This bill was last introduced in 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.
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.
Peter Van Loan Conservative York—Simcoe, ON
moved that Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters, be read the third time and passed.
Colin Carrie ConservativeParliamentary Secretary to the Minister of Health
Mr. Speaker, I would like to start by asking for unanimous consent to split my time with the member for Etobicoke Centre.
The Speaker Andrew Scheer
Does the hon. member have the unanimous consent of the House to allow the parliamentary secretary to split his time?
Some hon. members
Agreed.
Colin Carrie Conservative Oshawa, ON
Mr. Speaker, I welcome this opportunity to speak to Bill S-5, the financial system review act at third reading. This bill would reinforce stability in Canada's financial sector, fine-tune the consumer protection framework and adjust the regulatory framework to new developments.
Since the onset of the global financial crisis of 2008, our government has remained committed to strengthening the framework overseeing the financial sector. Our focus has been to provide the best consumer protection environment possible, one in which there is competition, information is disclosed and consumers are able to make informed choices. Bill S-5 does just that.
Bill S-5 proposes to improve the consumer protection framework by enhancing the supervisory powers of the Financial Consumer Agency of Canada, FCAC. FCAC is mandated with ensuring that federally regulated financial institutions adhere to the consumer provisions of the legislation set out to govern them. In addition, FCAC is the government's lead agency on financial education and literacy. It has moved forward with an array of excellent initiatives in recent years. FCAC has developed innovative tools to help Canadian consumers, such as a mortgage calculator that quickly determines mortgage payments and the potential savings resulting from early payments.
FCAC has also been instrumental in leveraging and coordinating private sector and voluntary sector initiatives on financial literacy already under way across Canada. Financial literacy among Canadians will pay dividends for future generations. That is why, in budget 2009, we established the task force on financial literacy, to make recommendations on a cohesive national strategy to improve financial literacy in Canada.
The task force had 13 members drawn from the business and education sectors, community organizations and academia. The task force delivered its final report, “Canadians and Their Money: Building a brighter financial future”, on February 9, 2011. It outlined 30 recommendations to improve the financial literacy of Canadians. I am pleased to note that the proposed financial literacy leader legislation before Parliament now responds to a key task force recommendation for the need for dedicated leadership. That legislation, as the name suggests, would provide the framework for the appointment of a financial literacy leader. This financial literacy leader would be mandated to work with stakeholders to support financial literacy initiatives and would continue the progress achieved by the Financial Consumer Agency of Canada.
Informed consumers are the very foundation of a solid financial system. Indeed, a country's prosperity is ultimately the sum of the financial successes and related decisions of all its households. However, we have done more.
In 2009, our government acted to protect Canadians who use credit cards. We want to ensure that Canadians understand their obligations in advance of signing up for and using these purchasing instruments. To that end, the measures we introduced, which are in effect today, mandated clear and simple information on credit card application forms and contracts, and clear and timely advance notice of changes in rates and fees. This initiative provides Canadian consumers with precisely the kind of improved financial information that leads to better decision making.
Also, to protect consumers, in August 2010, we put into effect the code of conduct for the credit and debit card industry. The code was developed in consultation with small business. Under the code, merchants will be provided with clear information regarding fees and rates, given advance notice of any new fees and fee increases, able to cancel contracts without penalty should fees rise or new fees be introduced, and given new tools to promote competition and in particular the freedom to accept credit payments from a particular network without the obligation to accept debit payments and vice versa.
This code has been widely applauded, especially among small business. I will quote at length what the Canadian Federation of Independent Business had to say. It stated:
The Code of Conduct's biggest achievement has been to protect Canada's low-cost flat-fee debit system.... the Code's other big accomplishment is providing merchants with some power in their relationship with credit card companies, banks and card processing companies.
Merchants have new powers under the Code that have helped them achieve tangible results in their dealings with the industry. This simply wouldn't have happened without the Code.
I encourage all members to take the time to review the code and discover how it will contribute to a better system for both merchants and consumers. Before I conclude, let me very quickly highlight some of the other measures in today's legislation which, I believe, other speakers will address in greater detail.
