House of Commons Hansard #145 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was consumers.


An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:25 p.m.

Progressive Conservative

Elsie Wayne Progressive Conservative Saint John, NB

Mr. Speaker, I rise on a point of order. If we are not going to debate Bill C-70 this afternoon as I was told we were, could you advise us please on what day next week we will be debating it?

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:25 p.m.

The Deputy Speaker

The hon. member for Saint John probably does not realize that the Chair does not know these things. The Speaker is not able to do that. Perhaps the hon. Secretary of State for International Financial Institutions will do that in his remarks.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:30 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, a point of order. I have a quick question which I hope you can answer. The Speaker told me as a member of Parliament that I would have the floor after question period for four minutes. That Speaker left and there was a transition when the Speakers changed. If that is what happened I still stand in my place and I insist that I get my four minutes.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:30 p.m.

The Deputy Speaker

The same point was made before. I will try to put it in other words. The government is entitled under our rules, which have been passed by all members, to change the order of business whenever it wishes to do that.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:30 p.m.

Scarborough East Ontario


Doug Peters LiberalSecretary of State (International Financial Institutions)

Mr. Speaker, I welcome the opportunity to add my voice to those of hon. colleagues in the government in support of Bill C-82. I hope my other colleagues will be equally supportive.

I attach particular importance to the consumer protection measures in Bill C-82. We live in a period of rapid evolution in the financial sector. Technological advances, globalization of financial services markets and a changing competitive landscape are some of the broad trends at play. All of these trends have major implications for consumers, most of which are positive in nature.

Canadian consumers enjoy more choice and convenience in the financial services market than ever before. Long gone are the days when we had to go to the bank between 10 a.m. and 3 p.m. on a week day to take out money and write cheques to make payments. Now we can get cash at any hour of the day or night through automated banking machines. Payments can be made using convenient new mechanisms like direct debit and pre-authorized debits. In addition, we can do the basic banking we want, apply for loans or seek insurance coverage from our home computers or by telephone.

Technological innovations have been accompanied by an ever-increasing array of financial products from a range of service providers. For example, insurance products can be tailor made to fit an individual's circumstances. Consumers who carry credit card balances can reduce their interest costs by using one of the new low rate credit cards on the market, and consumers can satisfy many of their financial needs through one stop shopping. For example, they can take out mortgages, invest in guaranteed investment certificates and buy mutual funds from the same trust company.

These innovations bestow countless benefits on consumers. At the same time, they have led to changes in the relationship between financial institutions and their clients. Consumers want this relationship to be balanced and fair, and have therefore expressed

the desire for better protection in their dealings with financial institutions.

The government agrees that consumer protection must be enhanced in the context of a rapidly evolving financial sector. Bill C-82 proposes several measures to accomplish this.

One key measure deals with privacy. Privacy protection is of utmost importance to the government. This is an age where technological advances permit increasingly easier access to and analysis of personal information. In this environment, consumers want to maintain control over their own information. They want to know why their information is being collected, how it will be used and how it will be stored.

In the financial sector the collection and handling of personal information is a significant issue. Financial institutions rely on extensive amounts of often sensitive information to offer their services. As a result it is important that they take privacy protection seriously.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:30 p.m.


John Williams Reform St. Albert, AB

Mr. Speaker, do we have quorum?

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:30 p.m.

The Deputy Speaker

The member is correct. There is not a quorum. Call in the members.

And the bells having rung:

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:30 p.m.

The Deputy Speaker

There are now 20 members in the House. We have a quorum. Resuming debate, the hon. secretary of state.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:35 p.m.


Doug Peters Liberal Scarborough East, ON

Mr. Speaker, financial institutions have made efforts to deal with privacy concerns. For example, they participated with consumer groups, government representatives and other business groups in the development of the Canadian Standards Association model code for the protection of personal information which was finalized in April 1996.

The government wants to build on these efforts. Accordingly, the bill provides the authority to make regulations in the area of privacy. Specifically, it allows for regulations requiring financial institutions to establish procedures governing the collection, retention, use and disclosure of customer information and to inform customers about these procedures. In addition, the bill provides the authority to require financial institutions to establish procedures for dealing with complaints on privacy and to report annually on complaints received and actions taken to respond to them.

Following passage of the bill, the government intends to establish regulations to implement all of these requirements. I am sure that hon. members will agree with the merits of this proposal. Although privacy protection is an issue that cuts across industries, and the government is developing a broader approach to privacy protection, it is important to take this opportunity to respond to the immediate concerns of consumers of financial services.

Bill C-82 also provides for enhancements to the cost of credit disclosure provisions in the legislation. These provisions were designed to ensure consumers are informed about the cost of credit before they enter into loan contracts.

As part of the internal trade initiative, federal and provincial governments agreed in September 1996 to harmonize cost of credit disclosure requirements across jurisdictions. The objective of the harmonization exercise is to ensure uniform disclosure practices across the country and to ensure consumers benefit from a consistently high standard of protection.

Accordingly, the bill proposes amendments to the disclosure provisions in federal legislation. These amendments will allow the government to implement all aspects of the agreement with the provinces.

Under the new cost of credit disclosure regime, consumers will receive fair, accurate, timely and comparable information about the cost of borrowing. Armed with such information, they will be better able to assess credit options and obtain the most economical credit for their needs.

The government has been working to better protect consumers in other ways. I would like to report on significant initiatives in two areas: access to basic financial services and information about fees.

During the course of the 1997 review, several consumer groups expressed concern that low income individuals often have difficulty in getting access to basic financial services such as opening accounts and cashing cheques. For example, it was pointed out that financial institutions' identification requirements often include credit cards and a driver's licence which not everyone has. To remedy the situation the government held discussions with consumer groups and with financial institutions.

I am pleased to report that the major banks have made a number of important commitments to improve access. In particular, banks have agreed that they will require only two pieces of signed identification instead of three to open accounts or to cash cheques. They will also accept sponsorships from responsible customers known to the branch. In addition, employment will not be a condition of opening a bank account. Bank staff will be trained to follow these policies and to be sensitive to the needs of low income individuals.

The government has also encouraged improvements with respect to information about service fees. While consumers have access to a broad range of accounts in deposit taking institutions, they often find it difficult to compare the changes applicable to various accounts and therefore choose the best account for their needs. After discussion, the major banks have agreed to ensure that clear information about their products and services is available in publicly accessible areas of their branches. This will include information about low cost accounts and tips on minimizing fees. The banking industry is also working with Industry Canada to

provide information about bank accounts on Industry Canada's Internet site.

