One of the goals of modern provincial Personal Property Security Act legislation is to bring greater certainty and predictability to the resolution of priority competitions between secured lenders, and this legislation is largely successful in achieving this objective.
The continued existence of Bank Act security undermines this purpose, since Bank Act security cannot easily be harmonized with the priority rules of the provincial secured transactions regimes. PPSA legislation is used by lenders for the registration of the vast majority of secured interest in Canada, with the banks being the most frequent users. The banks are in a special position, however, in that they have section 427 Bank Act security available as backup should a problem arise with their PPSA security registration.
Section 427 Bank Act security is unfair because it provides banks with an extra form of security for their loans that is not available to any other lenders. In 2004, the Law Commission of Canada recommended that the Bank Act security provisions in the Bank Act should be repealed, and we agree with this recommendation. We were therefore pleased when the Senate banking committee suggested, and officials from the Department of Finance agreed during Senate committee hearings on this bill, to undertake discussions regarding the need to retain Bank Act security provisions in the Bank Act. We would urge this committee to give support to the need for such a study.
To conclude, Canadian Central thanks the committee for the opportunity to speak to you today about Bill S-5. We support the enactment of this legislation, but we also feel it should be followed up with a review that should lead to the eventual repeal of the Bank Act security provisions of the Bank Act.
We would be pleased to provide you with any additional information that you may require.