House of Commons Hansard #265 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was institutions.
National Housing ActGovernment Orders
The Deputy Speaker
Pursuant to Standing Order 45(5)(a), I have been requested by the chief government whip and the chief opposition whip to defer the division until a later time.
Accordingly, pursuant to Standing Order 45(5)(a), the division on the question now before the House stands deferred until tomorrow after government orders, at which time the bells to call in the members will be sounded for not more than 15 minutes.
The House resumed from November 24, 1995 consideration of the motion that Bill C-100, an act to amend, enact and repeal certain laws relating to financial institutions, be read the second time and referred to a committee.
Jim Jordan Liberal Leeds—Grenville, ON
Mr. Speaker, I move that we suspend the House for 10 minutes.
Bank ActGovernment Orders
The Deputy Speaker
There is not unanimous consent. The hon. member for Erie has the floor from the last time. He has 15 minutes remaining for debate, if he wishes to take advantage of having the floor.
John Maloney Liberal Erie, ON
Mr. Speaker, I have a few remarks to wind up my address to the House.
Bill C-100 takes important steps to ensure that Canada's financial institutions enjoy effective, independent corporate government yet allows OSFI to intervene in the composition of senior management and boards when the institution is experiencing financial difficulty. Clearly it is often when institutions encounter financial trouble that management and boards need to be carefully scrutinized.
The current minimum one-third of unaffiliated or independent directors sitting on the board of a financial institution will no longer be permitted to hold a seat on the board of their unregulated parent. This will help ensure that there are directors of institutions who will focus on the institutions' interests alone. This measure will be particularly important for ensuring independence and objectivity in the management of institutions in trouble.
For institutions that are in trouble, the legislation will empower the superintendent to veto the appointment of directors and senior officers of that institution. This is a very limited provision as it applies only at the appointment stage and only when the institution is in financial trouble.
Incidentally, a similar authority exists in the United States. It is an important power since the institution in trouble needs to rely on its board to make important decisions about the future of the company.
My remarks so far have focused on the measures to give OSFI further power to enhance the quality of corporate governance. It is also important to note that this legislation recognizes that effective corporate governance is not just one-sided.
We should appreciate that Bill C-100 includes measures that will help boards perform the all important function of overseeing management. An example is the guidelines for supervisory interventions that are being set out. These guidelines identify four stages of increasing intervention available to the superintendent, culminating in the power to close an institution.
By knowing what stage their company is in and the penalties involved, directors will have both a tracking measure and a set-up to guide their dealings with management.
As well, the legislation includes providing the Canadian Deposit Insurance Corporation, CDIC, with the authority to apply varying deposit insurance premiums based on risk factors. This too will act as a source of information for directors who will be free to inquire why their institution may be paying more than the base rate.
I have covered a fair amount of ground. I will close by putting the legislation into context as I see it.
Bill C-100 is being put forward for the continuing success of a supervisory and regulatory system which must evolve with market trends and respond to current experience both here and in the rest of the world. The thrust of the legislation clearly is safety and soundness. These improvements in safety and soundness build on the recent Canadian experience with financial institutions that have failed.
By giving our approval to Bill C-100, we will be honouring a responsibility to help maintain what is truly a world class financial system. This is a goal we can all support irrespective of partisan politics. I urge all members of the House of Commons to support Bill C-100.
Werner Schmidt Reform Okanagan Centre, BC
Mr. Speaker, it is a pleasure to enter the debate on Bill C-100. This bill is designed to bring about certain changes and make some amendments to the Trust Companies Act, the Interest Act and so on. I want to address this in the context of what is happening in the financial world in Canada today.
About 10 years ago legislation was passed in the House which actually eliminated the four pillars of Canada's financial institutions. I will review briefly what that was all about. We know that the four pillars which existed were the banks, the trust companies, the insurance companies and the investment companies, or investment dealers as they are more commonly known today.
The provisions in the past were that the banks took deposits, made loans and had financial interaction with their customers. The ownership of the banks was restricted to 10 per cent. No one person or group could own more than 10 per cent of a bank.
The trust companies were another pillar. They were allowed to hold property in trust for others. They could hold shares, bonds and real estate. Often they exercised the prerogative and in fact did take the fiduciary responsibility to manage the portfolios of individuals, particularly widows, children, orphans, and other people who did not want to look after their own portfolios. It restricted very much the kinds of things the trust companies could do. For example, the trust companies could not lend out more money than they actually had on deposit. They also were limited in the kinds of loans they could give. For instance, they were excluded for many years from lending out under the Small Business Loans Act.
The insurance companies, the third pillar, were divided into two sections: the life insurance section, and the property and casualty section. The life insurance companies were there to provide life insurance policies and annuities for people who wanted payment in perpetuity. The property and casualty insurance companies dealt with the liabilities that might be incurred toward individuals. They also insured the physical properties, buildings in most cases and vehicles and other equipment.
The fourth pillar was the investment companies. The investment companies were the underwriters of equity shares. They also helped to distribute those particular shares once they were issued. They also underwrote debentures and limited partnerships and made a market for these particular securities. They acted nationally and internationally so that individuals who wanted to sell shares internationally could do that.
In 1987 these pillars came apart. They were changed. The legislation allowed the banks to own trust companies, the banks to own insurance companies and the banks to own investment dealers. The independence which was guaranteed before was now amalgamated under one piece of legislation. The insurance companies also took advantage of those changes. They bought trust companies and in some cases the established banks. They also got into the mutual fund distribution business.
Why did it happen? It happened because the insurance companies and banks are the two big giants in the financial institutions. They command the largest proportion of the money that is managed in our financial world. The banks wanted access to the huge funds of money the insurance companies had and of course the insurance companies wanted to keep them out.
There was a real conflict going on at that time. The insurance companies finally agreed to let the banks buy insurance companies. That made it possible for the banks to actually own an insurance company, but they could not distribute the insurance through their branches.
Actually, the very thing the insurance companies wanted to prevent they ended up not preventing. Now the only difference is the bank cannot really distribute it through their branch network. I will talk about that in more detail later.
I will briefly focus on the concentration of the financial interests that has come into an increasingly small group. Fewer and fewer companies actually manage more and more of the financial assets in Canada. That is really what has happened here. I want to bring this into a more detailed focus as I get toward the end of my speech.
The policy paper was presented by the Secretary of State for Financial Institutions when he appeared before the Senate committee in August. He said he intended to release a policy paper sometime early in 1996 which would deal with these four financial institutions under the Trust Companies Act, the Loans Act, the Investment Companies Act and the Bank Act.
The secretary of state wants to release that in the early part of 1996. That policy paper would then be followed by further consultation before we table legislation for passage early in 1997 which has to do with a total review of the Financial Institutions Act. He said: "I want to act now on the issues included in Bill C-100 because the legislation enhances the safety and soundness of the system. When steps can be taken to improve on it to diminish risk, I believe it is important to get on with those changes right away".
It is pretty hard to argue against that, except that we are now at the end of November. This statement was made in August. The bill is before the House. In the early part of 1996 there is to be this
policy paper, yet we have something that is supposed to be acted on right now.
I warn the secretary of state and the government that to make the kinds of changes that are being proposed in this legislation will affect other legislation. I am convinced it will affect the overall review that will take place in 1997.
What is the big hurry now? We are not even seven weeks away from 1996 and we are faced with supposedly some kind of an emergency. I submit there is no emergency. There is no urgency to get this done right now.
Some people will say that this is actually to come to grips with a big problem we had last year when Confederation Life went down. What is really involved here is that this is a very subtle way to get us ready for that continued erosion of the distinction between the financial pillars. It will have the effect of drawing more and more power into the hands of fewer and fewer financial institutions, namely the banks.