I believe that the measures I have discussed today will provide important benefits to consumers of financial services. We are confident that these initiatives will help ensure a healthy balance in the relationship between financial institutions and their clients.

In closing, on behalf of the government I would like to extend sincere appreciation to the various consumer groups that played a role in shaping these initiatives. These groups gave freely of their time and energy to ensure that the consumer voice was heard in this review, and the government has listened.

I call on my colleagues in the House to do the same by giving their support to Bill C-82.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:40 p.m.


Richard Bélisle Bloc La Prairie, QC

Mr. Speaker, more than anything else, Bill C-82 is a technical revision of the Bank Act. It does not contain major changes such as the deregulation of financial institutions, for example, allowing banks to sell insurance and the merger of major banks.

The government does, however, propose some legislative novelties, one might call them, which, although they do not go as far as the white paper and the Liberal finance committee report, do merit our further attention.

In addition to technical amendments to the Banking Act, Bill C-82 seeks to modify or develop legislation on two main themes: enhancing consumer protection, on the one hand, and lessening the burden of regulation imposed on financial institutions on the other. It must be noted that implementation of a new access system for foreign banks will, it seems, come in a separate act slated to come out by the end of the year.

The government will adopt clauses on the protection of confidential information, better information on the cost of credit, and protection of consumers from tied selling. After discussions with the government, the banks will take a number of steps to improve access by low-income individuals to basic financial services, as well as information on banking services which, we must admit, have been virtually non-existent until now, possibly to the detriment of users of banking services. Banks must also adopt a policy on tied selling, and set up mechanisms to handle complaints on this. Some banks have already taken such initiatives.

As for tied selling, the government is naive almost to the point of complacency. These measures apply only to banks, while the same thing is not required of other financial institutions. This is because banks fall under federal jurisdiction, while the other institutions, such as insurance companies, come under provincial jurisdiction. The federal government should let the provinces set the rules and require its federal institutions to adhere to the provincial legislation. This is the opinion of the Bloc Quebecois. That way, the legislation would not have the double standards it does at the moment.

The government also states that the clauses to amend the Bank Act so as to prevent high-pressure tied selling will come into effect only if they prove necessary. Banks are being asked to create their own internal complaint handling system, and the act will apply only if this proves insufficient-but using what criteria?

The government is therefore doing nothing concrete about tied selling. What is proposes to do eventually is not even the right thing, in our opinion. It just refers to tied selling in order to gain brownie points as the elections come closer, but in actual fact it strikes us that this is nothing but hot air.

If the government wants to do something concrete, it should make the banks subject to the same legislation as financial institutions that come under provincial jurisdiction, which offers consumers genuine protection.

We deplore the fact that the federal government is trying to interfere, through the back door, with areas under provincial jurisdiction. Under sections 254 to 259 of the Insurance Companies Act, an insurance company with a federal charter or a foreign company regulated under this act is currently prohibited from selling its policies in Canada to another insurance company that is provincially regulated.

Since most foreign insurance companies operate in Quebec under a federal charter, Quebec insurance companies cannot buy their policies when these companies withdraw from the Quebec market.

This is unfair to Quebec insurance companies for the following reasons: first of all, they cannot freely enter into transactions with another insurance company that is federally regulated, even to purchase a block of policies that are all held by Quebec policy holders. Second, it is against the spirit of NAFTA because through Ottawa, artificial trade barriers are being created in Quebec. Third, banks and trust companies do not have the equivalent in their legislation, so that a federally regulated bank or trust company may buy blocks of business from their provincially chartered counterpart.

In other words, Quebec insurance companies are not treated as well as foreign companies and this, in their own country. In a joint brief dated February 1996, the Canadian Life and Health Insurance Association, the Canadian Bankers Association, the Insurance Bureau of Canada, Canada Trust, the Trust Companies Association of Canada and the Credit Union Central of Canada-this is starting to look like quite a crowd-asked the federal government to allow, with the approval of the minister, the transfer of policies in Canada

from a federal insurance company to a provincial insurance company.

The Government of Canada did not respond to this request in Bill C-82, thus perpetuating the unfair treatment of provincially chartered insurance companies like those in Quebec. If nothing is done, C-82 will continue to restrict the opportunities for expansion of provincially regulated insurance companies, so that many will prefer to obtain a federal charter. Let us not forget that insurance is a strictly provincial matter. The federal government has always tended to forget that.

The reason the federal government is prohibiting the sale of policies by a federally chartered company to a provincially chartered company is that the latter is outside its control and supervision. On the other hand, the federal government is permitting the sale of blocks of insurance policies by a provincially or federally chartered company to a federally chartered company-the reverse is not permitted-on the grounds that the latter is under its supervision and must be a member of the Canadian Life and Health Insurance Compensation Corporation.

Clearly, it is a one way street: what goes one way does not go the other. It has been this way since 1867, always to the federal government's advantage. Over time, companies, and especially the major ones, end up with only a federal charter, because a provincial charter penalizes them by preventing them from acquiring blocks of policies from a federally chartered company.

The provincial market, which is shrinking as a result, may well disappear. Sooner or later, if there are no more companies with a provincial charter, the province, as we know, will become a redundant lawmaker, and this is how the federal government will take total control of an area that, under the Constitution, comes totally under provincial jurisdiction.

In such a situation, the Bloc certainly has nothing against the protection of consumer information, but this is a matter of civil law, an area of provincial jurisdiction. Quebec already has legislation on consumer protection, on the protection of personal information, on insurance and on market intermediaries, which is to be reviewed shortly.

The aim of the federal government is to be able to make additional regulations in an area of jurisdiction where it has no business, by duplicating and overlapping what already exists. In this regard, federal policy never changes.

This is to be found in section 459 of the Bank Act, which is amended by clause 55 of Bill C-82, which is before the House today. The government claims in its fine speeches to want to eliminate overlap and allow the level of government best suited to provide the public with the services it needs to do so. In fact, however, it continues to trample all over fields of provincial jurisdiction.

It cites an agreement between the provinces in order to legislate in this area. That is not what federalism is about. It is not because ten provinces agree on a subject that the federal government has the right to make laws and regulations in an area of jurisdiction that is not its own.

The federal government claims with Bill C-82 to be improving access to basic financial services for low income Canadians. For instance, only two pieces of identification instead of three would be required to open an account or cash a cheque, photo ID being considered desirable but not mandatory. This is a mere facade, since the problem remains.

