Finance Committee on March 8th, 2012

[Frank Swedlove]

Yes, I would agree with Mr. Campbell. While this is essentially an added layer, I think there's a recognition that the world has changed since 2008 and that the minister needs at his disposal what is required to ensure the safety and soundness of the system. We have no objection to the change.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate that.

Just as a comment, I think one of the things is that when people see this clause, I don't think there's a lot of knowledge, perhaps, by Canadians of the number of acquisitions that have gone on. For instance, you mentioned the John Hancock acquisition. I'm not sure how many Canadians are aware that Manulife owns John Hancock, or that TD actually now has more branches in the U.S. than in Canada.

[Terry Campbell]

Yes, exactly.

[The Chair, Conservative, James Rajotte]

A lot of Americans think TD is an American bank, which is quite interesting.

I have about a minute left. I wanted to ask Mr. Campbell a question that's often raised here in public policy in terms of the banking sector and the regulation of the sector.

There are those like my good friend John McCallum who will say that the reason we have a very solid financial sector, especially with respect to banking, is that we prevented mergers—his government prevented mergers—and that is why it's solid. There are those who argue differently—including me—and who say no, it's actually the capital ratios, the leverage ratios, that are in fact responsible for the soundness of our institutions and therefore the overall soundness of our system. I certainly credit OSFI with a lot of their prudential regulation.

But I did want to get you on the record, Mr. Campbell, on that policy question.

[Terry Campbell]

I would say the core thing.... I think Mr. Van Kesteren pointed out the good old-fashioned conservative Scottish banking. My last name is Campbell, so I took heart at that.

I would say that fundamentally it's the behaviour of our banks, it's the behaviour of our regulators in terms of the quality of supervision, and it's the content of the rules. Those are the three things that have stood Canada in good stead.

I'm not going to pronounce on the merger decision of two decades ago, but it's hard for me to see how those fundamental qualities would change. So I think—whether or not it's just the way we do things in Canada—it's that tripartite, the three legs of the stool that seem to work together very well in this country.

[The Chair, Conservative, James Rajotte]

I appreciate that very much.

I do have to put in a small plug for FCAC, especially with the motion passing yesterday, and thank them very much for all their work on financial literacy.

Mr. Giguère, you have five minutes.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair.

Internationally, a great many financial institutions are currently in a fragile state, but that is not the case for Canadian institutions. In such a situation, do we not run the risk of seeing a series of takeovers, given that our institutions now have the means, expertise and reputation required to purchase foreign institutions much more so than they did in the past?

Could you provide us with an order of magnitude on this issue?

[Terry Campbell]

Thank you for the question. I apologize, but I am going to answer you in English.

I would say our banks have been.... If you look at the track record over the last 10 years, 15 years, 20 years, I think it's very clear that our banks—while they have been interested in expanding and have done so—have done it in a very cautious way. You read comment after comment from CEOs to say they're not going to rush into this; they're not going to buy it just because it's out there and it's a cheap deal. They do their due diligence. Remember, they're very mindful of the oversight of OSFI, and they're very mindful that we have to maintain a very strong risk management culture.

So there may be opportunities as a result of the fragility you talk about, Mr. Giguère, but I would say—and I think the track record proves me out—the banks will approach acquisitions.... They do not want to buy a bunch of problems. They do not want to buy a bunch of new risk simply for the sake of getting bigger. We saw that in the United States, but we don't really see it here.

The caution is well placed, but I think the track record speaks for itself.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you.

My next question pertains to demutualization, which is threatening some cooperatives, in that the accumulated assets of past investors and participants may be shared amongst the current members. As far as this matter is concerned, the amendments proposed by Bill S-5 do not necessarily afford all the protection that was desired.

Would you please provide me with your comments, please?

[Terry Campbell]

Is your question for Mr. Swedlove?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes.

[Frank Swedlove]

There is a separate demutualization legislation for life insurance companies. Most of the industry was demutualized in the late 1990s or early 2000s. I would say by all accounts that went extremely well, and I think those who benefited from it felt they were.... I should say all the people involved in that process felt they were fairly treated.

What is now being discussed by the finance ministry is the whole issue of demutualization in the property and casualty insurance business, on which I really am not in a position to comment.

This Bill S-5 doesn't deal with the demutualization issue. That's a separate piece of legislation, which has been on the books for some time.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you.

My last question is for Mr. Sarrazin.

At the federal level, cooperatives are considered to be somewhat like banks. Am I mistaken?

[Philipe Sarrazin]

The Bank Act was amended in 2010 to, indeed, allow for the creation of known entities such as quasi-banking cooperatives, if you will.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

What would happen should a cooperative be demutualized? In other words, the cooperative would be converted into a financial institution or regular bank? What would happen to the accumulated assets of past generations of investors?

[Philipe Sarrazin]

The regime exists to enable provincial cooperatives to continue or to be incorporated under federal regulations. However, there are none right now. I would therefore find it difficult to answer you and explain what would happen if a cooperative decided that it wanted to demutualize. I do not know how to answer you.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

This probably explains why there are not any: the threat is too restrictive.

[Philipe Sarrazin]

This is also because this is relatively recent: the regime was established in 2010. And before a provincial cooperative can move to the federal round, if you can call it that, a long process must be followed.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Giguère.

We'll finish with Ms. Glover today, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

For my turn, I would like to celebrate International Women's Day by asking Ms. Menke a question. I would like to congratulate her on her appointment to the position she holds in her organization.

I would like to ask a question about the pro-consumer changes and the federal financial institutions. Now consumers can cash, at no charge and throughout Canada, cheques of less than $1,500 that are issued by the government. I would like you to tell me how Canadian consumers are really benefiting from these changes, and which Canadians will be the most affected.

[Ursula Menke]

It is a bit difficult to answer your question because this was really a technical amendment. We had this rule in the past. Anybody could go to a bank branch in order to cash a cheque, even if this were not the individual's own branch. At one point, some people interpreted this rule to mean that the banks did not have to cash cheques free of charge in the client's branch.

The legislation was amended to counter this argument. The intention has always been that Canadians should be able to cash these cheques free of charge.

[Shelly Glover, Conservative, Saint Boniface, MB]

Had some financial institutions been charging for this service?

[Ursula Menke]

This did happen from time to time, but generally speaking this was done by mistake. We did receive complaints in the past from people who had been charged. We acted on these complaints, because this was in fact against the law.

[Shelly Glover, Conservative, Saint Boniface, MB]

So the act was amended to prevent these mistakes from being made again.

We have just announced, in addition to the changes regarding cheque cashing, measures that will enable Canadians to have access to their money immediately. Here I am referring to the first $100. Who stands to benefit the most from this measure?

[Ursula Menke]

We are hoping that this measure will help people who really need their money. This could be a cheque from an employer. There are people who do not have much money and need it immediately because they are hungry or something along that line. Generally speaking, this will help those people who need their money and who otherwise would turn to other money suppliers charging much higher rates.