Thank you, Mr. Chair.
Part 6, division 16 of the bill, entitled “Financial Sector Legislative Renewal”, proposes amendments as part of the financial sector legislative review prior to the statutory sunset date of March 29, 2019. The periodic sunset of financial sector legislation is designed to ensure that the financial sector framework is reviewed regularly and that it remains effective and technically sound.
The Department of Finance began the financial sector legislative review in 2016. Over the course of 2016 and 2017, the department led comprehensive public consultations with stakeholders in order to understand their priorities and perspectives. Through these consultations, we heard that the financial sector framework is functioning well and that the foundational elements of the framework continue to be supported. These elements include strong and clear mandates for financial sector regulatory agencies and a principles-based approach to regulation. They also include a separation between banking and insurance activities, which we are not proposing to reform.
Stakeholders also told us that certain targeted updates would help Canada's financial sector keep pace with global developments and the changing needs of businesses and consumers. To that end, amendments are being proposed in four priority areas.
The bill proposes four priority reforms as part of the financial sector review.
First, proposed amendments will provide greater flexibility for financial institutions to undertake and leverage fintech activities.
Second, proposed amendments will provide prudentially regulated deposit-taking institutions, such as credit unions, the flexibility to use generic bank terms, subject to certain disclosures.
Third, proposed amendments will allow life and health insurers to make long-term and predictable investments in infrastructure.
Last of all, proposed amendments will renew the sunset date for legislation governing federal financial institutions for five years from the date on which the Budget Implementation Act receives royal assent.
I will take a moment to explain the changes with respect to infrastructure.
Part 6, division 16 proposes amendments to the Insurance Companies Act to permit life and health insurance companies to make long-term investments in infrastructure to help them obtain predictable returns. These new investment powers would also be granted to fraternal benefit societies and insurance holding companies.
Through our consultations, we heard that life and health insurers are seeking greater flexibility to invest in infrastructure assets that would support their asset-liability matching needs. Life and health insurers are attracted to infrastructure as an investment class because, generally, it gives long-term, stable, predictable returns. These characteristics make infrastructure a suitable type of investment for insurers to match against the liabilities they take on.
As part of a general restriction on commercial investment under the Insurance Companies Act, the current legislation does not permit life and health insurers to make such investments. By enabling insurers to invest in infrastructure assets, the proposed amendments will support the industry asset-liability matching needs, which will make insurers more financially resilient.
The proposed amendments will also have the added benefits of unlocking a new source of infrastructure financing that can support Canadian communities.
My colleague, Mr. Brazeau, will speak to the proposed amendments in the area of financial technology and bank terms.