The federal and provincial governments forbid banks to ask for some identification that most Canadians carry, including their social security number. The solution would be to think of a piece of ID that everyone has and that banks are allowed to ask for to check the identity of individuals. More often than not, the only cards they can ask for are credit cards, which very few low income people have.

Banks are not allowed to impose undue pressure on their clients, but the legislation does not say what constitutes undue pressure. In any case, it is up to the provinces to define this undesirable practice, as consumer protection is a provincial responsibility. However, the federal government reserves the right to make regulations in an area under provincial jurisdiction where there is already duplication and overlap, as pointed out earlier, in the case of Quebec. This is unacceptable to us, Bloc members.

In addition, Bill C-82 makes a distinction between undue pressure and favourable tied selling in subsections 459.1(2) and (3).

This policy raises major questions, since the goods that are tied seldom have the same life or expiry. This will make control extremely difficult, in a word, it cannot work. Why not require banks to comply with provincial consumer protection and tied selling regulations?

We know that, for the federal government, streamlining and duplication are synonyms, while harmonization really means interference. But this must stop, particularly if the government wants to fulfil the commitments made in the last speech from the throne. We feel that Bill C-82 provides the government with a good opportunity to show that it intends to fulfil its fine promises by not legislating and by not adopting regulations that duplicate and overlap what is already being done at the provincial level.

The federal government is imposing on banks standards that are not imposed on other institutions that come under provincial jurisdiction. Given that all these financial institutions are ultimately competing against each other, the only way to ensure they are subjected to the same rules is to let the provinces decide how these

institutions, including banks, must deal with the issue of consumer protection, including complaints relating to tied selling.

The Insurance Brokers Association of Canada fears that federal regulations in the financial planning sector would interfere with what is already being done. According to the association, the code of ethics on the disclosure of personal information, which is currently adhered to on a voluntary basis, is too soft on banks, given what is required of intermediaries in the marketplace.

The Bloc Quebecois expressed a number of reservations regarding Bill C-82. The government should correct the irritants that we mentioned today. Then, and only then will we be able to support Bill C-82.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:55 p.m.


Gérard Asselin Bloc Charlevoix, QC

Mr. Speaker, I rise on a point of order. The hon. member sitting next to me just made an excellent speech. He gave some advice to the government, but I notice that there are more Bloc Quebecois members than government members, or even Reform Party members, in the House of Commons. I am asking the Chair to check to see if there is a quorum.

And the count having been taken:

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:55 p.m.

The Deputy Speaker

There are now more than 20 members in the House, we can therefore resume debate.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

3:55 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I rise to address Bill C-82. I would like to go over a number of issues and review some of the items that are in the bill which the parliamentary secretary has pointed out.

I would also basically like to submit to the House a lot of the work that was done by my colleague from Okanagan Centre who is our critic for industry and who has been monitoring and following the impact of this bill on Canadians and the four pillars of our financial institutions in Canada. A lot of what I do will be some work that he has done and that he has monitored.

I will express the overall outline of the Reform Party and then explain to Canadians who are watching how standing committees work, what actually is presented at standing committees by various groups and how that has an impact or no impact on final legislation. I will then read into the record a report by the member for Okanagan Centre which he has sent to the Secretary of State for International Financial Institutions. That way our position as a party and our contribution to this debate on this issue will definitely be moved forward.

The Secretary of State for International Financial Institutions indicated that Bill C-82 was really about protecting consumers. In a sense that is right but there are objections I have to that comment. How do we protect consumers when we increase their taxes? How do we protect consumers when we confuse them across this country, for instance, with the harmonized sales tax in three provinces but not in the other provinces? How can we implement tax reform and how do we encourage financial institutions and the four pillars to know what is going on when we have one tax regime in three provinces and a different one in other provinces?

We saw that big flaw. We saw that the direction of the government in terms of taxation was the wrong direction. We saw that in terms of another bill we debated earlier today, Bill C-70, the harmonization tax, the blended sales tax or the tax inclusive pricing which the Senate sent back to the House. I thought we were finished with it.

Although the amendment is headed in the right direction on that bill, tax inclusive prices in three provinces confuses consumers and lenders. The bill does not go far enough. I do not see why the bill should not have had, along with being open and visible, a national harmonized sales tax, not a partial one, and a single rate, not a mid-double digit rate. A lower rate would force the federal government to keep its expenses down and not overspend. There should have been another amendment to allow doctors to claim the GST on input credits.

The Liberals are very lucky they have a Senate and senators who went on a trip. Because of the power they have in the other place they were able to send the bill back to this House. At least they understand the meaning of representation and what is in the best interest of an area or a community. The Liberal premier of New Brunswick also understands the meaning of representation. He puts the people of New Brunswick first and not the Liberals. He puts the people he represents first and not his party. He puts his province first and not the Liberal federal government. Many Atlantic MPs will benefit from that decision.

I said many times that the harmonization effort was not really based on economic benefits for Canadians. I submitted sufficient proof that it bears a high cost. Yet the parliamentary secretary just said on Bill C-82 that he is worried about consumers.

Consumers are taxpayers. Taxpayers have had to pay three provinces $961 million. Taxpayers are consumers. They have a traditional cost in terms of their businesses and government transitional costs of $200 million. They are over a billion dollars now. There will be a huge increase in costs to consumers when the blended sales tax is applied in the three provinces after April to goods and services the provincial sales tax never applied to before. It will represent a 7 per cent tax increase to consumers.

I have read all the news about the government and what the Liberals are doing by introducing this bill and that bill and by jumping back and forth one to another. A new issue has come up that amazes me and disappoints me. The Liberals truly sound like the Conservatives before them.

During the Charlottetown accord Mulroney labelled anyone who voted against his accord as enemies of Canada. Now certain Liberals feel threatened by the actions of the Liberal premier of New Brunswick, Frank McKenna, in terms of the Liberals' re-election chances federally. They are angry he did a flip-flop on the harmonized sales tax. They are angry he did an about-turn and does not support the harmonized sales tax the way it was being shoved down the throats of Atlantic Canadians.

McKenna sided with the Senate banking committee to defer tax inclusive pricing, much to the embarrassment of the Liberal government and in particular the finance minister who claims that he was representing the consumers of Canada, the consumers of Atlantic Canada. Yet he is contradicted by the Liberal premier.