Bill S-5would update financial institution legislation to promote financial stability and ensure Canada's financial institutions continue to operate in a competitive, efficient and stable environment. It would improve the ability of regulators to share information officially with international counterparts. It would change the priority status of segregated fund policies in insolvency situations that would facilitate timely transfer, consistent with life and health insurance policies. It would clarify that Canadians are able to cash government cheques under $1,500 free of charge at any bank in Canada. It would promote competition and innovation by enabling co-operative credit associations to provide technology services to a broader market. It would amend the Payment Clearing and Settlement Act to remove the requirement that there must be at least one bank involved.
In all, the measures proposed by the bill would further strengthen our system by reinforcing stability in the financial sector, fine-tuning the consumer protection framework and adjusting the regulatory framework to adapt to new developments.
Canadians should be justifiably proud of our financial services sector. It employs over 750,000 in good, well-paying jobs. It represents about 7% of Canada's GDP. It is a world leader in the use of information technology.
Over the past four years, the World Economic Forum has ranked our banking system as the soundest in the world. Forbes magazine has ranked Canada number one in its annual review of the best countries to do business. Five Canadian financial institutions were named to Bloomberg's most recent list of the world's strongest banks, more than any other country.
Recently, a Financial Stability Board peer review praised the government's response to the global financial crisis. It highlighted the resilience of Canada's financial system, calling it a model for other countries. The FSB review said that “the strength of Canada's economy and its financial system meant that no Canadian financial institution failed or required government support in the form of a capital injection or debt guarantees during the global financial crisis.”
By updating the financial legislation framework, we would continue to ensure that Canada's financial institutions operate in a competitive, efficient and stable environment that would help Canada maintain its well-earned reputation as a global leader in financial services.
Mr. Speaker, thank you for the time I was given to participate in today's debate and to recommend the timely passage of Bill S-5.
Peter Julian NDP Burnaby—New Westminster, BC
Mr. Speaker, I enjoyed the member's speech on Bill S-5. The concern we have had on this side of the House is how improvised the Bill S-5 process has been.
This is something the government knew about years in advance, the revisions of the Bank Act. It did not make it public and did not call for real, sincere public input into Bill S-5. It was brought forward by the Senate first. It was brought into the House of Commons at a late date and the government did not allow the finance committee to do a thorough vetting.
Of course, consumer groups are very concerned because no issues were able to be raised in any fulsome manner with these revisions to the Bank Act. Now we are pressing for a deadline. We have to get this bill through in the next few days.
My question to the member is simply this: Why did the government botch this process? Why did it improvise all the way along, so we are now moving to rush the bill through Parliament to meet a deadline that the government knew about years in advance?
Colin Carrie Conservative Oshawa, ON
Mr. Speaker, I am very pleased that the NDP member actually stood up and asked a question on financial literacy. He is quite right, this is mandatory legislation. The premise of his question is false. As he should know, we did extensive consultations. The process was on September 20, 2010. The government launched the five year review of the federal financial institution legislation. The government invited the views of all Canadians on how to improve our financial system. Approximately 30 submissions were received from a range of stakeholders. Everyone had the opportunity to contribute.
The proposed bill takes into account the concerns of the major interest groups, including consumer groups, stakeholder and policyholder groups and financial sector industry associations.
I think we have done a very good job here. I think this is something all of us can be proud of. We can be proud of our financial institutions because, as I said in my speech, we have been number one. That is something all Canadians should be proud of.
Kevin Lamoureux Liberal Winnipeg North, MB
Mr. Speaker, I would like to follow-up on that question. What we have witnessed over the last number of months, since the Conservatives have had a majority government, is they tend to want to prevent and downplay the importance of procedures in the House in allowing for adequate debate and so forth. As has been pointed out, we have known about the need for the bill for a long time. It was interesting that the Conservatives chose to introduce it through the Senate as opposed to the House of Commons.
This bill comes up every four or five years under review. Could the member affirm if this is the first time it has been introduced through the Senate? If so, why did the government choose to go through the Senate as opposed to the House?