I will get into the Confederation Life matter in greater detail because it is this concentration of power that creates some difficulties. For example, the Confederation Life people bought trust companies and through that trust company they developed what would easily be characterized as an imprudent portfolio. It was imprudent from the point of view that it was overextended in a particular sector.
My understanding is that the former Superintendent of Financial Institutions did tell the Standing Committee on Industry that he had warned that particular institution that it was over extended in the real estate market. But what did he do? Nothing. What did the company do? Nothing.
Some people would argue it is more poor management than an imprudent portfolio. Imprudent portfolio, poor management, whatever the case, the issue is there was legislative provision that allowed a concentration and overextension that was never the intention of the original legislation but nevertheless was the effect of it. That is precisely the danger we are running into here.
Suppose one of our chartered banks today were to go down. Imagine the implications that would have across the country. Within that context let us now look at the provisions in Bill C-100. In particular, I want to look at the Office of the Superintendent of Financial Institutions.
In this context I would refer to exactly what the purpose of the bill is. It is to amend the Bank Act, the Co-operative Credit Associations Act, the Insurance Act, and the Trust and Loan Companies Act, dealing with the disclosure of information, the elimination of appeals in relation to certain matters, the disqualification of persons from becoming office holders of an institution, the taking of control of an institution by the Superintendent of Financial Institutions, and changes to the duties of the superintendent.
Then there are amendments to the Winding-up Act respecting the circumstances and procedures for winding up an institution and the revised part III dealing with the restructuring of insurance companies and amendments to the Canada Deposit Insurance Corporations Act concerning the business affairs of the corporation, the restructuring of the institutions by means of divesting of shares and the corporation becoming a receiver, the assessment and collection of deposit insurance premiums, and the enforcement of the act.
What are some of these details? I refer to clause 81:
(2) The Governor in Council may make regulations and the Superintendent may make guidelines respecting the maintenance by life companies and societies of adequate capital-
Okay, let us keep that in mind.
(3) Notwithstanding that a life company or society is complying with regulations or guidelines made under subsection (2), the Superintendent may, by order, direct the company or society
(a) to increase its capital; or
(b) to provide additional liquidity in such forms and amounts as the Superintendent may require.
Does anybody need any more authority than that to run a company? The whole company could be run with those two phrases.
Then the bill goes on to state:
The Governor in Council may make regulations and the Superintendent may make guidelines respecting the maintenance by property and casualty companies of assets of a particular value.
This is again a direct imposition. In fact the Superintendent of Financial Institutions can get into the exact management now of the company itself:
Notwithstanding that a property and casualty company is complying with regulations or guidelines made under subsection (2), the Superintendent may, by order, direct the company to increase its assets.
Furthermore:
A company may then enter into a transaction with a related party of a company if the Superintendent, by order, has exempted the transaction from the provisions of section 521.
We want to put this into the context of clause 93, because we recognize how significant the powers of the superintendent are in determining the assets of a company, to increase its financial situation, to look at the ownership of property of the company. Now let us get a good view of what else happens here:
The Superintendent shall disclose, at such times and in such manner as the Minister may determine, such information obtained by the Superintendent under this Act as the
Minister considers ought to be disclosed for the purposes of the analysis of the financial condition of a company, society, foreign company or provincial company-
Good, we will say, that is fine; there is nothing wrong with that. I agree. It goes on:
-and that
(a) is contained in returns filed pursuant to the Superintendent's financial regulatory reporting requirements in respect of companies, societies, foreign companies or provincial companies; or
(b) has been obtained as a result of an industry-wide or sectoral survey conducted by the Superintendent in relation to an issue or circumstances that could have an impact on the financial condition of companies, societies, foreign companies or provincial companies.
Now comes the key part. We notice that the superintendent can do these things but subject to the minister's approval. The second clause states:
The Minister shall consult with the Superintendent before making any determination under subsection (1).
What has happened here? We have the minister deciding in the first instance what the superintendent should do and what kinds of information can be collected, and then before he can have any discussions or make any public pronouncements he has to go back and consult with the superintendent before he can do that. Who is in charge here?
The person in charge here is the Superintendent of Financial Institutions. The Minister of Finance, who is to be looking after the financial affairs of this country on behalf of the people and who the Prime Minister has entrusted with this particular portfolio, is now having his hands virtually tied by the Superintendent of Financial Institutions, a bureaucrat who has been appointed by the minister.
These kinds of provisions are not for the health of this country.
I draw the attention of the House to the exact powers and objects of the Office of the Superintendent of Financial Institutions. The objects are to supervise financial institutions in order to determine whether they are in a sound financial condition and are complying with their governing statute law and supervisory requirements under that law; to promptly advise the management and board of directors of a financial institution in the event that the institution is not in sound financial condition or is not complying with its governing statute law or supervisory requirements under that law and in such a case to take or require the management or board to take the necessary corrective measures or series of measures to deal with the situation in an expeditious manner; and to promote the adoption of management and boards of directors of financial institutions of policies and procedures designed to control and manage risk.
That is good. A further object is to monitor and evaluate system-wide or electoral events and issues that may have a negative impact on the financial condition of financial institutions. That is good. Further, in pursuing its objectives the office shall strive to protect the rights and interests of depositors, policy holders, and creditors of financial institutions, having due regard to the need to allow financial institutions to compete effectively and take reasonable risks. We would say that is just great, and I agree.
Notwithstanding that the regulations and supervision of financial institutions by the Office of the Superintendent of Financial Institutions can reduce the risk that financial institutions will fail, regulation and supervision must be carried out having regard for the fact that boards of directors are responsible for the management of financial institutions. Financial institutions carry on business in a competitive environment that necessitates the management of risk, and financial institutions can experience financial difficulties that can lead to their failure.
He is supposed to do all these wonderful things and then in the final analysis he is given the power to intervene, to get involved in the actual management of a company. Then in the final section it says that if things go wrong it is not his fault. I think the bureaucrat wrote this, because he is totally absolved on these things.
We are dealing with the trust and the faith that individuals have in financial institutions. I have no difficulty in recognizing that the Office of the Superintendent of Financial Institutions is a very important office. It has been given extensive powers. But in the final analysis, who is accountable?
We have to come to grips with this. We need to know all the secrets. In all the texts I read there is no obligation to make those kinds of things public. I want to get into the Canada Deposit Insurance Corporation, because it is here that it becomes even more significant.
The Canada Deposit Insurance Corporation guarantees the first $60,000 deposited in a financial institution that is covered under that particular act. This is a great provision, but I want to take a look at some of the experiences.
This particular corporation was set up in 1967. There were no bank failures prior to 1967. Since 1967 there have been 30 failures of financial institutions, 20 of them in the last 10 years. The CDIC has now paid out a total of about $5 billion and owes the federal treasury $1.7 billion as of March 1994. It may be a little more than that, about $1.745 billion if my memory serves me correctly.
The provisions of this act are very noble. People want to know that their deposits are insured. However, it has had some very interesting effects. Financial institutions did not fail before but have failed since. Why? There are pretty obvious things, but
nobody can prove them. It reduces the incentive of a financial institution to look after the deposits up to $60,000. They can be reckless or risky because that money is not going to come out of their pockets. The first $60,000 will be paid by the Canada Deposit Insurance Corporation.
There is also no incentive on the part of the depositor to look around to find which of the financial institutions is the soundest. They look to see which institution is to pay the best return on their money after it is deposited. That becomes the issue, and not the soundness of the financial institution.
There are some interesting things that can be looked at here. The insurance premium the institution pays to the Canada Deposit Insurance Company should be commensurate with the risk incurred by placing these deposits in certain kinds of ways. The act does go that way up to a point. It states, for instance, that financial institutions will pay $5,000 as a base and after that I believe it is a fraction of a percentage, based on the total of the money that is on deposit. That is great, except that the minister, without telling anyone, has the right to reduce that rate.