A disgruntled Liberal MP claims that "people are getting tired of his shenanigans", referring to Premier McKenna and his actions. The Liberal MP goes on to state further "on the condition of anonymity". This is a public servant elected by people and he speaks on the condition of anonymity. Does that shows real courage? He says: "I have never seen a premier accumulate so many enemies in three and a half years".

Because a Liberal premier, no less, disagrees with the federal government on what is best for the constituents of New Brunswick, he is labelled an enemy of the federal Liberals. Shame. Arrogance abounds on the government side.

All members of Parliament should be evaluating the consequences of increased taxes. All members of Parliament should be evaluating the consequences of tied selling, allowing banks to get into all businesses and becoming a stronger oligopoly. All MPs should be interested in representing the wishes of their constituents.

Our job as politicians is to represent voters across the country, not just the wishes of the federal Liberal government. If they do not agree with the government they should not be labelled as enemies of the country, as enemies of Canada, or as enemies of the Liberal government. If the Liberal government cannot keep an election promise it is not the fault of those who oppose. Nor should they be labelled as enemies.

I spent some time on the aspect of consumer protection. That is what Bill C-82 is all about. After the review will the bill improve things for the people of Canada, the consumers, as the Secretary of State for International Financial Institutions claims?

Let us look more specifically at what the legislation does for Canada and for Canadians. Some of the more notable clauses in the bill provide that more detailed information be available to the consumer regarding cost of credit disclosure. They require simplified and improved dissemination of information to consumers about basic financial services, low cost options and fees on products and services. They also allow non-deposit taking institutions to opt out of the Canada Deposit Insurance Corporation and loosen subsidiary requirements. So far so good.

They introduce regulations to allow financial institutions to enter into joint venture agreements and propose changes that permit mutual insurance companies to issue participating shares. They require that large mutual insurance companies remain widely held after conversion to a stock company. They also permit foreign banks to be regulated as Canadian banks.

In terms of foreign competition the Reform supports competition in the financial sector. We support permitting foreign banks to be regulated as Canadian banks. The Reform feels that competition leads to the best service and to a lower cost for the delivery of that service.

There is also an item called coercive tied selling. The whole issue of tied selling is probably the single most controversial aspect of the bill the government will have to address and be held accountable and responsible for. The issue raises serious concerns with regard to tied selling. Subsection 459.1(1) in clause 55 states:

A bank shall not impose undue pressure on, or coerce, a person to obtain a product or service-

Subsections (2) and (3) set out provisions where the banks are allowed to offer loans to persons on more favourable terms and conditions, on the condition they buy other products and services from a particular person. A bank or one of its affiliates may offer a product and service to persons on more favourable terms, on the condition a person obtains a loan from the bank.

Although subsections (2) and (3) are intended to be interpretative clauses for the courts, it is our opinion that they permit tied selling and give the banks considerably more power than they enjoy now.

We recommend that these clauses be deleted. If not, the banks will have the ability to pressure individual and small businesses to consolidate their financial activities and requirements into a single provider. This would not be considered fiscally prudent. Having assets under one roof increases the relative influence of the bank to determine who is granted loan capital and who is denied access.

In order to ensure a balanced system that respects both the interests of the consumer and the integrity of Canada's financial

institutions it is necessary to ensure that legislation such as the Bank Act is clear in its meaning and intent.

We must be prudent in all cases and ensure that access to capital is freely available without constraints of any kind. That point is trying to strengthen the argument that tied selling is a very delicate and potentially divisive issue. It deserves further review and discussion.

Earlier I said I would talk about some items raised in the Standing Committee on Finance in October last year. This is where the issue was discussed and certain groups came before the committee to make representations.

I will read the fourth report of the Standing Committee on Finance of October 1996 under tied selling:

Tied selling occurs when a vendor requires a customer to purchase one produce or service as a condition of purchasing another one. As the white paper points out "concerns have been raised that the special nature of the relationship between financial institutions and their customers renders their customers especially vulnerable to coercion and that market forces and the Competition Act may not provide sufficient safeguards for these consumers".

The committee is concerned that tied selling must not be confused with cross selling. Cross selling, in essence, involves offering a lower price for a particular product or service if the customer agrees to purchase another product or service.

That is like a volume discount. It continues:

Non-coercive cross selling may actually result in savings to customers who often find package sales attractive. As well, banks may find it worthwhile to make small business loans only if other services to that customer are part of a package, and the committee does not wish to discourage lending to small business. It is not always a simple matter, however, to distinguish between tied selling and cross selling.

That gets back to my earlier point that the Bank Act must be clear in its language and in its intent, and I do not believe it is. It goes on:

The Independent Investment Dealers Association brought three specific cases of alleged coercive tied selling by banks before the Senate Committee on Banking, Trade and Commerce. The Canadian Bankers Association has disputed that these cases involve tied selling. Without investigating the details of each case, the committee cannot judge their merits. Suffice it to say, however, the committee remains concerned about the possible abuse of power by not only banks but by all financial institutions and insists that their customers not be subjected to abusive practices involving tied selling.

The Competition Act currently prohibits tied selling by "a major supplier of a product in a market that is likely to

(a) impede entry into or expansion of a firm in the market,

(b) impede introduction of a product into or expansion of sales of a product in the market, or

(c) have any other exclusionary effect in the market with the result that competition is or is likely to be lessened substantially".

The committee does not believe that any of its concerns about tied selling of financial services can be dealt with by the Competition Act prohibitions since undue pressure on an individual customer would not meet the test of substantially lessening competition in that market. Accordingly, arguments to the effect that the Competition Act can resolve this committee's concerns about tied selling are specious.

In addition to the Competition Act prohibitions against tied selling, section 416(5) of the Bank Act states as follows:

"No bank shall exercise pressure on a borrower to place insurance for the security of a bank with any particular insurance company-"

The committee received representations from both the Canadian Bankers Association-and the Independent Investment Dealers Association-on this provision.

The IIDA asked that section 416(5) be amended to read as follows:

"No bank shall exercise pressure on a borrower to purchase or obtain any financial product or service from any particular supplier".

The CBA objects to the use of the word "pressure" as it currently applies, and to the expansion of its prohibition beyond "insurance for the security of the bank" to "any financial product or service".

The committee shares the concerns of the CBA that the word "pressure" is not defined and that many aspects of selling could involve an element of pressure. As stated by the Consumers' Association of Canada, what is important is that the pressure not be undue or coercive. The committee therefore recommends that section 416(5) of the Bank Act be reconsidered with a view to reflecting that it is not just any pressure, but only undue or coercive pressure, that amounts to unacceptable behaviour.

