House of Commons Hansard #23 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was labour.

Topics

Bank ActGovernment Orders

11 a.m.

Some hon. members

No.

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11 a.m.

The Acting Speaker (Mr. Kilger)

All those in favour of the motion will please say yea.

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11 a.m.

Some hon. members

Yea.

Bank ActGovernment Orders

11 a.m.

The Acting Speaker (Mr. Kilger)

All those opposed will please say nay.

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11 a.m.

Some hon. members

Nay.

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11 a.m.

The Acting Speaker (Mr. Kilger)

In my opinion the yeas have it.

And more than five members having risen:

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11 a.m.

The Acting Speaker (Mr. Kilger)

A recorded division on the motion stands deferred. The recorded division will also apply to Motion No. 8.

We will now proceed with Group No. 1, that is Motions Nos. 11, 12 and 13.

Bank ActGovernment Orders

11:05 a.m.

Bloc

Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

moved:

Motion No. 11

That Bill C-15, in the Schedule, be amended by replacing line 26, on page 124, with the following:

"ment of foreign ex-".

Motion No. 12

That Bill C-15, in the Schedule, be amended by adding after line 30, on page 127, the following:

"(2.1) A directive may not be issued under this section in respect of a participating institution that is a member of a system for the clearing and settlement of securities transactions by clearing houses."

Motion No. 13

That Bill C-15, in the Schedule, be amended by adding after line 2, on page 136, the following:

"PART III CLEARING AND SETTLEMENT SYSTEMS FOR SECURITIES TRANSACTIONS

  1. Sections 1 to 23 apply to systems for the clearing and settlement of securities transactions and to clearing houses operating a clearing and settlement system to the extent that such clearing houses clear and settle payment obligations.

  2. The powers provided for in this Act may be exercised, with respect to systems for the clearing and settlement of securities transactions or with respect to clearing houses operating a system for the clearing and settlement of security transactions, only for the purpose of monitoring the operation of the clearing and settlement of payment obligations or preventing systemic risks in respect of the clearing and settlement of payment obligations."

Mr. Speaker, I am very pleased to debate real amendments after having discussed a series of cosmetic amendments.

As I said in my first speech, this bill systematically infringes upon an exclusively provincial field of jurisdiction, securities. This field is strictly defined in the Canadian Constitution, in section 92.13, on property and civil rights in the province, and in section 92.16, which includes generally all matters of a merely local or private nature in the province. These things are under provincial jurisdiction.

We fought against the first bill, Bill C-100, because it was a deliberate attempt by the Liberal government to encroach upon a provincial field of jurisdiction, thus creating duplication and overlap. The three amendments we are proposing, whether the Reform Party likes it or not-and let us not forget that the Reform Party did not do its job during the last session, it did not examine and criticize Bill C-100-our three amendments pertain to the clearing system and the settlement of payments. Their aim is to stop the federal government from encroaching upon an exclusively provincial field of jurisdiction.

In other words, through these three amendments, we say as clearly and simply as we can in legal terms, that the federal government should mind its own business.

The first amendment strikes, in fact, the word "securities" from the original clause, so that federal jurisdiction does not extend to that provincial jurisdiction. The second amendment, Motion No. 12, seeks to exclude from the application of federal guidelines institutions participating in clearing houses for securities.

The first amendment takes away from the federal government the power to create a clearing house, and the second amendment takes away the power to regulate provincial clearing houses. This is exactly what we want, that is to remove from this bill any invasion of provincial jurisdiction.

The third amendment relates to the system for the clearing and settlement of securities. This amendment limits federal regulatory

power to payment settlement activities, as opposed to institutions that are likely to carry out such activities.

Furthermore, the federal government can take action only for reasons of management of systemic risks, as the Superintendent of Financial Institutions and the Minister of Finance claimed, and for no other reason. That is what we opposed from the beginning, when we argued against the bill. That is what has become of Bill C-15.

So, these are the amendments, and I would invite members of this House from the three parties to support these amendments that would be beneficial, in particular for federal-provincial relations.

Bank ActGovernment Orders

11:10 a.m.

St. Paul's Ontario

Liberal

Barry Campbell LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, my, my, my. It is incredible. When we debated the first eight motions grouped by the Chair, the hon. member for Saint-Hyacinthe-Bagot was full of indignation over amendments being tabled at the last minute with no chance to absorb them.

