Finance Committee on Feb. 19th, 2007

[John Lawford]

I'm just going to repeat Duff's comments, that something needs to be done to help organize civil society, if I can put it that way, and consumer groups to bring that position forward. It is a resource problem, a chronic problem.

Always, always, as well, we all gird our loins for attacking bank mergers, and that takes a lot of time away from it. Then when people pull bank mergers off the table, there all the other issues we should have been working on that fell by the wayside. That's not an excuse, but it's what happens.

But we will be better organized next time. It's just.... It's difficult.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

And for some of us, it's also the fear that if we take too long to dispose of this, we might get bank mergers back on the agenda, and then what would we do? It's partly that too, I guess.

Frank, on that point...?

[Frank Zinatelli]

I just want to recollect the process, as I recall it, leading up to the 2006 review. I recall that there was a consultation paper, I believe in the spring of 2005, which invited comments—

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Yes, I'm aware of that.

[Frank Zinatelli]

—on a number of issues, plus anything else that people wanted to bring up. After that process, discussions led up to the white paper last June, and then to this.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you. I'm aware of that whole formal process. I'm really concerned, though, that only certain voices get heard, and that a lot of the consumer issues are not either in the white paper or in the legislation. That's a constant frustration.

I guess we could have voted against the bill at second reading stage and then started again, but that was the only choice we had. I'm really anxious to try to turn this around and to find ways to deal with some of the issues around bank closures, around how we move on community reinvestment.

As you know, one of the issues we're trying to raise now is around all the fees consumers are facing. We focused on ATM fees, but there are so many others—the credit card charges, all of this. In fact, the head of our own Financial Consumer Agency of Canada, in a recent speech, identified the problem of consumers being faced with a dizzying array of complex choices and products, and yet we haven't found a way to provide ready information to consumers. I think that should be the fundamental objective of this Bank Act at this point.

[Duff Conacher]

I could suggest that overall you would have a much better answer than we would, because you are the ones who are lobbied. You could pose a question, for example, to your committee colleague Mr. McCallum, who expressed concern about credit card interest rates several years ago, when he was junior minister of finance, but then there was no action by the government subsequently.

To paraphrase Joseph Conrad, between the thought and the action lie lobbyists in the shadow. When I was saying 100 to one is how far we're outmatched as citizen lobbyists, that's just counting the bank lobbyists, not the insurance company and trust company lobbyists, and not counting what happens at the provincial level as well.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Yes.

Mr. Phillips, I know you're generally happy with this legislation, as far as it goes, and I'm sure you have other thoughts about other directions, but I wanted to ask you about ATM fees, since we've been focused on bank fees.

What are your thoughts on either government or other pressure being put on financial institutions to curb the amount of fees one has to pay to access one's own money? Have you ever thought about the—

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Ms. Wasylycia-Leis, that's it.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Could I just get a quick answer?

[The Vice-Chair, Liberal, Massimo Pacetti]

Yes.

Perhaps you could answer that quickly--quickly and briefly.

[David Phillips]

I'll just speak to it from the perspective of the credit union system. We have established within the credit union system a surcharge-free network between credit unions. I'm a member of Alterna Savings in Toronto. I have a debit card. I'm going to be in Saskatoon tomorrow. I can go to the FirstSask ATM and pull money out and I won't be surcharged.

Each credit union member has access to at least 1,500 or 1,600 ATMs without surcharge. So as a credit union system, we're trying to address that issue through this means.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Shouldn't the banks have such a network--

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Phillips , and thank you, Ms. Wasylycia-Leis.

Mr. McCallum, we're going to go to five-minute rounds. I have Mr. McCallum, Monsieur Gaudet, Mr. Del Mastro, Mr. McKay, and then Mr. Wallace.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

My question will be somewhat beyond the scope of this act, perhaps.

When I listened to Mr. Conacher about competition and getting better prices or services from banks, I guess my general view is that for any industry, if you want better service or better prices, it's probably a better plan for the government to try to get more competition than it is to what you might call micro-regulate that industry.

My question for you would be, have you thought about how one could produce more competition in Canadian banking? And how would you go about that?

[Duff Conacher]

The government has tried pretty much everything so far, and the competitors don't step up. Why? Because the best locations are already taken, and the start-up costs are enormous. Foreign banks have testified to that now for 15 years.

When you have a market such as that, as we do with utilities and telephone and cable, what the government usually does is step in and regulate and ensure that prices are fair and that service is good. And that's what's missing in the equation.

[John McCallum, Liberal, Markham—Unionville, ON]

So are you assuming there are no barriers at all to foreign banks for entry into retail banking in Canada?

[Duff Conacher]

No, there are enormous barriers.

[John McCallum, Liberal, Markham—Unionville, ON]

I mean government-imposed barriers.

[Duff Conacher]

Not that much, actually, now, given what has been done under the WTO agreement, and also through Bill C-8.

But you just don't see them opening up branches. The only one that really has a branch network is HSBC, who bought their branch network.

Other than that entry point, which possibly could happen if there was a merger proposal--there are only, I think, one or two merger combinations that are even legal under the Competition Act--it would depend on selling off a bunch of branches. That might provide another entry point.

But otherwise, no. The barriers are down. They're not coming in because the market share control and the start-up costs are too great, and those are their own--

[John McCallum, Liberal, Markham—Unionville, ON]

I'm not sure ING Bank is doing that badly, or that physical location in today's electronic age is necessarily the critical factor.

[Duff Conacher]

No, but when you--

[John McCallum, Liberal, Markham—Unionville, ON]

To Mr. Phillips, what about credit unions as the instrument for providing more competition for banks? What changes could the government make at some future date to enhance competition through the credit unions?

[David Phillips]

We think we're already pretty good competitors of the banks. And certainly if you look across the country, you'll find the credit union system is growing in membership each year, growing in assets, growing in locations, and has a pretty good market share in some of the markets. Not universally across the country, but there are locations where we're competing very effectively. We're full-service financial institutions and very strong as competitors to banks.

Concerning the evolution of the system, I mentioned that in the case of the Cooperative Credit Associations Act, there are improvements there that may establish an association under that act as a more attractive organizational structure for credit unions.

As credit unions get larger and perhaps look to cross-border powers, a federal charter is something that may become more attractive. And at the federal level, those are changes that would be beneficial to the credit union system in the longer term. It's not an immediate issue for us, but we can see that is the direction in which our system is evolving.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

In terms of effectiveness of credit unions, that reminds me of when I used to work for a bank, I remember there was huge angst in the bank at what were perceived to be extremely effective credit card commercials in the Vancouver area. So that was an instance where the competition was effective.

To Mr. Zinatelli....

Do I have time for one more question?