Secondly, the committee recommended that the prohibition in section 416(5) of the Bank Act against undue or coercive pressure should apply to the provision of "any financial product or service" and not just "insurance for the security of the bank". There is no reason why such pressure should be permitted in any instance.

Thirdly, the committee recommends that a provision similar to section 416(5) of the Bank Act as amended above apply to all federally regulated financial institutions. Undue or coercive pressure should not be prohibited only among banks. Recognizing the possibility that constitutional issues might arise, the committee recommends that the government undertake discussions with the provinces with a view to obtaining this protection for consumers of all financial institutions.

Fourthly, the committee recommends that financial institutions would be required to:

designate a senior level officer in each financial institution to implement procedures for dealing with consumer complaints;

provide customers with details on how customers can make complaints; and

report annually on the complaints received and the actions taken to respond to these complaints.

Fifthly, the committee recommends that customers who believe their complaints have not been dealt with adequately by the financial institution concerned shall be informed of their right to complain directly to the Consumer Protection Bureau-under the Minister of Industry, and the CPB shall report to Parliament on such complaints.

Sixthly, in the event the largely self-regulatory regime proposed herein proves inadequate to protect customers against undue or coercive pressure from tied selling, stronger measures should be undertaken.

Lastly, the committee recommends that officials study the laws and jurisprudence in other jurisdictions to assist in determining more precisely the difference between tied selling and cross selling. For example, section 106 of the 1970 Bank Holding Company Act of the United States spells out in some detail the instances of activities of banks that are not considered to be tied selling and which are therefore presumably for the benefit of consumers. Various provincial laws dealing with this issue might also prove helpful.

These are the conclusions drawn by the Standing Committee on Finance based on the submissions given by various witnesses on the issue of tied selling.

One can see how technical this issue is in the sense that it is hard to understand and is hard for anybody to really get it clear in their mind the difference between tied selling and cross selling, when they are going from one by placing conditions into the other where they are just suggesting a better deal or a lower rate and a real benefit if they are offering cross selling.

I would like to read from a document written by the member for Okanagan Centre, our chief critic of industry, who is not here today. It is just a short article that he entitled "It's Time to Stop and Take a Good Look at the Financial Sector". Having read this, I share the general thrust and view of his position on this.

He goes on to write:

[The finance minister] surprised many in his 1996 budget speech by assuring Canadians that banks would not be allowed to sell insurance through their branch networks-this year. This soft ball, so deftly tossed our way, neither assuaged our concerns or addressed the issue.

The real issue is not whether the banks should be allowed to sell insurance or enter into the car leasing business but whether true competition exists within the financial sector and thus whether the consumer and the economy will benefit if banks are allowed to enter other markets.

The banks assure us that their own industry is competitive and not the oligopoly that Canadians suspect. This is difficult to believe when the six largest banks in Canada move en masse to raise or lower interest rates every time the bank rate so much as twitches. The only competition in this case is, who will move first.

The four pillars of the financial sector, banking, insurance, trust companies and securities dealers, have crumbled as deregulation and technological progress has blurred the lines of distinction. The banks have been applying pressure ever since to sell insurance in their branch networks, enter into auto leasing, and increase their interest in the securities market. Further deregulation and the subsequent increase in the size of banks, however, could reduce competition in the financial sector and hurt consumers. These are perennial issues in Parliament particularly when a review of the Bank Act is scheduled. Major reviews are conducted every 10 years, interspersed with minor reviews every 5 years.

1997 brings a minor review but it is a major review that is required. We need to know a good many things: How do our financial institutions interact? How do they operate in relation to other sectors of the economy? What are the strengths and weaknesses of the current regulatory structure? Not only will the answers reveal whether or not true competition exists within the banking sector and thus, whether or not they should be allowed to expand into other financial services, the answers will determine the veritable strength of our financial sector as it heads into the 21st century. Until such a review is completed, a moratorium should be placed on making further decisions about financial institutions.

Furthermore, Parliament must be the venue, perhaps in the form of a joint committee of the finance and industry committees. It is the only way we can assure all interests will be recognized and the process will be both accessible and transparent. Canadians must be able to see the process in order to put faith in it.

As lobbyists from all sides pressure members of Parliament to take sides and others to try to frame the issue within the overly political constraints of a war between big and small business, the challenge will be to keep our eye on the ball. That is, to ensure true competition exists and is free to function within the marketplace, that stability is maintained in respect of financial sectors, and a prudent regulatory structure is in place to protect the consumer.

If the bottom line is met, Canadians and the economy will indeed emerge as winners.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:20 p.m.

Some hon. members


An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:20 p.m.


Jim Silye Reform Calgary Centre, AB

That is the opinion of the hon. member for Okanagan Centre, who was our chief critic on industry.

I would like to continue, but I notice members on the opposite side are either wanting to take a breath of fresh air outside or they want me to finish speaking.

I want to add that if I would have been given unanimous consent, which Liberal members denied me, I would have finished that four minutes, I would have gone back to my office and I would not be making these people yell "time".

For the sake of clarification and for their benefit, I would like to let them know how much time I have left in this speech. I believe I have another 15 minutes, if I am correct. Will the Liberal members kindly indulge me and allow me to finish my remaining 15 minutes without yelling "time"?

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:20 p.m.


Marlene Catterall Liberal Ottawa West, ON

Mr. Speaker, could you please clarify that. I understood that the member had 20 minutes for his speech. He has now spoken for approximately 25 minutes. He seems to be under the impression that he has more time remaining.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:25 p.m.

The Deputy Speaker

The hon. member is allowed 40 minutes for his intervention. He has 12 minutes and 26 seconds left in his intervention.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:25 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, would you add another minutes for this intrusion and please make it 13 minutes and 20 seconds. These people want to rush things through in such a dictatorial undemocratic fashion. They have used closure more times than the previous government, which is not democratic. Now I am off on a tangent which I will take a minute to do.

When you are in opposition you have the rules of the House which are here to protect the interests of the minority. Obviously the Liberals have such a strong majority and they are representing the wishes of those people who put them in here. But for the protection of all Canadians and all provinces the Liberals have to take the time and give us time to be heard. They have to allow us to tell them what we think is right or wrong about a bill. They have to give us the opportunity to point out what we feel on a constructive basis could make the bill better.

If they do not have the integrity or the fortitude to sit there and listen, then they are not really interested in the people of Canada; they are interested in themselves. They have no place to go this afternoon. They have nowhere else to go except for here where they can sit and listen, and that they will do at least while I have the floor for another 11 minutes and 20 seconds.