That is the way it works around here. He knows that and he followed those exact rules and procedures in tabling his own very technical motions without any advance notice for us to understand them. Then, as he accused the government in an earlier debate, he stands up on these very technical motions which have been grouped for debate and speaks for about three minutes. I guess the saying goes that sauce for the goose is sauce for the gander. Did I get it wrong?

Bank ActGovernment Orders

11:10 a.m.

An hon. member

What is lost to Moses is lost to Judas.

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11:10 a.m.

Liberal

Barry Campbell Liberal St. Paul's, ON

We had all kinds of talk about the ten commandments but I will not get into that in this debate. Fortunately for the Secretary of State for International Financial Institutions he does not have to worry about religion on top of all his other concerns.

Let us talk about specifics. Let me respond with some substance to these amendments proposed in this group by the opposition which which we will not support.

If clearing and settlement systems are not properly designed they can result in considerable systemic risk; that is, the risk of problems experienced by one financial institution will spread to other institutions and destabilize the system as a whole. In an increasingly global marketplace in financial services that risk exists. If our systems are not properly designed problems occurring elsewhere may spread to the Canadian financial system.

The hon. member opposite can rail all he wants but this is an appropriate role for a central bank and it is not an appropriate role for a securities regulator.

Bill C-15 establishes a framework for proper risk proofing that is effectively designed and competitive in terms of the spread and cost with which payments are cleared and settled. This will enable Canadian financial institutions to compete more effectively. The proposed clearance and settlement legislation makes sense and has several key functions. It gives the Bank of Canada an explicit role in overseeing clearing and settlement systems that pose systemic risk. The bank already plays a key but informal role in ensuring that such systems are designed in a way which controls risk.

The proposed clearing and settlement legislation provides formal responsibility for the bank to oversee these systems, as it exists throughout the world. However, the legislation aims only to supervise those system that pose a risk to the financial system. It does not seek to regulate any associated financial markets. It is quite properly within federal jurisdiction. Equally important, it is what the safety, soundness and security of our financial system demands and what all Canadians would expect of the federal government. The oversight role for the bank is consistent, as I said earlier, with the role being played by central banks elsewhere.

Second, Bill C-15 gives the Bank of Canada the powers it needs to participate in clearing systems and contribute to their safe, efficient and cost effective operations. These powers will be important in the context of the large value transfer system being planned by the financial sector with the Bank of Canada. This may ultimately replace the large value component of the paper based system with a system that will facilitate the electronic transfer of large values.

The Bank of Canada does not currently have the power it needs to send and receive payments on what will be known as the LBTS. Under Bill C-15, the bank will be given powers allowing it to contribute to the operation of the system in several ways.

There is a level of risk containment that will allow Canada to meet internationally agreed upon standards and contribute to the global competitiveness of our financial institutions. It also reinforces what I believe is an important role of the government, establishing a framework so that financial institutions have the ability and incentives to recognize and control the risks they face.

Another example of a clearing and settlement system which will directly benefit from this risk proofing is the new system for clearing transactions of government debt securities known as the debt clearing service. It was implemented by the Canadian depository for securities and incorporates risk containment features accepted by federal and provincial authorities. Eventually placing all government debt on this system will reduce the cost for the government as issuer as well as for other participants in the systems.

A third key function, and the last one I want to comment on in this important legislation, is to strengthen the enforcement of netting arrangements under bankruptcy and insolvency law. Clearing systems rely heavily on netting of payments to reduce credit exposures between participants and reduce systemic risk.

Without legal certainty, netting arrangements can be called into question when they are needed most when a participant fails.

Confirming that netting arrangements are legally valid and unsaleable in a liquidation or restructuring is an essential part of this legislation.

My time is almost up. I emphasize that this aspect of the legislation is very much about ensuring efficiency and stability of the financial system and contributing to its international competitiveness and meeting our international obligations in regard to system soundness and security.

Therefore, I urge members of the House to reject the ill-advised amendments proposed by the opposition.

Bank ActGovernment Orders

11:15 a.m.

Reform

Herb Grubel Reform Capilano—Howe Sound, BC

Mr. Speaker, it is a pleasure to elaborate for a few moments-not delay the business of the House-on the remarks just made by the hon. parliamentary secretary.

Most people in Canada do not really understand what happens when they write a cheque and send it to an uncle a few provinces away, how the bank gets the money and how it is transferred. It is all done on what one could compare to a super highway that connects all the banks, dealers and others who have access to it. The debits and credits flow back and forth at the speed of electronic signals.

