Mr. Speaker, I welcome the opportunity to add my voice to those of my hon. colleagues in the government in support of Bill C-100.
The government has taken the position that the state and its officials should not try to do what others can do better. This is particularly true when it comes to the world of business and when it comes to making sure that we do not stand in the way of private sector dynamism. Furthermore, never in Canada's history has it been so important to control the cost of government. Our fiscal situation demands it and so do Canadians, who are suffering from tax fatigue.
I raise these points because they represent important underpinnings for some of the measures before us: specifically, the actions that Bill C-100 will implement regarding corporate governance.
Underlying the changes to the governance framework is a very basic assumption. The simple fact is, no system can forestall any financial institution failure unless it is given the authority and resources to oversee all management decisions and unless institutions are severely restricted in the loans and investments they can make. However the price of such a failure safe system, even if it did work which I doubt, would be to strip that industry from contributing to the dynamism, growth and evolution of our economy.
This is where the issue of cost also raises its head. To try and implement greater micro-management of the financial sector will
require a veritable army of additional auditors and regulators. This is the approach used in the United States. However, at a time when governments must downsize, I do not see this as an option anyone here wishes to embrace.
The alternative is to take a governance oriented regulatory approach by putting greater onus for the well-being of financial institutions on the management and the board of directors of financial institutions. This is an approach employed by the United Kingdom regulators.
Whether either approach could be characterized as a more efficient system of governance is difficult. Each system functions at opposite ends of the spectrum and it would be difficult to advocate that one approach was somehow foolproof in preventing failure, or better than the other, given the global environment in which institutions must operate.
As the Secretary of State for International Financial Institutions has argued so well, and I concur, our supervisory and regulatory systems cannot be positioned as a mechanism or regime dedicated to preventing an institutional failure. If we tried to do that, we would limit the potential well-being of the financial sector and its ability to serve the economy and Canadians. Rather, any specific supervisory approach should be built around the fiscal, business and economic environments. It is important that the regulatory tools be responsive to changes in these environments.
The changes in Bill C-100 to the governance for financial institutions strike a balance. They are not intrusive. Rather they clearly recognize that the role of the Office of the Superintendent of Financial Institutions is not, and cannot be, to micro-manage financial institutions. They give OSFI due authority but not excessive authority to intervene in the governance of financial institutions but only when circumstances warrant.
I should also highlight that the changes in Bill C-100 build on and enhance changes introduced in the wide ranging reform of financial statutes of 1992. It was during the 1992 reforms when the statutes were revised to require that no more than two-thirds of the directors could be affiliated with a financial institution. In other words, at least one-third of the directors would have no relationship with the company and as a result, would not in any way be beholden to management.
The 1992 reforms also implemented the requirement that important board committees, such as the audit committee, be comprised of a majority of unaffiliated directors. These were valid and valuable changes, but they left some unfinished business that Bill C-100 will complete. They enhance the balance which would place onus on management and directors for their own governance and yet allow the regulator to intervene where circumstances warrant.