The other part of this is that the rate the institution has to pay for its premium to be insured by this company is secret. This means that on the one hand we have the financial institution paying a premium that is somewhat commensurate with the risk involved, but the person who deposits does not know what it is. So he has no way of telling whether this financial institution is a sounder one than the other one.
I believe there are some very serious shortcomings in this act. If we really wanted to get serious about this act we should think about such a thing as a co-insurance plan of some kind. An individual who is depositing his money into a particular institution knows it is insured up to $60,000 but with a deductible. The individual will have the responsibility to put it with an institution that will insure his or her deposit for the full $60,000. If the Canada Deposit Insurance Corporation insures it for up to $58,000, the financial institution will give the other $2,000 with no penalty.
An institution could also state it is going to be paying 12 per cent on your deposit, CDIC covers a major part of it and it will cover part of it, but because this is going to be a high return you are eligible for $1,000 or $2,000 deduction. So there is a co-insurance plan here, which will provide the incentive to the financial institution to manage the money well or to at least let the individual know where the risk is in that particular deposit.
Second, that individual will say: "If I am to get a higher rate of return from this institution, I also need to carry some of the risk". There has to be responsibility in those particular areas. There are major concerns about the proposed amendments to this legislation.
I want to move now to another part of the review of financial institutions which has to do with the concentration of power to which I alluded before. The four pillars have, to a large degree, been eroded. It is my suspicion that the review in 1997 will erode them even more.
I draw attention in particular to the big fight now being displayed in the newspapers, financial papers and other media between the insurance companies and the banks. The insurance companies are saying: "You are not going to sell our product through your network". The banks are saying: "If we can own the insurance company, we want the authority and the power to do that". The fight is on.
A lot of problems are associated with the concentration of power, one of which I want to detail. That has to do with conflict of interest. I am going to take my example not from the insurance area but from the investment business. The investment companies have the opportunity to underwrite shares for an issue. I will use as an example the privatization of CN Rail. This share issue is underwritten by a number of investment dealers. Who owns the investment dealers? The banks, with a few exceptions. They underwrite the issue. However, some people are going to borrow money to buy those shares. Who will lend them the money to buy those shares? The banks.
There is a projection that the investment dealers of Canada are going to have an extraordinary year. They will have great profits this year. Guess what the main contributing factor was on "Canada AM" report this morning. The privatization of CN Rail.
This is very interesting. It is a very cosy arrangement. A crown corporation is in the process of privatizing. The underwriters are investment dealers who are, to a large degree, owned by the banking community. The banking community will, through its subsidiaries, show a tremendous profit. The banks will earn approximately $5 billion this year and, as well, the investment dealers will realize a terrific return.
The banks are also saying they want to sell the insurance product because it will give them more money. Associated with that money comes a far more significant issue, of which I am most fearful, which is the concentration of power. When a few people can decide where the money is going to be applied and how it is going to be invested, that is too much power in the hands of too few people. That is my big concern.
Every effort should be made to balance this situation very carefully. We must not run into this situation without being very clear about the implications.
Comparisons will inevitably be made by the banking community. The banks will argue that they should have the service because to be competitive globally they have to be able to sell insurance. Let us look at this situation.
Approximately 2,000 banks operate in France, while in Germany there are 4,600 licensed banks. With such intense competition it is difficult for a European bank to cross-subsidize its entry into the insurance business. That situation cannot be compared to the one that exists in Canada. To use that argument is not only specious but misleading. We have to be very very careful not to get sucked into that kind of situation.
To suggest the banks are going to take control is rather easy to understand. In 1992 reforms gave the chartered banks unrestricted powers to own trust companies. A few years later, what portion of the trust business is now in the banks? Almost all of it. Less than three years after the 1992 financial institution reforms came into effect only two independent trust companies of any size remained in the business. The danger of banks cross-subsidizing their entry into other financial services is that it is provoking a reduction in competition for consumers.
Probably the most vicious argument is that all this entry into the marketing of insurance through the branch network is in the consumers' interests because they will have one stop shopping. That may be convenient, but will the consumer get the best advice? Will the consumer get the best price? Will the best interests of the consumer be served? That ought to be the consideration, not whether the consumer can do it all in one place. If the customer gets a bum deal in one place, it is a bum deal regardless of the fact that it was very convenient to do it in that place. That becomes our concern.
We need to make sure the power is balanced, that we have a separation so the people's best interests not only now, but in the long term, are looked after as well.
Dennis Mills LiberalParliamentary Secretary to Minister of Industry
Mr. Speaker, I thank the member for his contribution on a very important issue.
It is important for members of the House and the public to know that the critic for industry from the Reform Party has been working very hard in committee over the last two years on the whole issue of access to capital for small businessmen and women. The issue we are debating today is very important for that whole small business market.
We have been trying to the best of our ability in a non-partisan way to try to change the thought processes of the banks in their attitudes toward small business. Frankly, after two years despite a bunch of PR from the banks we have not accomplished a lot.
Does the member not fear or have concern that those million small businessmen and women out there who depend by and large on that relationship with their branch managers will once again lose leverage with their financial institution because once they take on the insurance component of a business relationship, that small business will have no other place to deal than with the bank? If that relationship is not solid then that small businessman's or businesswoman's whole equation is in jeopardy.
Werner Schmidt Reform Okanagan Centre, BC
Mr. Speaker, that is an excellent question. I would like to divide my answer into three parts.
The first part has to do with whether the businessman is going to feel coerced into buying the product the banker is shoving down his throat. The question then becomes is the bank in this instance acting as a broker for a variety of insurance companies or is it going to be presenting its own insurance company which it owns? Talk about a conflict of interest; there it is.
The second part concerns whether the individual gets the best possible premium rate. The individual, in order to get the loan through, will buy the insurance as well at the same time.
The third point is that recently the banking community had a study done on its branch network. It seems to me that both in the United States and here in Canada the conclusion was and the recommendation was to reduce the number of branches. That network, which is supposed to be this great fanning out, is actually going to go the other way.
I do not think that businessmen or individuals are going to be served as well as they are today.
John Bryden Liberal Hamilton—Wentworth, ON
Mr. Speaker, it is a pleasure to rise in debate on Bill C-100. I am going to bring something a little different to this debate. I take my hon. colleague's comments very much to heart. This debate has been well motivated by the very best spirit of Parliament to try to bring all kinds of light to a very important piece of legislation before the House.
I have listened very carefully to the debate. We are dealing with the Office of the Superintendent of Financial Institutions and the Canadian Deposit Insurance Corporation. I will confine my remarks primarily to the Office of the Superintendent of Financial Institutions because this legislation is designed to enhance the protection of the assets of ordinary people. This is the kind of legislation that Parliament and the government should be all about. I believe it is exactly that.
Small people put their life savings into financial institutions which are regulated by the Government of Canada. We must at all costs ensure that their deposits are safe. This legislation builds on earlier legislation, primarily because we have seen some unfortunate incidents in the financial marketplace of late. I am thinking of the collapse of Confederation Life and the earlier difficulties with other institutions. Certainly the depositors and the investors in these organizations were paid back. Nevertheless, a question of confidence arose from these eventualities.
Bill C-100 is an effort to address this problem of confidence. In a nutshell the legislation gives a mandate to the Office of the Superintendent of Financial Institutions to investigate, along with various other things.
I am very interested in this legislation because it is a model for what can be done in other sectors. It is a model for what can be done in the not for profit sector.
It is well known that I am an MP who has shown a great deal of interest in the regulation of charities and non-profit organizations, which currently are, basically, very poorly regulated now. They are controlled by a hodge-podge of legislation here and there, court precedents and that kind of thing. Yet the not for profit sector represents about $120 billion of revenue a year going in and out of these organizations.