The arrangements which guide the traffic on this highway have to be updated periodically in light of technological innovations, changing economics and the development of new instruments, development of problems like bankruptcy and so on. These developments are taking place in the rest of the world and if Canada wants to be competitive it has to do the same thing.

Essentially, we set rules and standards for the vehicles that are travelling that road. We set traffic signs that guide whatever is going on. It is quite clear that at the end of such a highway the business which takes place in no way is influenced by the rules guiding the traffic on the highway. The entire system is like a public good, it has to be protected.

The Bloc is proposing that the setting of the rules which increase the efficiency of that highway and the flow of information back and forth is an interference with national sovereignty and an encroachment on the rights of provincial governments. I do not think this is correct. It is like having one highway stretching across the country. The culture developing at either end is not impeded by having a highway that functions efficiently and safely.

In the same way I believe the financial institutions that are developing in each province have the opportunity to maintain the

local characteristic to be regulated and to be encouraged. That is up to the provincial government. This bill does not deal with these issues and I would be the first to argue against any encroachment by the federal government on provincial rights with respect to what is going on in the financial sector at the access points on this highway for clearing financial obligations within Canada.

Therefore, the Reform Party opposes these amendments and will vote accordingly when the vote comes up.

Bank ActGovernment Orders

March 28th, 1996 / 11:20 a.m.

Bloc

Richard Bélisle Bloc La Prairie, QC

Mr. Speaker, the parliamentary secretary has criticized my Bloc Quebecois colleague for having spoken only three minutes on our three very technical amendments tabled, as were his, at the last minute this morning. I will attempt during the next ten minutes to provide further clarification to the parliamentary secretary so that he may better understand our three amendments.

Bill C-15 before the House today is a sort of omnibus bill, a collection of scattered measures, the sole objective of which is to tighten control and regulation of the financial services field in Canada. Generally speaking, the bill amends a number of Acts governing financial services and repeals the Investment Companies Act.

We are not opposed to the principle behind the bill but to some of the measures proposed, because they are an outright intrusion in provincial areas of jurisdiction. In order to eliminate this intrusion, the Bloc Quebecois is proposing three amendments to the bill.

The proposed amendments have to do with the system for payment clearing and settlement. Their purpose is to bar the federal government from this provincial area of jurisdiction. The first amendment proposes:

That Bill C-15, in the Schedule, be amended by replacing line 26, on page 124, with the following: "ment of foreign ex-".

This amendment thus removes the words "securities transactions" from the original clause, so that the federal government's jurisdiction does not extend into this provincial area of responsibility.

The second amendment also concerns the schedule to Bill C-15 and proposes adding after line 30, on page 127, the following:

"(2.1) A directive may not be issued under this section in respect of a participating institution that is a member of a system for the clearing and settlement of securities transactions by clearing houses."

The purpose of this technical amendment is to remove from the application of federal directives institutions participating in clearing houses for securities transactions. The first amendment, in fact, takes away the federal government's power to create a clearing

house and the second amendment takes away its power to regulate provincial clearing houses.

The third amendment amends Bill C-15, in the Schedule, by adding, after line 2, on page 136, a part III which sets out the fields of application of a system for the clearing and settlement of securities transactions and in which regulatory power is also limited. This amendment limits the power of the federal government to regulate payment settlement activities.

Moreover, the federal government can take action only for purposes related to systemic risk management, and for no other reason. So, the objective of the last amendment is to control more strictly the clearing and settlement systems for securities transactions.

Why did we propose these three amendments? Because Bill C-15 brings about changes that are totally unacceptable to the provinces, and, from our point of view, to Quebec.

The most important of those changes would widen the Bank of Canada payment mechanisms to include securities. That action would duplicate the clearing mechanisms already regulated by the Commission des valeurs mobilières du Québec and would open the door to federal interference in securities regulation, which is under provincial jurisdiction. So, Mr. Speaker, we oppose it vigorously.

With Bill C-15, the Canada Deposit Insurance Corporation could base its participation premiums on the risk posed by a financial institution, including Quebec chartered institutions which are already regulated by the Régie de l'assurance-dépôts du Québec, which uses the value of the deposits in the institution to assess its premiums.

There would therefore be two standards for evaluation, and the one linked to risk might place Quebec institutions at a disadvantage because they are relatively small-larger institutions often being considered less risky-and because Quebec has its own deposit insurance, premiums for which are not determined by risk.

