This bill is from the 41st Parliament, 1st session, which ended in September 2013.
This bill has received Royal Assent and is now law.
This is from the published bill. The Library of Parliament has also written a full legislative summary of the bill.
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.
All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.
Bill numbers are reused for different bills each new session. Perhaps you were looking for one of these other S-5s:
Colin Mayes Conservative Okanagan—Shuswap, BC
Mr. Speaker, I ask my hon. colleague from London North Centre why the large bank ownership threshold has been increased.
Susan Truppe Conservative London North Centre, ON
Mr. Speaker, in 2001, the Government of Canada established a widely-held requirement for large banks. In 2007, our Conservative government increased the threshold from $5 billion to $8 billion to reflect the growth of large banks. Since then, the sector has continued to grow. To reflect that growth, the large bank threshold is being increased from $8 billion to $12 billion.
Hélène LeBlanc NDP LaSalle—Émard, QC
Mr. Speaker, it is always a pleasure to rise in the House to speak about Bill S-5, the Financial System Review Act, on behalf of all the people of LaSalle—Émard.
One can no longer look at a newspaper without coming across a headline about household debt in Canada. If the storm unleashed by the 2008 laissez-faire financial crisis did not hit Canada as hard as the United States, it is because of the way our financial sector is regulated.
There is an urgent need to maintain and reform the regulation of our financial institutions. In order to do so, the House must firmly commit to getting Canadians involved in the review process and thus help to protect the public, ensure the transparency of our financial institutions and promote the independent review of acquisitions. Finally, we must engage in public consultation to allow various stakeholders—more than just 30 or so— to express their opinions on the impact of the changes proposed by this bill.
I therefore address my remarks to the people of LaSalle—Émard to explain my position on the bill to amend the legislation governing financial institutions.
This Senate bill amends not only the Bank Act, but also 12 other acts. My colleagues in the official opposition have already described several technical aspects of the changes to regulations in the financial sector. I would simply like to go over some of the main points.
Under Bill S-5, large foreign acquisitions will require ministerial approval. The bill will raise the widely held ownership threshold for banks from $8 billion today to $12 billion.
Henceforth, banks controlled by foreign governments will be able to hold a minority interest in Canadian banks and financial institutions.
The bill enhances and expands the supervisory and enforcement powers of the Financial Consumer Agency of Canada.
Lastly, the bill tightens measures to prevent tax evasion in the case of Canadians who do business with subsidiaries of foreign banks.
That said, this bill raises a number of concerns. First of all, why did the government give the Senate, which is full of defeated Conservative candidates, the task of introducing a bill on an issue as important as the review of legislation governing our financial institutions?
Second, will the government give the members of the House the time needed to carefully examine this bill?
To deliver a bill that shows that it truly cares about protecting Canadian consumers, the government must consider adopting measures that are not currently in this bill. Here are some examples: approving large foreign acquisitions of financial institutions cannot fall solely to the minister, as set out in this bill. Such important decisions should be made by the Office of the Superintendent of Financial Institutions without any political interference.
We need to introduce regulatory mechanisms for the banking and financial sectors that are transparent in practice, and not simply in principle. This means we should examine the possibility of regulating all hidden costs and making their disclosure mandatory.
It is also crucial that the committee responsible for reviewing the legislation governing our financial institutions hear from witnesses who are experts on risky mortgage loans, which are of concern to the Governor of the Bank of Canada.
As elected representatives, we have a duty to protect consumers and our constituents. When Canadian financial institutions announced profits of $25 billion last year, debt had become a ball and chain for Canadian households. And if the debt being carried by Canadian households is the ball, middle-class wage stagnation, usurious interest rates, high service charges and incomprehensible loan agreements are what keep Canadians chained to those debts.
Unfortunately, too many people in my riding are among the ever-growing number of Canadians who are burdened by debt. The Association coopérative d'économie familiale du Sud-Ouest de Montréal, with which I met last fall, is on the front line and works with residents of southwest Montreal to find ways of improving their consumer practices and their spending. When people’s wages are stagnant, when their incomes are declining and their debts are piling up, things get more and more difficult.
That organization and the members who work there have heard every story. The people who come to see them are living in dread of the bailiffs who call them at all hours of the day trying to collect. They can no longer sleep at night and they shut themselves away during the day. Some of them have no choice but to consider declaring bankruptcy. The distress is real, and protecting our fellow Canadians must be our first concern.
The most important recommendation I have to make is that the government should use the review of our financial institution legislation to ask what Canadians think and find out what they are concerned about and what issues are of concern to them. In that regard, the government would do well to learn from the best practices developed by the NDP. For example, the NDP has just completed public consultations throughout Canada to find out what Canadians’ concerns are when it comes to the cuts the government is planning to make to the old age security program.
