Finance Committee on Feb. 15th, 2007

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. McKay.

Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you.

I'd like to continue the discussion on electronic payments. More and more citizens are talking to us about that. This issue is a great concern for them. In Canada, one industry could expand extensively, on the Internet, among other things, if statutory measures aren't introduced to slow that trend. However, those measures aren't included in the act for the moment.

I know you favour a voluntary approach, but that involves two problems, in my view. First, it can be a long and difficult process, and it isn't clear that it will be to the advantage of consumers. In addition, people's perceptions are at issue. I won't be telling you anything new when I say that a large segment of the population has little or no trust in the financial institutions. Citizens often tell me that they doubt those institutions are able to regulate themselves. They also doubt that this process is to their advantage.

One of the measures sought by a number of consumer advocacy organizations is to set a fraud liability limit of $50 for every electronic payment. At the moment, that limit applies when you pay by credit card.

Would you be open to the idea of applying that limit to other payment methods, so that this minimum protection always applies, regardless of payment method? We would be assured that the financial institutions would make even greater efforts to prevent fraud since they would have to bear the balance of any potential frauds.

If we were to adopt that measure, would you support it?

[Serge Dupont]

When we talk about a voluntary approach, we're not talking about a process in which providers simply do what they want to do. We're also talking about a code whose implementation is potentially monitored by the Financial Consumer Agency of Canada. Second, for these payment methods to have a future, in other words, for consumers to want to use them, we will have to convince them that standards and measures designed to protect them will be implemented. If consumers don't trust these payment methods, they won't necessarily use them.

Service providers therefore have an interest in maintaining a certain level of trust, and consumers...

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

I'm going to interrupt you, since I understand all that. This is more a political issue, which is the minister's responsibility.

Would you support the decision to introduce limited liability, set at $50, for all payment methods?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I support competition, so the answer is that I wouldn't be in support of a compulsory rule for everybody in the country for it, no. I think it's one of those items financial institutions should compete about, offering various products at various prices to people. Let people make their choices.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. St-Cyr.

Mr. Dykstra, you have three minutes, please.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Chair.

This is to the minister or the ministry officials. There have been a lot of discussions around banks. Obviously, we have some credit unions in our country as well. Could you comment on any amendments that may be in the act that will provide some benefits for some of the credit unions?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

If you don't mind, Mr. Dupont will reply.

[Serge Dupont]

There's one amendment in particular in the bill, which in fact we've discussed with the Co-operative Union...the CUCC—sorry, I have the acronym, but I forget the different parts—that is allowing a retail association of credit unions to be created with a lower threshold. Currently under the act, such an association to provide services to credit unions can be created if you have ten credit unions getting together in creating such an association. We're lowering that threshold to allow two credit unions alone to do it. That means that two credit unions, which might be in separate jurisdictions in the country, can get together, for example, to share data processing and share other services that they can then render to themselves. It's allowing them to establish more competitive platforms nationally, getting together and becoming more competitive.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you.

One of the other issues that I certainly had a lot of meetings on from a local perspective was with respect to banks and insurance, and where we were going to go with that. As you mentioned, the decision was made to not move forward, Minister. Is there any thought in terms of where this is going to go? Perhaps you could comment a little further on the decision to not allow that to happen at this point.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you for the question.

Our government has been clear that we are not about to expand the ability of the banks to sell insurance. There are various concerns relating to that in terms of policy issues, but suffice it to say that we have been clear on that position and are not going to move forward on that.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Dykstra.

We'll go to Mr. Thibault, and then Mr. Del Mastro. We need to clear the room by eleven o'clock, so I'm going to go to two minutes each, if possible.

[Robert Thibault, Liberal, West Nova, NS]

Welcome, Minister.

Madame Ablonczy pointed out that we did hear witnesses who pointed to some dangers in the income trust sector, but the fact remains that the promise had been made not to tax it, and you did. What could have been a surgical strike was a nuclear bomb. Lots of money was lost. The Governor of the Bank of Canada, David Dodge, said there were some investment needs in Canada for which trusts were a good vehicle forward, a good instrument forward. You, yourself, I believe, have agreed with that by leaving the REITs in.

What I fail to understand is this. You now have a proposal on the table for modification of your plan, a proposal that maintains the principle that you want to look at—stop the proliferation of trusts—but one that answers to all those other needs by permitting them when it's the proper tool, when it's the proper instrument, thus reducing the hit on individual Canadians.

We have heard that large institutional investors were not hit by your decision, that things get mitigated over the medium to short term for them, but individual investors were hit very hard. Now you refuse to consult with the industry and you refuse to study or even discuss a proposal put forward by Mr. McCallum to mitigate some of those negative effects. I fail to understand that, Minister.

[The Vice-Chair, Liberal, Massimo Pacetti]

You have thirty seconds.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Please don't misunderstand my disagreement with the position of the Liberal Party with not understanding it. I understand it fully. It does not create tax fairness. It does not stop the leakage of tax revenue, according to the Liberals' own figures in 2004. It continues to favour foreigners compared with Canadians with respect to the payment of taxes. So it fails on all three counts.

This is exactly what your government did when you were the government in the fall of 2005. You bungled the issue. You keep talking about some way of doing it other than the way we did it, and you failed.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

We have three minutes left, so I'll give Mr. Del Mastro two minutes, hopefully on a positive note.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thanks.

Mr. Minister, I wouldn't waste too much time trying to convince them, since 28 witnesses appeared before them and told them evidence to the contrary. They never heard any of it, so I wouldn't suggest that you're going to have any more success.

I would like to go back to the issue at hand, which is the Bank Act. As we know, there is a real entrepreneurial and creative spirit in Canada. Small business certainly relies on strength in the banking sector. The strategic investments that the sector makes in supporting small business is critical to our overall economy.

Having said that, we see fairly significant profits in the banking sector. Are you satisfied that we see enough competition in our banking sector? Do you think the banks are taking enough risk in supporting small business?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

That's a good question, and certainly a very broad question.

I'm for competition in the financial services sector and elsewhere. I'm happy to see the strength in the credit union sector, quite frankly. I think it's good to have that kind of growth and competition in financial services in Canada.

At the same time, when I look internationally, we can be very proud of our financial sector and its participation internationally. We need to grow Canadian businesses globally, which we made clear in our economic plan for Canada, Advantage Canada.

Our large chartered banks and our large insurance companies are leaders internationally. We don't have that many large businesses in Canada—unlike our neighbour to the south, perhaps—that can lead the way into large emerging economies in the world. But our banks can and our large life insurance companies can, and they're a way for Canadian businesses, including SMEs, our small and medium-sized enterprises, to have access to some of the foreign markets.

Internationally, I think it's terrific that we have this strength of financial services. I'm thrilled at the employment numbers, which are great, with substantial employment, of course, in the greater Toronto area, where I'm from. It is one of the pillars of the Canadian economy, and I hope we'll continue to have substantial competition, and even more competition in the Canadian banking system.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Del Mastro.

Thank you, Mr. Flaherty. I would give you a closing remark, but I think that was a good closing comment.

We have to clear out the room. The committee has Room 237-C, so can we meet you there in five or ten minutes. Thank you.

The meeting is adjourned.