A third major change is that the Superintendent of Financial Institutions would have increased powers, enabling him to wind up Quebec-chartered institutions. We can just imagine all the conflicts between the various provincial and federal bodies that will ensue.

Bill C-15 modifies nine important laws that are currently in effect: those governing financial institutions (banks, trust and loan companies, insurance companies and associations of credit unions), those governing winding-up and restructuring, the Office of the Superintendent of Financial Institutions Act, the Canadian Payments Association Act. As well it does away completely with the Investment Companies Act.

Quebec is already involved in the clearing system via the Commission québécoise des valeurs mobilières and the Inspecteur général des institutions financières. Schedule I of Bill C-15 creates new overlaps, by placing Quebec's financial institutions wholly under the directives and orders of the Bank of Canada.

Under the pretext of controlling systemic risk, Bill C-15 is allowing Ottawa to meddle in this area. The governor of the Bank of Canada reserves the right to issue directives, not just to clearing houses, but also to participating financial institutions, regardless of their charters.

Many essentially Quebec institutions, such as la Fiducie Desjardins or the brokerage firm of Lévesque, Beaubien, Geoffrion, may be directly affected by the Bank of Canada's orders and directives.

With Bill C-15, the federal government is demonstrating more of a desire to grasp hold of new powers than any wish to ensure the mobility of financial institutions and the safety of investors.

Once again, with this bill, Ottawa is letting its centralizing dynamic show through. Bill C-15 constitutes an unacceptable interference in the securities field, something that has even been denounced by Daniel Johnson Jr. in February 1994, as my Bloc colleague has already pointed out this morning.

These new prerogatives of the governor of the Bank of Canada are therefore in complete contradiction to another of Quebec's traditional demands. Even above and beyond the areas of provincial jurisdiction, Quebec's financial institutions and its investors will be the victims of the double supervision Ottawa plans to impose. The result of this will be additional costs, administrative inefficiency and a system that lacks cohesion.

To conclude, in order to minimize all of these risks in a system that is already too unwieldy and over regulated, in these times when balancing budgets requires less regulation and fewer resources to apply it, when all taxpayers need a chance to catch their financial breaths a bit, and when all of Canada's and Quebec's financial institutions, and business in general, need more flexibility, I would invite the members of this House, the Parliamentary Secretary included, to show good faith and to support the three amendments tabled by the Bloc Quebecois this morning.

Bank ActGovernment Orders

11:30 a.m.

Bloc

Roger Pomerleau Bloc Anjou—Rivière-Des-Prairies, QC

Mr. Speaker, I would also like to speak about the three amendments proposed by the Bloc Quebecois. We know that Bill C-15 before us today, even if it is not a major bill like others tabled in the House, still brings many amendments to the whole series of existing acts, as my colleague said earlier.

Even though we have no objection in principle to this bill, which actually aims to increase regulation of financial services in Canada, we have a lot of concerns and the amendments we introduced today reflect precisely these concerns.

This bill is not a reform of the legislation governing financial institutions. This reform will come later on, because, as we know, a white book is in the makings. We believe the bill before us today is actually a step forward. It prepares the ground for the control of securities in Canada.

What are the amendments we are proposing? My colleague has read some of them and I will repeat them in a few words. The first amendment proposes to delete the words "securities" in a text. By deleting this word, we are taking "securities" out of federal jurisdiction. We believe that this is strictly a provincial jurisdiction and that the act, as it presently stands, should apply to everything else but not directly to securities.

The second amendment, which we have added, aims at excluding from federal guidelines institutions already participating in securities clearing houses. What purpose would it serve? Duplication, of course. This already exists in provinces.

The third amendment limits the federal government's regulatory power to the settlement of payments and not to the institutions involved. As my hon. colleague pointed out, we want it limited to the management of systemic risk and not used for other considerations.

Why exactly did we table these motions? I will go over some of the arguments so it will be very clear, given that the text is highly technical. A Canadian clearing system is currently being developed, set up and implemented and will eventually come under the control of the Bank of Canada.

This is part of our concern, as Quebec is already involved in this sector through the Commission québécoise des valeurs mobilières and the Inspecteur général des institutions financières, like the other provinces. Schedule I of Bill C-15 will create costly new duplication, by subjecting Quebec financial institutions to orders and directives from the Bank of Canada.