On the other hand, deposits of around $600 million are covered by Bill C-100. We have comparable huge industries, one that is subject to very fine regulation now, one that does not have very much regulation.
I would like to go through Bill C-100 and put it up against what I would like to see happen with the not for profit sector.
First, Bill C-100 gives a mandate to the Office of the Superintendent of Financial Institutions. In effect, it lays out the rules. It says this organization can investigate and monitor all institutions that are in the business of taking deposits from ordinary citizens. We would like to see with the not for profit sector a charity commissioner with a similar mandate, which incidentally does not exist at this time.
Bill C-100 also adds something that is vitally important and very near and dear to my heart. It enhances disclosure. The public throughout Canada is demanding that institutions be more transparent than they have been hitherto. To give the Office of the Superintendent of Financial Institutions the ability to track what is happening in deposit organizations Bill C-100 requires a higher level of disclosure.
For example, it requires all deposit institutions to disclose their balance sheets in much more enhanced detail than is defined by regulation. It requires the disclosure of executive salaries. That is a favourite issue with me because executive compensation is not a matter of privacy when dealing with the public trust. It is a way of determining whether the executives of an organization who have the public trust are acting in the public's best interest. In other words one of the most instant signals of trouble with an institution is a very high executive salary and very low results on the balance sheets.
Bill C-100 requires an enhanced level of disclosure of the assets and liabilities of deposit taking institutions. Some of my colleagues feel that is an invasion of the central government into the affairs of an organization. Indeed it may be a provincial organization such as the caisses populaires in Quebec.
Nevertheless if we are to know what is happening we need the details. It requires an enhanced monitoring of assets and liabilities. I can compare that with non-profit organizations and say that it would be an enormous step forward if the public had access to the details of how non-profit organizations are spending their money and what are their assets. Presently no such regime exists for non-profit organizations. As such, for charities it is very restrictive in its level of public disclosure.
Bill C-100, however, would give all this to the public so that everyone could see what is happening, including the Superintendent of Financial Institutions. This is the most important.
Bill C-100 defines the role of the Superintendent of Financial Institutions as his office monitors deposit taking organizations. There is a whole schedule of warning bells. Certain things happen. Certain things appear on the books. The Superintendent of Financial Institutions will ask questions. If further problems occur the questions will be more probing. They will go deeper and deeper. There is a whole schedule of early warning levels for the Superintendent of Financial Institutions.
The organization knows the benchmarks at each level, the benchmarks going down as it gets into trouble. It knows what to expect, what it has to give, and what is expected of it by the Superintendent of Financial Institutions. Bill C-100 lays out very clearly what will happen when there is a crisis and what are the steps if an organization is deemed to be in significant trouble, for example if its liabilities exceed its assets or that kind of thing.
I can compare with charities and non-profit organizations and say that is precisely what we want with charities and non-profit organizations that also have the public trust and are in effect chartered by the government. They ought to be able to convince the public that they are using the money wisely and well.
When it is determined that a deposit taking organization is in a sorry state financially, the Office of the Superintendent of Financial Institutions can move in to take over. Basically it will dismember the organization or sell it.
We need the same for the not for profit sector. Right now if a charity is deemed to be in trouble it is a painful and difficult
process to take it out of action no matter how extraordinary its failure is. In the case of not for profit organizations there is no real legislation to take them out of the picture at all if they have problems. We only find out about the problems when they get into such difficulty that it hits the news or if there is a criminal or extraordinary charge. Otherwise secrecy is the order of the day with respect to charities and non-profit organizations.
Bill C-100 applies transparency and a whole regime of what to do when organizations that have the public trust get into trouble. There is a series of regulations to look after the problem. I wish the revenue minister and the finance minister would take note of the structure and effectiveness of Bill C-100.
One problem of the not for profit sector is that it has been unregulated for many years. The problem of bringing in legislation to control it seems insuperable. However Bill C-100 is the model that could be used to set up a charity commissioner or a not for profit commissioner who would bring the entire $120 billion sector under regulation and into transparency so that public confidence in charities and not for profit organizations could be restored.
My comments will be in another direction temporarily. I listened with great attention to the debate on the bill in the House last Friday. I was struck by the comments of Bloc Quebecois and Reform Party members who tend to be opposed to the bill. At one point the Liberal member for Willowdale stood and with great passion complained that the opposition to the bill of the Bloc Quebecois, and to some degree the Reform Party, was as a result of their separatist leanings.
I listened with great attention to what I heard from the Bloc and the Reform Party and I did not hear separatism so much as I heard provincialism. I heard from the Bloc Quebecois and the Reform Party about the fundamental problem with Confederation. There is always a tension between the federal government in the central power and the provincial powers. The provinces are always looking for more power and saying: "You are intruding into our affairs". This is natural and normal aspect of Canada as we know it today. It is a pity that the Bloc Quebecois translates provincialism into separatism. Bill C-100 clearly illustrates why federalism works and why provincialism in this case should not be the order of the day.
I will explain myself. Certain aspects of our political life occur at a provincial or municipal level. At that level politicians are normally taken up by local needs, almost selfish needs. It is very difficult sometimes for local politicians to look at the grand scheme of things when they have local community and provincial concerns to look at. This was illustrated last week by a Reform Party motion dealing with the suggestion that the federal government should force municipalities to provide better sewage treatment rather than dumping effluent into the seas. It was a classic case of where it was easier for the municipality to use its taxes on things that matter to its people locally rather than to worry about the environmental aspects of a problem being caused to the country at large or the world at large.
So it is with financial institutions, with charities and non-profit organizations. The need for central regulation of charities and non-profit organizations is amply illustrated by the example of the Nanaimo Holding Society in British Columbia that is under investigation for suspicion of having diverted charity funds to the provincial NDP of British Columbia. Without commenting on where that investigation will go, it is the kind of reason we need arm's length regulation of public institutions with the public trust.
At the provincial level or the municipal level these organizations may be subject to undue political influence. If there is something like the Office of the Superintendent of Financial Institutions that can look from afar at an organization and be out of reach of local politicians we are better guaranteed that the public trust is being served by the organization. The warning will be sounded by an organization that has no axe to grind or has no involvement in the institution.
The classic example was during the recent referendum when it was claimed that the caisse populaire was supporting the Canadian dollar. We learned from the caisse subsequently that it was not doing any such thing. Nor should it. It is a classic reason for needing an organization like the Office of the Superintendent of Financial Institutions. If undue influence were exerted by the local political power, be it the province or the municipality, control would be in an arm's length organization that exists outside the zone of political interference.
Quebec and the caisse benefit from federalism because of an organization like the Office of the Superintendent of Financial Institutions. The benefit is even greater because all deposit taking organizations are dependent on the rest of the country for the confidence the public has in them.
Let us just suppose that every banking institution, every deposit taking institution were separately administered in each province, as I suspect has been suggested by the Reform Party. We would not have the level of confidence in the institutions that we have when people in Quebec or British Columbia, for example, know that the institution is subject to the same rules of transparency, openness and honesty across the country from sea to sea. It does not matter whether the organization is in Quebec or in Nova Scotia. Because we have organizations like the Office of the Superintendent of Financial Institutions, Canadians from sea to sea can have confidence in their institutions.
Bill C-100 deserves the support of the entire House regardless of our individual viewpoints on centralized government or decentralized government. This legislation serves us all regardless of our political viewpoints. It serves the ordinary person.
I should like to discuss the bill at great length but I know my time is up. It is the kind of legislation which makes federalism work and of which I am proud as a member of the government.
Richard Bélisle Bloc La Prairie, QC
Mr. Speaker, I will take advantage of the opportunity afforded by the debate on Bill C-100 to draw the attention of this House to the inconsistencies and poor decision-making that undermine the very foundation of the federation.
