The Credit Union Central of Canada, the national association for credit unions in Canada, said:

...we want to note our support for the proposed amendments....

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. A strong advocate at the CPA is important for the credit union system's ability to advocate on behalf of credit unions and to continue to operate payments facility efficiently and cost effectively, which has a direct impact on overall credit union system competitiveness.

I think all members would agree that a strengthened credit union is good for all Canadians.

For those reasons, I urge members to support the passage of this largely technical but important act which would ensure the smooth functioning of Canada's payment systems.

[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?