Madam Speaker, I agree with one of the premises underlying the hon. member's bill. Canada's financial system would benefit from more competition generally and foreign competition in particular. This view is reflected in the Reform Party's minority amendment to the government's report on the hearings on the review of the financial sector held by the finance committee this fall. In this amendment we opposed the government's proposed legislation which would have made it more difficult and expensive for foreign banks to operate in Canada.
However, I cannot agree with the second part of the hon. member's legislative initiative which would require foreign banks to commit themselves to increased lending to small business as part of obtaining a licence to operate in Canada. I oppose this provision on two grounds.
First, it is out of touch with a modern relationship between business and government. It is sometimes efficient and equitable for government to set general rules of operation to assure public safety, as for example the rule which requires banks to maintain equity at a certain per cent of its deposit base. This rule assures the systemic stability of the banking system in case of a serious economic slowdown and many bankruptcies.
However, it is not wise for the government to set out specific rules about the composition of the banks' loan portfolios. Such regulation represents an indirect tax on the banks which they pass on to other clients. It also represents an indirect subsidy-