—Ilse Treurnicht, former chief executive, Toronto's MaRS innovation hub. Again, I think these would be interesting individuals to meet with. The Canadian Banking Association, I note, is not enthusiastic because it says there's a risk of contagion to reputation or other types of risks with broad-ranging consequences from consumer data being shared. I know that the privacy component is in here.
The Competition Bureau also put out a fintech report back in 2017, supporting open banking, or generally being in support of it. It was entitled “Technology-led innovation in the Canadian financial services sector”, if any member wishes to take a look at it.
I think we could strengthen the motion some more. I think we could offer, maybe even a friendly subamendment if Mr. Fergus is willing to entertain it, to adjust the wording of the motion to get at what we would like.
There are a lot of jurisdictions doing this. I know it mentions the U.K. specifically, but Japan has done this too. Singapore has done this. Many other countries in the European Union have done this. A lot of this is already being done, from what I could gather, and 90% of it is already being undertaken by the private sector within the confines of the law, the way it is structured and the directives being issued by regulators. I really think that the real advantage we have here over, say, a government advisory committee, is to offer specific legislative changes to the Bank Act and other acts that would facilitate open banking, if that is our recommendation from this. If it's not, then fine, I'd be totally fine with that.
It's why I think it's critical to have recommendations. They should be very specific legislative recommendations, dealing with the Income Tax Act, for example, section so-and-so, that these are the changes that should be made, or to the Bank Act., etc. If it got to down to the specifics, it would be a great advantage to the government. A lot of the government's findings...and the Bank of Canada does a financial systems survey as well, where it asks how many people are interested in open banking, whether they see it as an issue. It's at 13% now amongst banking executives and senior executives in the financial services sector, so I think it's worth it.
One other thing I do think we could add to the motion, because I don't think it's covered, after the words, “how potential risks related to consumer protection, privacy, cyber security and financial stability”, is “and the automation of trading”. I think that would be a good addition to make. With automation of trading, the automatic traders, every second a trade is done by AI software, by artificial intelligence. We've seen other committees take on this subject, on whether there are issues with how fast trades can be made, automated trading creates systemic risks in the financial system, whether there are additional risks when people surrender their active participation and they just allow software to decide for them what their trades will be during a day and how that information is shared, perhaps, with different banking institutions. I think automation of trading could be added on here.
One other thing I don't see here is the potential job losses from open banking, given the brick-and-mortar style of banking that we mostly have in Canada right now. I know all of us have apps on our phones. For the major banks, at least, we have these apps, but perhaps a review and a specific mention of the impact on jobs in Canada would be a good addition.
I want to draw the attention of the committee members—I don't know if you've seen this—to an article in the Financial Post, “'Resistance is futile' in slow march to open banking in Canada”. Part of the committee's work, I assume, would be to make the march not as slow and speed it up a little bit.
I want to quote Matt Flynn:
“Canada needs to speed things up, frankly,” Matt Flynn, a Toronto-based partner at Bennett Jones, a law firm, told me in an interview on Jan. 23, adding that “90 per cent” of the legal structure that would be needed to support open banking already exists. “It’s better to get ahead and export our prowess (in financial technology) to the rest of the world, rather than have others come, partner with our banks, and eat our lunch,” he said.
It has a header, “Some fintech companies think the legacy banks might be the problem”. I mentioned the Canadian Banking Association being unhappy about it. I'm just wondering whether automation of trading couldn't be added here. If there's a good reason for not putting it in, I'd love to hear from government caucus members on why. If there's an opportunity, perhaps, to amend the (b) section, just to include job losses.... That wasn't something I'd mentioned before. I think job losses in the banking sector would be of concern to people in the greater Toronto area, because there are a lot of financial institutions there.
I know for the credit unions back home, and for the Alberta Treasury Branches Financial, a quasi bank owned by the Alberta government, it would be of concern to them as well if we're moving away from bricks and mortar. It is also a concern how fast the shift will be, and how fast those jobs are substituted with more IT design, app design and API software companies. That might be fine, but perhaps we should do a deeper dive into that type of information, to specifically bind ourselves to looking at it. I think that would be a good signal to members of the public, organizations and companies that we are going to look at the job losses.