Colin Carrie Conservative Oshawa, ON
Mr. Speaker, as my colleague should know, we are mandated to review it. It is mandatory legislation and it can be through either the Senate or the House of Commons. As the member says, we are a majority government and we have been busy doing the work Canadians are expecting us to do. As opposed to other governments in the past that liked to dither and waste time in the House and in the Senate, we are committed to following through on commitments to Canadians.
Our financial sector is the best financial sector in the world, and this needs to be done by April 20. We are committed to getting it done on time and we are very open to anybody who wants to have input into it. We have had a good consultation process.
As I said, our government is moving forward on all these things because we want Canadians to understand the importance of financial literacy. We want them to have the tools so they can save into the future. This is about the economy and jobs. That is what we are committed to, that is what we ran on and that what we will continue to do.
Ted Opitz Conservative Etobicoke Centre, ON
Mr. Speaker, I am thankful to speak to the third reading stage of Bill S-5, financial system review act.
I thank the hon. Parliamentary Secretary to the Minister of Health for his comments, especially those on financial literacy. They are a cornerstone for all Canadians to understand their institutions. This would help the jobs and economy of our country to continue to grow.
The bill is significant legislation because, although it is purely technical, it would guarantee the long-standing strength and security of Canada's financial institutions. Our government will make a series of changes to various legislation that govern Canada's financial system, including the Canadian Payments Act, about which I will speak in greater detail in just a few moments.
First, I want to emphasize for members of the House, and Canadians watching at home, that the Financial System Review Act is a mandatory and routine legislation. Canada's financial system is the safest and most secure in the world, and that is a direct result of mandatory five-year reviews. That kind of vigilance has been absolutely critical to maintaining our economic strength in our financial institutions. As the hon. member before me pointed out, much of the world has lauded that, understands that and has given Canada credit for it. Thanks to the greatest finance minister on the planet, the hon.—
An hon. member
Paul Martin
Ted Opitz Conservative Etobicoke Centre, ON
No, absolutely not.
However, that is why we have our system. In fact, it is a long-standing tradition in Canada to conduct mandatory five-year reviews of Canada's financial sector legislation. I should point out that this most recent review process was officially launched in September 2010, when our Conservative government launched the public consultation process open to all Canadians.
I am sure most members of the House are familiar with the World Economic Forum, which has ranked Canada as having the soundest banks in the world for four years running. What is more, Canada's safe and secure financial system is the envy of the world.
I will quote from the United States Congressional Research Service report which explains how Canadian banks offer a model to the United States and other countries on how to avoid a future financial market crisis. It states:
Canada’s financial system, in particular, garnered attention, because it seemed to be more resistant to the failures and bailouts that have marked banks in the United States and Europe...
As my hon. colleagues are no doubt aware, Canada's credit unions offer important and valuable services as part of our banking sector. Indeed, more than five million Canadians and business owners are the grassroots shareholders of co-operative financial services in Canada and one in three Canadians is a member of a credit union or caisse populaire.
In recent years, our Conservative government has demonstrated its commitment to credit unions by supporting a federal credit union charter to accommodate growth and expansion of the Canadian credit union system. These actions will ensure that those credit unions, which choose to pursue business ventures out of the province, will not be constrained by outdated rules on provincial incorporation. Furthermore, this will also give credit unions a means of diversifying sources of funding and spreading their geographic risk exposure. Similarly, in order to provide federal credit unions with a greater leverage of the Canadian Payments Association, today's legislation would amend the Canadian Payments Act so that credit unions would be classified under the co-operative class in the act instead of the bank class.
At the same time, credit unions will still employ the long-standing, well-understood and robust governance, liquidity, clearing and settlement frameworks in use today. While this may sound like nothing more than a technical change, it is nevertheless fundamentally important. This change would continue to promote a level playing field within the financial sector which would foster competition among players and would ensure a stronger, more stable overall system.
This is what the Credit Union Central of Canada, the national association for credit unions of Canada, had to say about this modification. It 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 will remind everybody that CPA is the Canadian Payments Act.