This is meant to be a democratic institution. I wish government members would recognize that just because they have a majority they do not have the right to trample over our rights in the minority. We have to be heard. We insist on being heard. The games this House leader plays and the way the Liberals fool around with the government orders with no notice, a lack of notice on this bill. Our chief critic is not here. He is not able to tell the people what he really thinks. He has been in the standing committee. He could shed a heck of a lot more light on this bill than I could.

I have some experience with banks and financial institutions so I feel qualified as a businessman to speak on this bill. I will get little

more personal if not as technical on this bill once I have read this letter which was sent by my colleague from Okanagan Centre to the Secretary of State for International Financial Institutions. This is the kind of work that Reform Party members do. It is a sample of the kind of hard work that Reform members of standing committees have done.

My colleague from Capilano-Howe Sound sits on the Standing Committee of Finance and has been our chief finance critic. He has made a number of valuable interventions in standing committee. They have been good, open, democratic and non-partisan suggestions. Here is an example from the member for Okanagan Centre. I hope the government listens to what he has to say. The reason I want to read this into the record is to show Canadians how things work in Parliament. It is not just debate and question period. For the media and for a lot of people it is just question period, it is theatrics. The real work is done right now on debate like this where people get up and put forth their arguments for or against a bill. Then the bill is sent to committee where people come forward as witnesses and argue their points of view, how they feel a certain bill will impact on them. And then there is the work that gets done behind the scenes.

Here is a sample of some work behind the scenes, a letter to the Secretary of State for International Financial Institutions written by the Reform member for Okanagan Centre:

Dear Minister,

As the Reform Party critic for financial institutions, I wish to express a concern that a growing number of small business people and I have with Bill C-82, an act to amend certain laws relating to financial institutions.

Specifically our concern rests with clause 55, section 451.1 subsections (2) and (3).

While 459.1(1) states explicitly that no bank shall impose undue pressure on, or coerce, a person to obtain products and services, subsections (2) and (3) appear to contradict 459.1(1) by allowing the banks to do just that. In our opinion these provisions for tied selling give the banks considerably more power than they enjoy now.

As acknowledged by your officials, the definitions of tied selling and coercive tied selling are numerous. While sectors do practise tied selling or product bundling, we feel caution must be exercised where coercive or pressure tied selling is concerned. Any legislation which could be interpreted as giving the banks the ability to coerce or exert pressure is grievous. Mechanisms such as conditions for preferred rates on loans and/or products and services which unduly influence the consumer to consolidate assets within one financial institution is not prudent in our opinion.

While we understand subsections (2) and (3) are considered to be interpretive and are intended to assist the courts, the Reform Party feels it would ultimately be in the best interests of all concerned to delete (2) and (3) thereby allowing 459.1(1) to stand on its own merits and to remove any chance of misinterpretation which would give the banking sector grounds for unfair advantage. Any resulting confusion can be adequately clarified by the provisions set out in 459.1(5) via the regulatory powers of the Governor in Council.

Barring this amendment, we would like to suggest an alternative amendment to Clause 45 and Clause 55 be deleted.

We are extremely aware of the time constraints inherent in the Bank Act which emphasize a preference for speedy passage of Bill C-82 through the House. The Reform Party does not wish to unduly delay the passage of this Bill. However, since a growing number of small business people, including members of the casualty and property insurance sector, share our concerns, I feel it would be irresponsible of me as a critic to advise our caucus to support Bill C-82 as long as Clause 55 stands as is.

We would like to see an amicable resolution to our concerns and wish to express our support for the merits of this legislation. Our main objective is and will always be to ensure that the integrity of our financial institutions remains intact and the interests of the consumer and the small business person are balanced with the interests of the financial sector.

I ask that you give fair and reasonable consideration to these concerns.

It is signed by the Reform member of Parliament for Okanagan Centre.

As members can see, our main concern with this bill lies in that aspect which controls tied selling and the difference between that and cross selling. One must be very careful when passing legislation and making laws that one does not step on people's toes or infringe on the rights of the corporation or the individual.

Banks are in a position to offer a lot of services. However, when looking at the size of banks and the number of people who are dependent on them, there has to be in anyone's mind some concern that legislation is not passed that allows the banks to have an unfair advantage over smaller or specialized businesses. That specialized business may be a large insurance company which offers just one service. It is not in a position to cross sell its product or offer volume discounts unless a person takes out a bigger life insurance policy or leases a more expensive vehicle or something like that.

When these smaller businesses are involved in their own specialized niche, it is important that when dealing with the banks that legislation is not imposed that gives the banks more power than the other financial institutions and investment dealers raising money, who can be offering chequing services and who cannot.

I have heard arguments from people who are anti-bank or bank bashers who say that the banks can get into any business they want. They can lend money for any purpose they want, provide insurance services or provide leasing facilities or whatever. We should then allow other people like investment dealers or other institutions to get into the banking business.

They do not like that so why not allow that so that we can have these specialized businesses if they have sufficient capital to offer other services? It seems to me that insurance companies have sufficient cash around. They could be in the deposit taking business, chequing business or credit card business which is a big business. We notice in the the Eaton's bankruptcy application that the most successful portion of its business is the credit card business and it is highly profitable.

We are trying to review the Bank Act, trying to make it fair for consumers and, at the same time, not make it punitive for the banks. We have to make sure that while one is applying for a loan for a house and the bank is approving the mortgage, it can suggest

one may need insurance for the house, so while one is there the bank might like to show its package.

The problem is how can one be inside that room or how can we pass legislation that puts one inside the law inside that room? We do not know what the bank manager or the account manager is saying.

The manager is telling the customer that the bank is giving him or her a mortgage. There is a big difference between your mortgage is approved, you have the proper credit facility and you know what, we can offer you insurance. Here is our package and I think it is a heck of a deal. You should take a look at it. That is okay and is cross selling in my mind. However, if the manager says that your mortgage is approved if you also take this insurance policy on the house, they come together, that is tied selling. That is not right. That is coercive. That is undue pressure on the consumer.

I feel that a lot of my intervention today was technical in nature, but I wanted to tell Canadians that a lot of work goes into bills like this. A lot of different people with different points of view make contributions. It is not easy: tied selling, cross selling, the difference, who is inside that room, how do you know.

Although the intent of the bill is is necessary and we agree with the majority of it, the one area that we are still unhappy with is the area of the tied selling in that clause.