I have had an opportunity during the past thirty years to observe, as many of us have, the evolution of Canadian federalism. A system based on certain relations between the federal government and the provinces, federalism has never been able to settle the issue of Quebec, Quebec which has the largest national minority in Canada. The Fathers of Confederation designed a system of government in which the provinces maintained a large measure of autonomy. In the twentieth century, two world wars, the emergence of the welfare state and the modernization of institutions as part of today's worldwide trend towards globalization gave the central government a chance to intervene increasingly in the administration of the provinces.
This normal development in a country whose geography was continental in size was never well received by the Quebec government which, for most French Canadians and later Quebecers, had always come first. Any attempt or decision made by the government in Ottawa to improve the way this country was governed has always been perceived by successive governments in Quebec as an encroachment on the prerogatives of the Quebec National Assembly.
The sovereignty plus partnership proposal of Quebec sovereignists constitutes the only concrete and realistic initiative to get out of the vicious circle that has poisoned the existence of this beautiful and great country that is Canada. Yes, Canada is an exceptional country. Although the current state of its public finances has prevented it from developing its full potential, this is due to the legacy left by former Prime Minister Trudeau and to the inept financial management of the present Prime Minister who was then Minister of Finance.
Under his stewardship, the deficit rose to $10.4 billion in 1977-78 and to $12.6 billion in 1978-79. For the first time, the annual deficit exceeded the 10 billion dollar mark, before spiralling completely out of control during the years that followed. In power for far too long and instructed by English Canada to deal with the Quebec problem, Pierre Trudeau believed he could unite the country by wooing voters with wall to wall social programs. He temporarily reduced certain disparities which today reappear with a vengeance as a result of the debt left us by the former Prime Minister.
Yes, Canada is an exceptional country, and the only way to deal with the crisis in our public finances, with useless administrative overlap and internal constitutional bickering, is to create a new economic and political partnership between Quebec and Canada, with a sovereign Quebec engaging in continuing negotiations between two sovereign and equal states. Yes, Canada is an exceptional country, but as Quebecers, we want our own country.
We know Quebec will also be an exceptional country and will be Canada's first global partner. Canada will be an even better country, once it has stopped the bickering and useless power struggles with a sovereign Quebec that will maintain special ties with Canada, based on equality and friendship.
Instead of supporting this view of relations between modern states, instead of supporting the proposals for renewal and change which the Prime Minister promised us during the last days of the referendum campaign in Quebec, the government proposes Bill C-100 on financial institutions, after tabling C-76 in which Ottawa assumed the power to impose national standards on social programs. Ottawa made another attempt at centralization with Bill C-88, to implement the agreement on internal trade, an agreement that would allow the government to act as the ultimate arbiter in interprovincial disputes.
The federal government and Quebec are going to be at each other's throat over regional development. Under Bill C-91, Ottawa will also be able to sign agreements with local authorities directly, without regard for provincial governments or existing regional structures.
All these legislative efforts aimed at centralization and at building a modern country could be meaningful and have some implication, if Quebec's situation were settled once and for all. Canada could blithely carry on with its efforts at economic modernization and streamlining the administration of its structures, if Quebec's situation were settled through the sovereignty-partnership arrangement we sovereignists are proposing to Quebecers. Ottawa will always be too centralizing for most Quebecers, whereas the majority of Canadians believe, quite legitimately, honestly and proudly in a strong central government.
In the meantime, no attempt can really reform Canadian federalism without the resolution of the Quebec-Canada issue, through the emergence of a sovereign Quebec that would keep close ties with its Canadian partner.
Instead, the Liberal government is proposing Bill C-100, which simply fuels the flames of federal-provincial relations. Let us have a closer look at the implications of this bill for Quebec's financial institutions.
Bill C-100 is very clear. It enables the federal government to take action faster when a financial institution is in difficulty. It also aims to reduce the risks inherent in Canada's financial system.
Under clause 6 of Schedule I, which establishes a Canadian clearing system, the Governor of the Bank of Canada reserves the right to issue directives, not only to clearing houses but to financial institutions as well, regardless of their charter. So, for example, Bill C-100 would allow the Governor of the Bank of Canada to issue directives and orders to institutions that are institutions of Quebec essentially, such as: Fiducie Desjardins, the Fonds de solidarité des travailleurs du Québec or the Lévesque Beaubien Geoffrion brokerage firm, to name but a few.
The Superintendent of Financial Institutions and of the Winding-up Act will be given more powers and will be able to intervene directly with provincial charter institutions.
The increased options available to the federal Superintendent of Financial Institutions will mean costly duplication and inefficient management of savings. The Inspecteur général des institutions financières du Québec already monitors the situation in this regard so that the federal superintendent's new powers will simply duplicate those that already exist.
The federal superintendent's broader powers may prompt Ottawa and Quebec City to issue court challenges that will leave struggling financial institutions and their depositors in the lurch.
Bill C-100 shows that the federal government is more concerned about assuming new powers than about ensuring the viability of financial institutions and protecting savings.
Bill C-100 will make major changes to the deposit insurance system in Canada. To become members, financial institutions now pay premiums based on deposit liabilities. The bill provides that the premiums will no longer be based on the financial institution's deposit liabilities but on its level or degree of risk. This raises many questions. For example, what criteria will be used to determine a financial institution's risk rating? The federal government now refuses to make public the regulations that will set risk ratings.
What will be the impact of federal risk ratings on financial institutions? No one knows.
Basing premium amounts on risk levels may penalize Quebec financial institutions particularly because they are relatively small. Since large corporations are generally seen as less risky and since Quebec has its own deposit insurance scheme, in which premiums are not based on risk levels as such, we will end up with two systems: one based on risk and the other on deposit liabilities, with all the inconsistencies and contradictions that this entails.
Bill C-100 shows once again Ottawa's determination to centralize activities. By establishing Canada-wide clearing and settlement systems, this bill encroaches on powers exercised by the Quebec securities commission and the Quebec inspector general of financial institutions.
All this results in costly overlap. Financial institutions will be subject to two levels of control, a situation which will result in unnecessary administrative duplication.
As I already mentioned, in addition to Bill C-100, the government has tabled three other centralizing pieces of legislation since the last federal budget, namely Bill C-76, Bill C-88 and Bill C-91. The centralization exercise is continuing as strongly as ever.
A 1991 Treasury Board study showed that 67 per cent of federal programs overlap provincial ones. With Bill C-100, Ottawa keeps heading in the same direction, towards a dead end. According to Julien and Proulx, from the University of Montreal, close to 1,000 meetings take place every year between Ottawa and Quebec public servants, simply to harmonize program objectives, or to ensure that provincial and federal programs are not incompatible with one another. Bill C-100 will give all these public servants another opportunity to meet, simply to try to harmonize the criteria used to determine premiums paid by financial institutions.
Pierre Fortin, who is an economist, estimates that three billion dollars is wasted annually because of overlapping Quebec and federal programs. Such overlap results in unnecessary costs for taxpayers, businesses and citizens. These costs have an impact on the debt and, in the end, jeopardize institutions which were set up to support our country's blueprint for society. From that perspective, Bill C-100 is nothing but an ill-considered attempt by this government to centralize, under the pretence of protecting investors, when the system in Quebec works very well.
This bill is also an unacceptable intrusion into the securities industry, when the private sector and major business associations already complain about excessive government involvement. Such abusive interference always results in lower productivity and in a shortfall, this at a time when there is an urgent need to improve the sad state of public finances. Instead of withdrawing and concentrating on the essential, as it should, given its chronic state of indebtedness, the federal government is increasingly interfering in fields of provincial jurisdiction, as well as in the activities of our businesses.