Bill C-15 uses the pretext-it is quite common for pretexts to be used, and I will come back to this at the end-of systemic risk control to allow Ottawa to meddle in this area. The governor of the Bank of Canada acknowledged, last June 20, that this risk was no longer a problem because of tighter control over the large value transfer system. In addition, under clause 6 in Schedule I, which will implement a Canadian clearing system, the Governor of the Bank of Canada retains the right to issue directives not only to clearing houses, but also to participating financial institutions, regardless of their charter. Thus, Bill C-15 will enable the governor to issue orders and directives to institutions such as the Fiducie Desjardins.

Secondly, they are using this bill to amend the prerogatives of the Superintendent of Financial Institutions and the Winding-up Act. Bill C-15 also gives more powers to the Superintendent of Financial Institutions, and, as we have pointed out since our arrival here, in almost all federal bills, power is being concentrated more in the hands of those who have it-be they ministers or the Superintendent of Financial Institutions.

Expanding the prerogatives of the federal Superintendent of Financial Institutions will mean costly duplication and inefficiency.

Indeed, in Quebec the inspecteur général des institutions financières already exercises some control over chartered banks, which means that the new powers given to the federal superintendent will overlap existing powers at the provincial level. This overlap is costly for the Quebec taxpayers-as we are well aware, since it is constantly being raised in the House-and for the Quebec chartered banks faced with insolvency problems.

Bill C-15 may lead to contradictory signals from provincial and federal authorities-this too has been pointed out ever since we came to this House. In this respect, let us remember that competition between governments will never be cost effective for the public. As for manpower training-an issue on which all stakeholders in Quebec have clearly been in agreement for a very long time, and which is not yet resolved-at least $250 million a year is wasted on this. The extension of the prerogatives of the superintendent may also lead to legal wrangling between Ottawa and Quebec, while the financial institutions facing problems and the people who have invested money will be forgotten.

In summary, if this bill does not take into account the amendments proposed by the Bloc Quebecois, there will definitely be-and I repeat the two or three points I made-overlap with provincial jurisdiction-and even the federalists in Quebec recommend that the Government of Canada not do this-costly duplication and overlap, and the system will, of course, be less efficient.

We can only lament the fact that, in most bills introduced in the House, we are always led to condemn the same things. The government uses all kinds of means to try to centralize ever more. All kinds of reasons are raised-market globalization, systemic risks, international competition. Technological inventiveness was just raised as a reason, implying that, for technological reasons, we will now have to centralize ever more. It is extremely sad to see that, at a time when the government claims publicly it is possible to reach settlements with provinces, it is doing exactly the opposite in the legislation. In Ottawa, greater centralization is the order of the day.

In conclusion, I want to reply to my hon. colleague from the Reform Party, who said that this highway being constructed must be more closely regulated and further centralized, and that, at both ends of that highway, culture will not be affected. Culture starts with the full control of all the economic levers. If Quebec gives up that much each time a bill is passed in the House, if there are no tools to protect Quebec's traditional positions, even within the constitutional limits, culture will eventually disappear.

Bank ActGovernment Orders

11:35 a.m.

The Acting Speaker (Mr. Kilger)

Is the House ready for the question?

Bank ActGovernment Orders

11:35 a.m.

Some hon. members

Question.

[Translation]

Bank ActGovernment Orders

11:35 a.m.

The Acting Speaker (Mr. Kilger)

Is it the pleasure of the House to adopt Motion No. 11?

Bank ActGovernment Orders

11:35 a.m.

Some hon. members

Agreed.

Bank ActGovernment Orders

11:35 a.m.

Some hon. members

No.

Bank ActGovernment Orders

11:35 a.m.

The Acting Speaker (Mr. Kilger)

All those in favour will please say yea.

Bank ActGovernment Orders

11:35 a.m.

Some hon. members

Yea.

Bank ActGovernment Orders

11:35 a.m.

The Acting Speaker (Mr. Kilger)

All those opposed will please say nay.

Bank ActGovernment Orders

11:35 a.m.

Some hon. members

Nay.

Bank ActGovernment Orders

11:35 a.m.

The Acting Speaker (Mr. Kilger)

In my opinion the nays have it.

And more than five members having risen:

Bank ActGovernment Orders

11:35 a.m.

The Acting Speaker (Mr. Kilger)

The recorded division on the motion stands deferred. The division will also apply to Motion No. 13.

The next question is on Motion No. 12.

Is it the pleasure of the House to adopt the motion?