Consequently, I move:

That the motion be amended by deleting all the words after the word "that" and substituting the following therefor:

"Bill C-82, an act to amend certain laws relating to financial institutions, be not now read a second time; that the order be discharged, the bill withdrawn and the subject matter thereof referred to the Standing Committee on Industry".

We are very concerned about that one area, tied selling versus cross selling. As I said earlier in my speech, the Bank Act must be clear and concise in its language so that people can interpret it without ambiguity.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:35 p.m.


Lee Morrison Reform Swift Current—Maple Creek—Assiniboia, SK

Mr. Speaker, a point of order. I would think that great herd of Liberals could somehow manage to maintain a quorum.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:35 p.m.

An hon. member

There is a quorum.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:35 p.m.

The Deputy Speaker

Resuming debate, the hon. Parliamentary Secretary to the Minister of Finance.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:35 p.m.

St. Paul's Ontario


Barry Campbell LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, I guess for some of the members opposite math is difficult.

The hon. member for Calgary Centre has carried on in a diatribe about his not being permitted to finish the last four minutes of his speech on the previous bill. I am sure which all members look forward to hearing from him on Bill C-70 when it is taken up again.

I want to point out, because he has harped on this, that in the Thursday question the House was informed that the government would commence consideration of Bill C-82 with respect to financial institutions no later than 3 p.m. today, Monday and that is exactly what we did.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

March 17th, 1997 / 4:35 p.m.

St. Paul's Ontario


Barry Campbell LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, it is a great pleasure for me to start the second reading debate on Bill C-82.

This legislation proposes important measures to better protect consumers of financial services, to lighten the regulatory burden of financial institutions, and to define some of the provisions in the legislation affecting these institutions.

These measures are the results of a thorough consideration process and of widespread consultations. Therefore, I would like to take advantage of this opportunity to thank, on behalf of the government, the many consumer groups, industry members and other stakeholders who shared their opinions with us.

I want also to mention the very helpful participation of the House of Commons Standing Committee on Finance and of the Senate Committee on Banking, Trade and Commerce.

Canada has one of the strongest financial systems in the world, a system that is effective, efficient and stable. It strikes a balance between our financial institutions' competitiveness and their stability. We want this to continue. That is why the Canadian government is keeping a close eye on the evolution of the financial sector and considering ways of evaluating the system.

In 1992, we eliminated a large number of restrictions that prevented financial institutions from freely competing with each other. The consensus seems to be that these changes had a positive effect. When the 1992 bill to amend the legislation on financial institutions was passed, it was agreed that the legislative framework would be reviewed five years later. That is why the legislation contained provisions calling for a review in 1997. We embarked on this legislative review with two objectives in mind: to determine whether the measures adopted in 1992 had yielded the desired results and to see whether the legislative framework was still appropriate in view of the financial sector's evolution.

Following extensive consultations and in-depth analysis, the government came to the conclusion that the framework put in place in 1992 was working well in general and that its main components had to be maintained. The majority of stakeholders agree with this evaluation. However, we believe it is possible to make a number of

major changes to give consumers better protection and to bring the legislation more in line with the new realities of the markets.

Let me now turn to the specifics of these adjustments. They involve amendments to statutes governing financial institutions and related acts, including the Bank Act, the Co-operative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Canada Deposit Insurance Corporation Act and the Canada Payments Association Act.

Several of the proposed adjustments are aimed at strengthening consumer protection. Relationships between financial institutions and their clients are in constant evolution and regulation needs to reflect this changing environment.

The bill proposes a number of amendments to improve protection for consumers in their dealings with financial institutions. The first of these changes involves privacy. The protection of personal information is an area of growing concern to consumers. Accordingly, the bill provides the authority to require financial institutions to establish procedures governing the collection, retention, use and disclosure of customer information, to implement complaints handling procedures and to report annually on complaints. Regulations will be passed to implement these requirements.

The bill also proposes to enhance cost of credit disclosure provisions in the financial institutions statutes following the recent federal-provincial agreement on harmonization of disclosure requirements. These changes will result in improved and uniform disclosure practices throughout the country.

Another matter the government will address is tied selling. The matter is a complex issue and, indeed, members opposite have been talking about it for a few minutes and should hear the reply.

Tied sales can be beneficial in many situations where a consumer pays less for one product if he or she purchases a second product. However, concerns have been expressed about the potential for financial institutions to exert undue pressure on consumers when selling financial products. In response, financial institutions will be asked to adopt a policy on tied selling and establish procedures for dealing with complaints in this area. While the government is confident that this is the best approach, we are prepared to go further if the need arises. The bill includes an amendment to Bank Act to prohibit coercive tied selling.

The Secretary of State for Financial Institutions issued a press release on February 14 which suggested that the government would proclaim this amendment if necessary. After additional consideration, the government is now prepared to set a specific date for proclaiming the amendment. We intend to bring it into force on September 30, 1998.

At the same time the government wants to provide an opportunity for the institutions to address the tied selling matter through the establishment of appropriate policies and procedures. Therefore, the government is requesting that, before the proclamation date, the House of Commons finance committee carry out a review. This review would assess the degree to which tied selling remains a problem and the extent to which financial institutions have responded to the challenge. It would also consider methods to differentiate between beneficial practices such as when discounts are offered for taking more than one service, something the hon. member for Calgary Centre did not want consumers to have the advantage of, and those forms of tied selling that might be anti-competitive. These matters would be reflected in regulations.

Consumers raised other issues during the 1997 review, including the difficulty many low income individuals face in getting access to basic financial services and the difficulty of comparing service charges across financial institutions. While the government is not proposing legislative changes in these areas, I am pleased to report that discussions with major financial institutions and consumer groups have resulted in concrete commitments to address these problems. I am confident that these commitments will result in significant improvements in access and information on service charges.

The government recognizes that to promote a proper climate for economic growth and jobs, we need to ensure regulatory requirements that are fair and necessary. The bill identifies several areas where the regulatory burden on financial institutions can and should be eased.

First, several rules governing the operations of foreign banks in Canada will be modified. These will streamline regulatory requirements and lower costs for foreign banks. In particular, the legislation removes the requirement for regulated foreign banks which own a schedule II bank to own other financial institution subsidiaries only through a schedule II bank. It also includes changes to ease regulatory requirements for near banks.

Near banks are entities that do not generally take deposits and are not regulated as banks in their home jurisdiction but provide banking type services. Approval requirements will be reduced for near banks in certain circumstances and near banks will be permitted to own non-bank financial institutions.