In Quebec, the various governments which have been in office over the last 30 years have all strongly defended Quebec's jurisdiction over the securities industry. Even Daniel Johnson reaffirmed that position in February 1994, when he was Quebec's
premier. The authority given to the Governor of the Bank of Canada to issue directives or orders to participants goes squarely against that traditional Quebec position, which was upheld even by provincial Liberals, which is quite something. As in the case of manpower training, there is a strong consensus in Quebec regarding this issue.
Consequently, the official opposition cannot support Bill C-100 on financial institutions, because it maintains a situation which, for more than 25 years now, has led to disputes which have drained the country and put it into debt. In order to end the current financial crisis, the federal government must stop getting involved in the activities of businesses. Similarly, in order to end the current constitutional crisis, Ottawa must stop getting involved in fields of provincial jurisdiction and let Quebec take charge of its own destiny. Unfortunately, this is just the opposite of what is proposed in Bill C-100, which is yet another stage in the exercise conducted by a centralizing government which is out of step with current events.
Werner Schmidt Reform Okanagan Centre, BC
Mr. Speaker, how would the hon. member explain the increased riskiness that apparently is to be expected by the financial institutions in Quebec relative to the financial institutions in other parts of Canada? In particular, I would like him to address the failure of Confederation Life, which was not exactly a small financial institution. I would like him to compare the risks Confederation Life had vis-à-vis some of the institutions which exist in Quebec.
I would like the hon. member to relate the small institutions that operate in Quebec vis-à-vis those that operate in other provinces, for example the Atlantic provinces, British Columbia, Alberta and Saskatchewan and some very small institutions that are covered by the CDIC. Is it the same kind of problem he is alluding to in Quebec, that in fact there are riskier situations? Exactly what point is the hon. member trying to make?
Richard Bélisle Bloc La Prairie, QC
Mr. Speaker, I would like to tell the hon. member that we already have a deposit insurance corporation in Quebec. Savers and investors' savings are already protected under the law, and I agree with him. A government majority member who spoke previously mentioned that the attitude displayed by both Bloc and Reform members could be described as a provincialist attitude or, in the case of the Bloc Quebecois, a separatist attitude.
I would like to tell these hon. members that all we, Quebecers, want is to be able to manage our own affairs. We certainly have nothing against any streamlining effort, any legislation or measure that Canada may want to make, pass or take to better protect people's savings. But as Quebecers and members representing the single largest minority in Canada, we must point out that we have a unique culture, a unique language, and have always defined ourselves as a distinct nation. All we want is to manage our own affairs. Whether in finance or in any other area, we want to be regulated and protected by our own laws.
We have absolutely nothing against any legislation being introduced before this Parliament to improve the way financial markets operate, or the way Canada operates. As I said earlier in my remarks, Canada is indeed an exceptional country. And I think it is destined for further growth in the future. But as Quebecers, that is not our goal as a society. It is not our goal as a country. All we want is just to manage our own affairs. And in a future referendum, in two, three or four years from now, I think that the majority of Quebecers will vote yes, and then, as I indicated earlier, we will have the opportunity to keep working together, hand in hand, not as one of nine or one of ten, but with all nine English provinces and the federal government. We will have the opportunity to keep working together on an equal footing, one on one, with Quebec on one side of the table and Ottawa on the other side.
That is all I wanted to say on this subject today. That is the context in which we want to continue to co-operate with you: as two peoples on equal footing.
Dennis Mills LiberalParliamentary Secretary to Minister of Industry
Mr. Speaker, I appreciate having the opportunity to stand and support Bill C-100, an act to amend, enact and repeal certain laws relating to financial institutions.
This bill, which is essentially a housekeeping bill, has many good features in it. We are giving the Superintendent of Financial Institutions, an organization within the Government of Canada, the power and the capacity to have a much more specific accountability. This is not just in terms of protecting depositors' funds, but also in terms of making sure that the financial institutions are following all of those rules and regulations they are responsible for following which is the reason they got their franchise.
A bank is really not any different from a McDonald's franchise. The person who applies for a McDonald's franchise has to live by the rules and regulations of the administration granting the franchise. If that McDonald's franchiser is not following the rules, then as I am sure members have heard from people who have owned a franchise other than McDonald's such as Budget or Swiss Chalet, the management will say: "There are rules and regulations attached to the franchise that you have been allowed to operate. You are not following them and if you do not clean up your act, we
are going to pull the franchise. We will pull our agreement. We will take the franchise away from you".
Very few Canadians realize that the people of Canada through their trustees and agents in this House of Commons are the ones that grant the banking franchises which exist in Canada. The men and women in this room are the ones who design the rules and regulations that allow the banks to operate. The basic thrust behind that banking franchise is to protect depositors' funds but they are also to be in the business of lending money.
The banks, the franchisees, have done a pretty good job of those 7,000 little franchise operations across Canada, whether they be the Royal Bank or the Bank of Nova Scotia. They have done a pretty good job of protecting depositors' funds.
Where I have a problem is the way they have been handling their relationship with small business men and women. If I had my druthers and if I had had an opportunity, I would have added a couple of amendments to the bill. I would have liked a very specific responsibility given to the Superintendent of Financial Institutions on behalf of small business.
As the Superintendent of Financial Institutions goes through all the lists of responsibilities he has to maintain in his relationship with banks there is special mention for small business. I do not see it in here anywhere. On that score, I am disappointed. It does not take away of course from supporting the bill because there are a lot of good things in this bill.
Today I have the opportunity to stand on my feet in the House two years into our mandate. I have to say that our effort to sensitize this country's banks to become much more supportive of small business has not grown. That attitude change has not grown the way it should have grown.
I see my colleague, the industry critic from the Reform Party, who sits on the committee with me. He is nodding his head in approval that we really have not done as much as we should have done in committee.
I do not want to say that our efforts and the efforts of the banks have been a total failure. Two weeks ago there was a meeting of the industry committee. It was reported in a document that at the end of the second year there was an increase in the small business loan float. We were all very excited about getting that document. We saw that the loan float for all small business men and women in Canada was approximately $28 billion. That is the total of outstanding loans being utilized by small business men and women. That is a 1 per cent increase in the small business loan float over the last year.
Granted some people would argue that we are lucky it was not a decrease. However, when we consider the government's Small Business Loan Act guarantee, which is also included in that and the fact that the float increased, the real risk the banks have taken on behalf of small business men and women has not increased that much in the last two years. We are going to have to continue to press forward.
We hope eventually the banking culture, the men and women who operate the 7,000 bank franchises across Canada, in the not too distant future will be fully converted. We hope they will realize that the only way the economy is going to get back on the right track and men and women will get back to work is by making sure the small business community is given the maximum opportunity and the best environment in which to grow.
The Superintendent of Financial Institutions can play a major role in helping members of Parliament accomplish that policy directive. I am not talking about my policy directive here today; it is a policy directive of the Prime Minister of Canada. Make no mistake about it. Two months before the last national election campaign began the Prime Minister of Canada sat in the press gallery across the street from Parliament and said on coast to coast television that we were going to be the government that would really work to change the attitude of financial institutions toward small business men and women.
When I stand in the House today and support this bill and talk about access to capital for small business men and women, I am speaking on behalf of the Prime Minister and the Minister of Industry. In the last budget even the Minister of Finance said that we have to create new benchmarks for the banks in relation to the small business sector.
Those in the Office of the Superintendent of Financial Institutions who will take this bill after it has passed here today and later through the Senate are responsible for monitoring, reviewing and auditing small business activities. I plead with them to assist us in sensitizing those 7,000 branch managers, those franchise holders that small business must be very much a part of the language of the review, et cetera.
I want to move on to another aspect of the bill which I am pleased to see is addressed. It is on page 29 and deals with the whole business of derivatives.