We organized local forums from coast to coast so the people who elected us could talk to us about the impact those cuts would have on them and their family members. For example, very recently, in Ville-Émard, we organized a public forum on reform of our pension system. We had a full house, and we met with 100 of our constituents who were worried about the government’s consistently vague allusions to the cuts it is planning to make to old age security. Our constituents spoke out and we listened to them. The NDP invites dialogue, and the government should do the same when it examines the legislation related to the regulation of financial institutions.
With that in mind, I would have preferred that this bill be drafted after a broader public consultation had been held. In spite of the concerns I have raised, I am going to support the bill, which still represents an adequate review of the financial system. I hope that committee members will have an opportunity to make the amendments that are needed so that the bill will be even more acceptable to Canadians.
Marjolaine Boutin-Sweet NDP Hochelaga, QC
Mr. Speaker, this week I received a document for one of my credit cards indicating that the interest rate was going to increase to 29.5%. That is almost 30%. It makes no sense.
Does my colleague believe that the government could have extended its study to speak to people like us who have to pay nearly 30% interest on their credit card and who might have some suggestions to make on the matter?
Hélène LeBlanc NDP LaSalle—Émard, QC
Mr. Speaker, that proves the point I was making in my speech. Quite often, as consumers and citizens, we have responsibilities. However, that responsibility has to be shared by the credit card companies and the banks. There need to be clear, transparent rules. We owe it to our constituents to have rules that are transparent and clear and not hidden and misleading.
Kennedy Stewart NDP Burnaby—Douglas, BC
Mr. Speaker, I was listening with great interest about how my colleague has been consulting her constituents about this issue and about how these cuts will affect their lives.
I was very interested in what she had to say about co-ops, which are really an important and very under-valued part of society in the banking structure. I am just wondering if the member could elaborate a bit more on her thoughts in terms of how co-operatives and co-ops contribute to the financial side of our economy?
Hélène LeBlanc NDP LaSalle—Émard, QC
Mr. Speaker, I want to thank the hon. member for that very apt comment and for raising this very important point.
We forget that a much broader co-operative system existed at one time and that, increasingly, we are turning to mega-institutions where people feel like a number and somewhat powerless in dealing with these giants. The establishment of co-operative systems would give people the power to establish fair and equitable rules for everyone.
Mathieu Ravignat NDP Pontiac, QC
Mr. Speaker, I thank my esteemed colleague for her very interesting remarks.
Perhaps, like me, she wonders why the Conservatives have not considered the possibility of regulating fees charged to consumers for the use of ABMs or the possibility of re-evaluating hidden fees. Why does their bill not require banks to disclose all of their fees?
Hélène LeBlanc NDP LaSalle—Émard, QC
Mr. Speaker, I thank my colleague for his question. Those are excellent questions. We are still wondering why certain transactions are so expensive. Lack of consistency and transparency is causing general confusion. All Canadians are suffering as a result because we have to pay fees that are often hidden, unfair and costly.
Financial System Review ActGovernment Orders
The Acting Speaker Bruce Stanton
We have time for a brief question and answer. It looks like there are no more questions.
Before we resume debate, it is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Etobicoke North, The Environment; the hon. member for London—Fanshawe, Seniors; and the hon. member for Cardigan, Fisheries and Oceans.
Resuming debate. The hon. member for Winnipeg South.
Rod Bruinooge Conservative Winnipeg South, MB
Mr. Speaker, I appreciate the opportunity to speak to this important bill.
Today is a very opportune time to be actively pursuing the passage of Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters.
Our government undertook a review of our financial sector and the legislation that governs it with the understanding that we live in an ever-changing world of evolving technology and financial sector innovation. The technical measures contained in this bill would ensure that Canada's financial sector regulatory framework stays ahead of the curve and accommodates these developments by mitigating risks, creating new opportunities and helping Canada's financial sector maintain its international reputation as a world leader in terms of its strengths and stability.
I am pleased to report to the House that this legislation was undertaken after a lengthy period of time of open consultation with Canadians from coast to coast to coast to ensure that Canada remains a global leader in financial services and maintains its sector advantage. This financial sector advantage is fundamental to Canada's remarkable economic performance throughout the global financial crisis of 2008. In our world-leading recovery from that episode in terms of jobs and growth, our advantage underpins this overall health that is found in our economy. That is why, in the wake of the financial crisis, our Conservative government took action to modernize the authorities of the Bank of Canada to support the stability of our financial system. This would allow the Bank of Canada to redistribute wealth and liquidity to financial institutions, buttressing them against the immediate aftershocks of the crisis and maintaining the vital flow of credit to Canadians and businesses during the so-called credit crunch.
While many foreign banks had difficulty raising capital on global financial markets during the crisis, Canada's financial system remains stable, well capitalized and underpinned by one of the most effective regulatory frameworks in the world.
Then, to further safeguard our financial system moving forward, we introduced measures in budget 2009 to strengthen the authorities of the Canada Deposit Insurance Corporation. This enhancement would contribute to the financial stability and protect insured deposits by giving CDIC a great variety of tools to manage the resolution of a troubled financial institution. An important element of this change is that it would allow CDIC to establish a bridge institution, known in the trade as a bridge bank, to preserve the critical functions of a financial institution facing trouble and to help maintain overall financial stability.