Another element of the bill that will reduce regulatory burden is deposit insurance opt-out for eligible institutions. Many banks in Canada specialize in serving wholesale customers whose deposits far exceed the amounts insurable by the Canada Deposit Insurance Corporation. Such institutions will be permitted to opt-out of Canada Deposit Insurance Corporation, CDIC coverage, provided they are not affiliated with another CDIC member. As a result they

will no longer have to fulfil the reporting requirements associated with CDIC membership. Banks serving retail customers are still required to be members of the deposit insurance program.

In addition, subsidiary requirements will be eased. Currently financial institutions can engage in certain types of business only through subsidiaries. To reduce operating costs the legislation will permit financial institutions to carry on both information processing and specialized financing activities in-house.

The bill also includes a number of changes to streamline the self-dealing regime. These involve streamlining the operations of the conduct review committee, narrowing the range of related parties and allowing subsidiaries of a federal financial institution to transact with each other.

Changes are also necessary to keep the financial institution statutes current with evolving trends. The bill proposes a number of changes in the area of corporate governance. Although the corporate governance provisions were updated in 1992 and are generally considered to be working well, changes are needed to keep the legislation in tune with evolving standards. The bill proposes measures to update and improve corporate governance procedures, including clarifying the duty of the audit committee and enhancing policy holders' rights.

Regulatory adjustments will also be made to provide more flexibility to financial institutions seeking to enter into joint venture agreements. The requirement that the eligible joint venture be controlled by a financial institution will be removed. These adjustments will enhance the ability of financial institutions to compete both in Canada and abroad.

The legislation includes a number of amendments to enhance access to capital for mutual insurance companies. They will be permitted to issue participating shares. In addition, the demutualization regime will be extended to apply to all mutual life companies and added flexibility will be provided. Large mutual insurance companies will be required to remain widely held after conversion to a stock company.

The Superintendent of Financial Institutions will have the authority to exempt companies on specific aspects of the demutualization regime on a case by case basis. The Minister of Finance will have the authority to exempt companies in financial distress from any aspect of the demutualization process. Details will be set out in regulations to be developed in consultation with industry participants over the coming months.

Bill C-82 also includes a number of amendments of a technical nature that are aimed at further streamlining the statutes governing financial institutions and the agencies that govern them.

Among the technical amendments are changes to the Bank of Canada Act to remove outdated impediments to certain activities of the bank. These include expanding the range of instruments that a bank may buy and sell in clarifying the ability of the bank to carry ancillary activities such as licensing anti-counterfeiting technology.

The bill also includes technical amendments to the Bank Act, the Co-operative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Canada Deposit Insurance Corporation Act, the Office of the Superintendent of Financial Institutions Act and consequential amendments to the Winding-Up and Restructuring Act and the Greenshield (Canada) Act.

The financial services sector is in constant evolution. It is absolutely necessary to update constantly the regulations governing this important sector of our economy to reflect the various changes that occur.

Even though it is agreed that the system works well in general, as I said earlier, it will be improved immediately through the bill before you. We are still focused on the future. That is why we have established a task force on the future of the Canadian financial services sector. The task force will be responsible for advising the government on the appropriate framework for the financial sector in the 21st century, a framework that will promote economic growth and job creation.

We have also undertaken a review of the payment system. Moreover, we are reviewing the access rules for foreign banks, which will lead to a system for establishing branches. Legislative proposals on this subject will be made public by the end of the year.

We have to approach tomorrow's challenges intelligently, but the same applies to the changes before us today. This is an important bill for many Canadians and I urge the House to adopt it as quickly as possible.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:50 p.m.


Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I would like to ask a couple of questions of the parliamentary secretary to the finance minister.

One of the amendments to the bill allows foreign banks to branch directly into Canada. I do not disagree with that. It is a good thing. It helps increase the number of service providers. It increases choice which should lead to more efficiency and lower cost of services.

I would like to ask the hon. member, on the other side of the coin, has the government addressed the Canadian banks' concerns regarding what they need? What is the government doing to help our banks compete in foreign markets?

Foreign banks are now allowed to come in here. What have the big banks, if anything, said to the finance committee with respect to their expansion abroad? What has the government done there? That is one question.

The second question I would like him to touch on is with respect to tied selling. In the press release that the government issued, it said that it would introduce tied selling safeguards. I do not think he would argue that there is a difference between tied selling and cross selling, and that one is good and yet the other we have to be careful about. I know that even in my intervention I used terminology which is difficult to understand. If we do not go slowly it is difficult to convey the message we are trying to pass along to consumers.

What specific protection is the government providing for consumers, as the bill stands now? What are the safeguards against tied selling? I assume the member is also against allowing the big banks to do it.

An Act To Amend Certain Laws Relating To Financial InstitutionsGovernment Orders

4:55 p.m.


Barry Campbell Liberal St. Paul's, ON

Mr. Speaker, I regret, because I have great regard for the member opposite, that he has it wrong. The bill does not allow foreign branching. There was an announcement at the time the bill was introduced that a foreign branching regime would be put in place by the end of the year. However, a great deal of study needed to be done about many features of the foreign branching proposal. He is not quite right on that, but he makes an important point about how that will enhance competition in certain sectors.

He is right, there is a flip side to that, which is the position of Canadian banks abroad. I can assure the member opposite that the government would not have taken the step of announcing the possibility of direct branching, as opposed to the current regime, unless it was assured that in those major jurisdictions where Canadian banks operate, namely the United States and Europe, they were gaining additional access.

If he talked to bankers today he would learn that the doors have been increasingly opening south of the border to allow greater expansion for Canadians doing business there. Recent changes, particularly under their securities acts, have made that an even more hospitable environment than just a few weeks or months ago.

I am glad the member asked the question because it gives me a chance to reinforce something which I said in French and will now say in English, that is, the establishment of the task force on the future of the financial services sector. That task force, which is under way and will report to the minister roughly 18 months hence, will address the very question of what the shape of the sector should look like, both to ensure that our institutions can be competitive internationally and to serve the needs of Canadian consumers.

That brings me to the last point, which dealt with tied selling and cross selling. I agree with the member opposite that there are a lot of terms involved which can be quite confusing. As a former competition lawyer I can tell him that it is a very interesting but complex field.

If he was concerned, as he asserts, about the ability of banks to grow and compete internationally, then I invite him, when the finance committee studies further this issue, to read up on it, do a bit of work on it, talk to people who know something about the field and share his views with the committee.