I am certain all members of the House would be in agreement that a stronger credit union system can benefit all Canadians.
Finally, as I mentioned at the outset of my remarks, I would like to speak to a piece of the financial system review act that would make improvements to Canada's payments system, something Canadians deal with almost each and every day. Indeed, every year, Canadians make 24 billion payments, which in total are worth more than $44 trillion. These payments allow us to run our businesses, sustain our households and allow governments to fund essential programs.
Canadians use various payments instruments to purchase goods and services to make financial investments and to transfer funds from one person to another. These instruments include cash, cheques, debit and credit cards. With the exception of cash, payment instruments have typically necessitated a claim on a financial institution such as a bank, credit union or caisse populaire. Therefore, banks and credit unions must make arrangements to transfer funds among themselves, either on their own or on their customer's behalf.
A payments system is set on instruments, procedures and rules used to transfer these funds. In Canada our national systems for clearing and settlement of payments are run by the Canadian Payments Association, or the CPA, a not-for-profit organization of federally regulated financial institutions.
Our government knows that no modern economy can reliably function without a payments system that is sophisticated and secure. However, the payments landscape is changing. For example, experience in Canada and abroad since the 1990s demonstrates that clearing and settlement systems do not always include banks as direct participants. That is why Bill S-5 seeks to amend the Payment Clearing and Settlement Act to remove the requirement that there must be at least one bank involved in a payments transaction. These new rules will allow more flexibility in establishing systems to clear complex financial instruments like over the counter derivatives, or OTCs. This adjustment will permit the Bank of Canada to monitor payments that could pose systemic risks to the financial system.
Canada's leadership in reforming the global financial system through membership and international organizations, such as the G20, is well-known and a source of pride for Canadians. What Canadians may not know is that one important commitment we have made to our G20 partners is that all our OTCs will be cleared through central counter parties by 2012. This is an important step for the resilience and stability of our financial system.
To meet our G20 commitments, it is critical that Canadian prudential and market conduct regulators have the necessary authority, tools and information to regulate the Canadian OTC derivatives market on an ongoing basis. This means coordinating activities across current federal and provincial jurisdictions as well as with foreign regulators.
This is the kind of evolutionary change that demonstrates the importance of regular reviews in our legislative framework to maintain Canada's leadership in financial services. For these reasons, I urge the members to support passage of this largely technical but immensely important bill, which would help to ensure the continued functioning of Canada's payments system.
Robert Chisholm NDP Dartmouth—Cole Harbour, NS
Mr. Speaker, we have raised this issue before in debate on Bill S-5. The matter came up recently this week in the media regarding the Ombudsman for Banking Services and Investment, which is a voluntary dispute resolution organization that was set up back in 2002. Two of the big major banks have withdrawn from that organization and no longer participate in it. The ombudsman has said that has effectively made the organization almost useless.
Could the hon. member explain what the government will do to ensure there is the kind of independent analysis and dispute resolution for these matters that was normally provided by that organization?
Ted Opitz Conservative Etobicoke Centre, ON
Mr. Speaker, I did not hear that direct comment in the media at the time. However, nothing here is invalidated, so I reject the premise of the hon. member's question. As I indicated in my speech, there are independent bodies that provide this advice.
We have consulted widely with Canadians as well as to what they want in this legislation, including all the credit unions and caisses populaires. Those independent factors and experts in the industry are available to us to refer to and to provide comment on this at any time.
Robert Chisholm NDP Dartmouth—Cole Harbour, NS
Mr. Speaker, I would like to follow up on the point I made about the Ombudsman for Banking Services and Investments. There was an article in the Globe and Mail on March 27.
The organization was set up to provide independent complaint-handling dispute resolution on behalf of customers and clients of the banks. It was to be dealt with in an independent manner. It has been clearly stated that in fact the organization's effectiveness has been lost because two of the big banks are no longer participating. It is a problem when customers and consumers do not have the opportunity to receive an unbiased independent review of their particular complaints. The minister and parliamentary secretary said that they were going to do something about it, but nothing has transpired.
Why does the member think that an independent arbiter representing customers and consumers is not a good idea?