It is no secret to anyone in the House that I have always been concerned about the private casinos the financial institutions in this country operate, the derivative sections in the banks. I see that this bill gives the Superintendent of Financial Institutions enhanced
authority to go into those derivative sections within the financial institutions and do thorough and complete audits.
I will be honest. I do not understand the complexity of the derivative game the banks are playing. I notice other members are nodding likewise. However, I trust that the expertise exists within the Office of the Superintendent of Financial Institutions. Some members are noting they are not convinced of that. I hope they are wrong. I will tell them why I hope they are wrong. I know of one financial institution in this country that in its derivative section, which I call the private casino, trades close to $30 billion a day. In one 24-hour period it trades $30 billion. This is an amazing amount of paper pushing, going back and forth. There are very small margins but with very big exposure.
If the essence of this bill, as my colleague from Dundas said earlier, is to make sure those depositors' funds are protected, then the Superintendent of Financial Institutions should start by making sure there is a good solid handle on all those private casinos, all those derivative sections in all the financial institutions.
Do members not wonder sometime how one bank can find $30 billion to play the derivative game in one day yet cannot seem to find the resources for the small business men and women who really require a small loan of $10,000 or $15,000 or $50,000? Am I losing it? Does anyone wonder about that sometimes? It is a totally different issue, but it has to do with will and attitude, which is the point I am trying to make.
If the board of directors or the senior management of a bank decides it is going to be in the derivative business and play with $30 billion a day, it happens. These guys work 24 hours a day, 7 days a week in these derivative sections of the bank. So if the management of a bank puts forward a policy that allows $30 billion a day to be pushed around the world by these unelected, unaccountable people who can affect the way our dollar goes and affect our interest rates, then why can we not get the same kind of will from the management of the banks to increase the float to small business by a little better than one per cent a year?
I noticed my colleague from the Reform Party, the industry critic, is saying that we can do it. We on this side of the House appreciate his consistent support as we deal with this issue.
This is a good bill because it gives the authority to the Superintendent of Financial Institutions to make sure that not only are depositors' funds protected in a more thorough way, but the whole administration of the bank franchises is followed according to the basic framework of the Bank Act. Alongside that responsibility, I would also ask them, as they go through their check list of responsibilities, to add another one: check and make sure that those 7,000 franchise holders of bank licences or bank charters across Canada are doing what they should be doing for small business.
Werner Schmidt Reform Okanagan Centre, BC
Mr. Speaker, I commend the parliamentary secretary to the Minister of Industry for raising the issue of what is happening to small business. I do not believe he is taking enough credit for some of the things that have happened and have changed the attitude of the banks.
On the one hand, it seems to me that the committee succeeded in saying we have to get more numbers together to ensure that we know for a fact they are not giving money to small business. That is important. The committee was sensitive not only to small business, but to the banks and to the House.
The banks will never be able to escape from the investigation that took place. Each of the chartered banks has appointed an ombudsman and they are now looking for a national ombudsman.
I know that the parliamentary secretary feels the national ombudsman will probably not be very effective because he will be appointed by a board of directors that is made up of representatives from the banks. We will see whether that is the case.
With all of this, the parliamentary secretary has demonstrated one word, although he has never said it: transparency. It is about transparency, being open, telling the story the way it is and making sure the banks come up with their numbers.
I ask the parliamentary secretary whether he agrees with the provision that the premiums paid by the financial institutions to the CDIC should be left secret. Should that not become transparent?
Dennis Mills Liberal Broadview—Greenwood, ON
Mr. Speaker, before I deal with the specific answer to the question I will deal with the first part of my colleague's remarks.
I do not believe it is appropriate for us to stand in the House and defend the chartered banks of Canada until they have really delivered on the objectives the hon. member helped to form in our "Taking Care of Small Business" document.
Yes, the banks have agreed to create an ombudsman, which they essentially appoint, because they control the board of directors. However, I am nervous about our effectiveness as a committee. Yes, they will report more numbers, but let us face it, the banks will not give us what we wanted in recommendation number two, where we wanted a much greater regional breakdown. When I only see a one per cent increase, which is what I call real action, not words-they are fantastic. Remember that campaign of the Bank of Montreal: "We want to share your pain". When I see only a one per cent increase in the small business float, are they getting to us? Are they pushing us off the mark? Are they pushing us off our focus? Are they distracting us?
This is not bank bashing. There are a million small business men and women out there, and there are as many in the hon. member's riding as there are in mine. If his small business men and women are saying to him that the banks are doing a great job, then his small business men and women are different from mine. They are saying we have not made much of a difference yet.
I plead with all members, if we get one thing done in this session for small business, let us make sure that we get the banks into the business of loaning to small business in a serious way.
In answer to the member's specific question about CDIC fees being disclosed, for me it is a slam dunk: I think they should be.
Dick Harris Reform Prince George—Bulkley Valley, BC
Mr. Speaker, I share the zeal with which the hon. member for Broadview-Greenwood campaigns on behalf of small businesses. I know exactly what he is talking about. I have spent my entire life in small business and I know the problems small businesses have had with banks. Quite often the small business people I talk to feel like third class citizens when they go to these big banks to try to get some financial help.
I agree that it must be demanded of the banks that they get serious about dealing with small business in a substantial manner. As far as I am concerned, one per cent is a bit low. I would like to see it higher.
I believe there is an inherent and traditional conflict of interest when it comes to the relationships that governments, whether they be Tories, Liberals, or whatever, have had with the banks over the last several years. The major contributors to the federal parties, both the Tories and the Liberals, have been these very powerful banking institutions themselves. The banks are the most powerful financial institutions, but they are also probably the most influential institutions as far as political direction.
I hope this government has the guts to stand up to the banks and hold a hammer to their heads and say the way they have done things in the past with the Liberal Party and with the Tory Party does not go any more and that the government wants to see them make a profound effort toward helping small business to thrive and prosper in this country. Until a government is prepared to do that, mean it and stick to it, nothing is going to change in the attitude of banks toward small business. That is the key to all this.
We can talk all day long about legislation, and we are going to put this in and we are going to make this amendment, but the government has to be prepared to back it up. I hope this is the government that does it.
Dennis Mills Liberal Broadview—Greenwood, ON
Mr. Speaker, I presume the hon. member was talking about the campaign donations made to the parties. I do not think political donations made by the banks really have any effect on whether a government would deal with an issue such as this. I do not see it. I could be wrong.
Where we have a problem as a government, and this is all governments, has to do with the bonds, the government coupons that are being clipped by banks; in other words, buying our debt. That is where bank decision makers can have a tremendous influence on the executive of a government. We are so dependent on the marketing and the purchasing of those bonds.
That goes back to what the member from Okanagan said earlier in his remarks, which has to do with transparency. When we have a bill like this today, Bill C-100, where we are dealing with the Superintendent of Financial Institutions and all the major financial institutions in Canada, I find it absolutely stunning that there is not a list of speakers the length of this room who want to speak on this bill. It gives us an opportunity not only to exchange with each other but also to send a message to the implementers of this bill where we, as a collective group, are coming from.
In my judgment, as MPs, we are blowing a gift to debate one of the most fundamental issues facing Canadians today, which is the ability of small business to gain access to capital. The Superintendent of Financial Institutions is one of the key players in making sure that happens and happens properly.
What are we doing? We have just half a dozen speakers, then the bill will go through the House. It is not that the bill would not go through the House, but this is a good reason to have a good, exciting debate to provide some hope for the only sector in the economy that is creating jobs.
Where are we today on this issue? I am not being critical of the House. I am just saying that every now and then we get a gift handed to us. This is one of the bills that affects the lives of most of our constituents. I wish we could create a little more excitement around it so the superintendent would understand where all of us are coming from on this issue.
Jean-Paul Marchand Bloc Québec-Est, QC
Mr. Speaker, thank you for giving me the opportunity to speak on Bill C-100.