Among other things, Bill S-5 is important because it includes a number of technical refinements to ensure the effective implementation of this bridge bank tool and it includes other measures that would contribute to financial stability.
We have seen all too clearly in recent years how heavily interconnected the structure of global finance has become, and this can pose unintended risks here at home, which is to say that bad or risky decisions can have repercussions that can travel right around the world and land back on our doorstep with a lot of unpleasant financial consequence in tow, and not just for the banks but for the people and businesses who depend on them. All governments have an obligation to weigh these risks. This is particularly important as Canadian banks expand into foreign markets and foreign players similarly enter the Canadian market. With Bill S-5, the Canadian government would have another tool at its disposal to take action when it considers these risks to be unacceptable.
In short, the bill would reinstate the requirement for significant foreign acquisitions of financial institutions to be approved by the Minister of Finance. Since 2004, there have only been four instances when this provision would have been applied. While this role would rarely be used, there is no doubt that this kind of oversight should be brought back.
Michael King, finance professor at the Richard Ivey School of Business, says:
This kind of a rule is actually one of the reasons why Canadian banks weathered the crisis so well over the years. ... Canadian banks have done well. And it’s helped the Canadian economy to have such stable banks.
Alec Bruce, noted Times-Transcript columnist, has reported that the finance minister has a point. “When our banks top up their foreign holdings in this environment they do, in fact...”, in essence, import many of the efforts they've made overseas and reject all of the contagion that comes overseas as well.
This also builds on recent stabilizing measures we have introduced to secure the financial sector. Budget 2011, for example, announced the 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 will make it easier for Canadian financial institutions to access this low-cost source of funding and help create a robust market for covered bonds in Canada.
Consumer protection is another area where we have taken decisive action to strengthen Canada's financial sector. In 2009, for example, our Canadian government acted to protect Canadian credit card users. The measures we introduced mandated that the inclusion of clear and simple information on credit card application forms and contracts would be required, and also required clear and timely advance notice of changes in rates and fees from card providers.
We have also limited credit business practices that do not benefit consumers. For example, we require credit card insurers to provide consumers with a minimum 21-day interest-free grace period on all new purchases when consumers pay their balance in full by the due date. We also require a minimum 21-day grace period on the billing period as well if the consumer has an outstanding balance that needs to be carried forward.
We have moved key information such as interest rates, grace periods and fees out of the fine print buried in credit card applications and contracts into a prominent summary box, so that consumers signing an application know exactly what kind of financial arrangement they are agreeing to. This measure also provides a clear picture of their debt load as they pay it off.
These initiatives are in effect today and are providing Canadian consumers with precisely the kind of financial information that leads to better decision making. These measures, like those in Bill S-5, reflect the understanding that every part of Canada's financial system must be resilient and strong for the benefit of individual consumers, businesses looking to raise capital, or the banks and other financial institutions that can help them realize their goals.
That is why Bill S-5 is focused on those areas that must be fine-tuned so Canadians can continue to rely on one of the world's best financial systems for years to come.
I would therefore encourage the hon. members of this House to support the timely passage of this bill and to join our government in its ongoing efforts to build and maintain Canada's financial sector advantage.
Pierre Nantel NDP Longueuil—Pierre-Boucher, QC
Mr. Speaker, what does the member opposite think about the fact that very few people expressed their opinions online during the consultations?
Rod Bruinooge Conservative Winnipeg South, MB
Mr. Speaker, when this bill was first introduced in its previous form in 2010, there was an extensive consultation period that was launched.
Of course the Internet is one way in which people can provide feedback to the government, but there are many other forums, as the hon. member is aware. There are other processes through which we as government receive information.
I think the process has been productive. Obviously we have a good bill today before the House.
Scott Armstrong Conservative Cumberland—Colchester—Musquodoboit Valley, NS
Mr. Speaker, I want to thank the hon. member for his speech today, which outlined several very important technical parts of Bill S-5.
The hon. member spoke about the bridge bank protection, which is provided by CDIC to financial institutions in trouble. He also spoke about the plank that allows ministers to approve any foreign company that wants to come in and take over a domestic financial institution.
I would like to ask the hon. member to comment specifically about something he spoke about in regard to consumer protection and the clearness, openness and transparency that is going to be required of credit card companies. I think that is a very important part of the bill, which protects consumers across Canada.
Rod Bruinooge Conservative Winnipeg South, MB
Mr. Speaker, I think that builds on a transparency in advertising philosophy, which is something consumers have come to expect in recent years.
I am very happy it is something that is also going to be applied to credit card distributors, people who provide credit. Though it is obviously a financial service that is needed and they are companies that should be able to profit from their services, at the same time they need to provide information that is transparent and provides consumers with the information they need to be able to make proper decisions.