Often we look at innovation, and this is a lot about innovation and the changes to legislation and regulatory directives by our regulators. However, we don't often look at the impact on Canadian jobs and what could potentially happen. I don't mean outsourcing; I mean a move away from the jobs of old. I'm not one of those people, but perhaps you remember when milk used to be brought to the door. That's not the case anymore. We have to go to the grocery store. Those jobs don't exist anymore. I think this would be important to look at as well.
I will mention that there is a bank, a junior member of the big six, the National Bank of Canada, that is already participating in data sharing. It has started sharing its customers' data if asked to do so. Lionel Pimpin, senior vice-president of digital channels, made the point that open banking is a two-way street and that National Bank created a digital hub where its clients can display both in-house and external accounts, which they say is very convenient for its users. It's an opportunity for National Bank to take some business away from some competitors and people from downstream on the business side. We see a lot of consolidation going on in the United Kingdom as well, and it's driven by clients granting permission to view the data they have imported from rival institutions. They see this as a major opportunity, which is different from what their banking association is saying.
Pimpin said all of this in a January 28th interview.
That's going back to my point that 90% are already doing it, according to Flynn, and at least one of the major banks in Canada is already engaging in open banking.
Obviously, there is already a legal structure, a regulatory structure, that allows for it. That's why the motion should be further amended to provide for specific legislative amendments.
I'll take you back for a moment to the tax treaty witnesses we had today. This is going to be complex. I don't think it's just a policy discussion; I think it's a legal discussion around the rules and how comfortable the banks feel about sharing customer data, as well as what the customers have a right to and the legal protections they enjoy.
If there is more open banking, more data could be shared out there. How closely will customers in Canada look at the data they're sharing? How long do those permission sets last? When you give permission to a financial institution, is it permanent? Can you revoke it? What are the measures to revoke it? Those are legal questions. They're ethical and moral questions as well. I think those are also legal rules that we should be recommending to the government on what to do.
That's maybe the difference between we and the advisory committee can do. They will perhaps look at the broader policy environment that exists right now. That is why I think our motion should make recommendations on legal changes to those acts that Minister Morneau is responsible for.
Moody's Investors Service has done quite a bit of review of open banking, making suggestions on some areas. Some of them match closely with consumer protection and the privacy and financial stability components that are in the motion. However, as I mentioned, automation isn't included in the motion, and neither are jobs.
I want to quote this one section from the Moody's report on the government's initiative:The government initiative is credit negative for the largest Canadian banks' retail operations because it has the potential to incrementally weaken the industry's favourable industry structure of a few concentrated players, and therefore the banks' retail franchise strength and associated high profitability....
I get a lot of complaints from Albertans in my riding about bank profits. That's perhaps a a generalized feeling among the populace in western Canada, which I understand. At the same time, we should be looking at the impact this will have on how they operate. With regard especially to the back office that a lot of these banks have, will those be broken down into smaller financial institutions? What are the risks involved in doing that? What are the legal requirements for these almost subcontractors who will be doing business, and how much of your personal information will be changed?
Those are some of the concerns that I have with the way this motion is structured.
I'm also concerned that we won't be able to take on any other study if we approve this motion. I know it says we should hold only up to four meetings, but we only have one week sitting in March, if I remember correctly, which means that in April we'll be back, but it will be for the budget or BIA. I assume that will take us until May.
There will be no opportunity to look at my favourite subject, which, as many members know, is the stress test. I would love to take a look at that. I would be willing to stop talking, if I get some type of indication from the other side that you would be willing to set aside one or two meetings to hear the concerns of witnesses and members of the public about the stress test. We just need to do a simple review, and not make any recommendations. I have a motion ready before the committee on the subject, but I will not read it because it's not entirely germane to the discussion. I want to stay on subject, Mr. Chair. I think that is a worthy one, so if I can get indication from the other side that you'd be willing to consider passing it—as in actually doing it—then we can structure it within the calendar in a timeline that makes sense for the government caucus side.
I'll remind you that last year, Governor Poloz mentioned that he would need a year's worth of data from the Bank of Canada before being able to report back on the impacts of the stress test. There have been plenty of articles written on the subject already. I think it would be good for us to schedule it, which is why I'm concerned that if we pass this motion, this will be the last subject that we cover before we move on to the BIA and the estimates.
I will also mention that RBC, BMO and the Canadian Homebuilders' Association have met with different members of the government. As well, the chief of staff to the finance minister met them on February 5. I assume those conversations are being held in private on the government side regarding the stress test, so to return to open banking here, I don't want this to be the last subject that we cover.