I feel obliged to say that this is yet another unfortunate federal initiative which, despite some slight impression that they are willing to help small business and create employment, is only intended, when it comes right down to it-at least in the eyes of a member from Quebec-to increase the powers of control and centralization over certain of the country's financial institutions.
The truth at the heart of the matter is that assigning powers to a superintendent of financial institutions under Bill C-100 increases his powers. It also allows Ottawa to take action more promptly when financial institutions are in difficulty, and here again, in the eyes of a member from Quebec, this is merely a move to increase the power in the hands of the federal government, since we in Quebec already have institutions in place which do the job and, what is more, do it very efficiently.
The Commission québécoise des valeurs mobilières is already in place and working very well. We have an inspector general of financial institutions who carries out the same duties Bill C-100 now wants to give to a superintendent at the federal level.
The game is therefore, of course, once again to beef up the federal government's power, the power of centralization, unfortunately at great cost, since once again there is overlap and duplication. Duplication is part and parcel of the history of Canada, the waste of having a federal department doing something, and a provincial department doing the same thing. There is a virtually endless list of examples of this fundamental problem of Canadian federalism, which essentially seems to me to want to monopolize powers in Ottawa, although there are already competent institutions on the provincial level.
This bill is, I repeat, not the sole example of this logic, or political attitude, within the federal government.
I could easily recall from memory some six or seven other bills brought before this House recently, since the election of the Liberal government. Without going into them in great detail, I could mention Bill C-52, which once attempts to add to federal power in areas that are not only under provincial jurisdiction but also concern the private sector. Then there is Bill C-95, which attempts to establish national health standards, often contrary to the interests and powers of the provincial governments.
We have C-96, which addresses human resources and also gives increased powers to the minister in applying the department's legislation. We have Bill C-91, which grants broader powers to the Federal Business Development Bank, we have Bill C-88 on interprovincial trade, which quite openly gives the federal government residual powers, including the power to intervene in agreements between the provinces. And there are many more examples. I could go on all day about this.
This government is quite simply intent on increasing its powers to guarantee a certain level of centralization and to keep the provinces well under control. We have this enormous deficit in Canada because the federal government in Ottawa has far too much power and, as a result, is wasting money left and right. It is the same old sad story of this country. As a system, Canadian federalism has been wasteful, and the federal government has failed to learn from its past mistakes. Even today, government members tell us, in speeches that are hypocritical and make no sense at all, that they are helping small business and will find ways to give them more money.
We are already doing the job in Quebec. We have agencies that are perfectly capable of meeting the requirements of small businesses. In Quebec, we have set up a number of creative initiatives to meet these requirements, in large municipalities and also in the regions. Our financial institutions work very well. We have all the resources and agencies we need to supervise these institutions. And it works.
So why bother today with Bill C-100, which would establish at the federal level a series of activities and institutions that already exist at the provincial level? Again, and we keep repeating this all the time, this is what is fundamentally wrong with the federal system. I could go on and on about the disease, as it were, that exists here in Ottawa, which is-perhaps unfortunately-not only due to a lack of political will on the part of the government but is reflected in the very survival of the whole bureaucracy established in Ottawa for so many years, which is very invasive and whose resistance to decentralizing powers to the provinces is ingrained, although across the country, people keep asking for decentralization.
The federal government has now tabled a bill that is a complete contradiction of these repeated requests for decentralization. The government cannot or will not listen. This is irresponsible, especially considering the deficit, which is cause for serious concern. It is extremely disturbing when a government tables bills like the one before the House today.
Bill C-100 is purely and simply another tiresome and costly duplication gimmick. In Quebec, we know what this means. We have problems with this, and perhaps this is one major reason for Quebec's wanting to leave and its wanting to change the way negotiations are conducted with the federal government. We want to negotiate as equals, because, it would seem that English Canada is unable to give the federal government a wake up call.
It will take Quebec's sovereignty to wake up the other provinces, and it will be in their best interests, because they will be able to reorganize themselves in more effective terms. When I talk of duplication and the costs of the waste it entails, we know what that means in Quebec. We have done a lot of studies on this. There have been commissions and studies, including the Bélanger-Campeau study in 1990, which gathered a lot of information. There was also the study by Mr. Fortin, a Quebec economist, who said that, in all, some $3 billion had been wasted due to federal and provincial duplication-and this was only as far as Quebec was concerned.
In other words, Quebec as a province could save some $3 billion if there were not this duplication. Three billion dollars; that is a lot of money. You will agree that $3 billion a year is a substantial amount. If the Government of Quebec had this money to create jobs, to lend it to small and medium businesses, jobs would be created.
It is time the government stopped kidding us about wanting to be more efficient and to create jobs, when, in fact, the only thing it wants to do is increase its power. There are examples of duplication. I tell you: all the latest studies show that Quebec alone is losing $3 billion. If we were to look only at the matters essential to Quebec's development, we could point, in the case of manpower training for example, to another study showing that, because of duplication between the federal and the provincial governments, Quebec loses $250 million a year. There is no training and the reason is that the federal government is trying to do the same job as the province. Often the federal government implements initiatives that run contrary to Quebec's interests.
Bank ActGovernment Orders
The Speaker
My dear colleague, you will be able to continue the debate after question period. It being two o'clock p.m., pursuant to Standing Order 31, we will now proceed to statements by members.
Peter Adams Liberal Peterborough, ON
Mr. Speaker, last summer I attended Civic Pride Day in the village of Lakefield, Ontario. This was the home of Margaret Laurence and before her of two other famous authors, Catherine Parr Trail and Susannah Mordy.
On this day, the village was celebrating no less than four anniversaries. It was the 75th anniversary of the Lakefield Hydroelectric Commission and Memorial Hall. It was the 100th anniversary of the library and it was the 120th anniversary of the first village council meeting.
The celebrations were organized by the LACAC, Lakefield Architectural Conservation Advisory Committee, with the support of council and many volunteers and sponsors. Past and present reeves and councillors were present. A historical booklet was produced.
We do not take enough time to celebrate our rich and diverse heritage. We need to think more about Canada as it really is today. My thanks to the village of Lakefield for setting such a fine example.
Cliff Breitkreuz Reform Yellowhead, AB
Mr. Speaker, the town of Barrhead started off with an idea and watched it produce fame and fortune. The idea, producing its own version of the $2 coin. The fortune, raising enough money to beautify the downtown core.
How does it work? The Pride in Barrhead Association representing over 100 local businesses minted the Barrhead two-buck. The coin features two deer on one side and on the other side the town's mascot, the blue heron. The two-buck is local tender in Barrhead until the end of 1996.
Collectors from all parts of Canada are clamouring to get their hands on this gold coin. The demand is so high that thousands more had to be minted.
If members want more information on this unique fundraising idea they could call my office. Better yet, they could purchase the two-buck. They had better hurry; they are going like hotcakes.
Len Taylor NDP The Battlefords—Meadow Lake, SK
Mr. Speaker, this morning I had the pleasure of participating in a presentation to the Governor General at Rideau Hall.
Our small group presented the Governor General with a Christmas tree, a white spruce, the provincial tree of Saskatchewan, on behalf of the town of Meadow Lake which was Canada's forestry capital in 1995 and on behalf of the Canadian Forestry Association of which the Governor General is the honorary patron.
I take the opportunity to thank the people of Meadow Lake and the Meadow Lake Forestry Capital Society represented today by Donna and Barry Aldous for the fine job that they have done on behalf of forestry communities throughout Canada in 1995. Meadow Lake's efforts during the past year will be fondly remembered for many years to come.
I congratulate the people of Meadow Lake, their representatives and the members of the Canadian Forestry Association for making the forestry capital program such a success.
I wish the Governor General, his wife and staff an enjoyable Christmas season with that fine white spruce in their lobby.