Mr. Speaker, it gives me great pleasure to present Bill C-82 for third and final reading. The legislation before us has three main objectives: to strengthen protection for consumers of financial services, to ease the regulatory burden on financial institutions, and to fine tune certain provisions of the financial institutions statutes.
This bill is the product of extensive consultations. We started our review of the financial institutions legislation in 1995 by consulting with a range of stakeholders, including consumer groups, industry representatives and other interested parties.
In June 1996 we released a consultation paper entitled "A 1997 Review of Financial Sector Legislation Proposals for Changes". The House of Commons Standing Committee on Finance and the Senate standing committee on banking, trade and commerce held hearings on this paper last fall. Their views and the views of other stakeholders are reflected in the measures in the bill before us today.
Since we tabled Bill C-82 on February 14, we have received comments from interested parties imposing some modifications. In addition, the House of Commons finance committee has conducted a clause by clause study of the bill and passed amendments. As a result, there have been several modifications to the bill since second reading. They are largely technical, mostly helping to clarify the language contained in provisions. As a result of the review, the legislation we have before us will ensure that the best interests of consumers in the financial sector are served.
I would like to elaborate on key measures in the bill. I will begin with a subject of tremendous importance to all of us and that is consumer protection measures. There are several.
First, consumers have made it clear they want better privacy protection in their dealings with financial institutions. Accordingly, the bill before us provides authority to require that financial institutions establish procedures governing the collection, retention, use and disclosure of customer information, implement complaints handling procedures and report annually on complaints. Once the legislation is passed, regulations will be introduced to implement these requirements.
Following up on the recent federal-provincial agreement to harmonize the cost of credit disclosure regulations, the bill enhances the disclosure provisions of the financial institution statutes. As a result of these changes in similar amendments to provincial statutes, disclosure practices will be improved and made uniform throughout the country.
Hon. members on all sides of the House are aware of the concerns about the potential for financial institutions to exert undue pressure on consumers when selling financial products. The government takes these concerns very seriously and is taking preventive action. Bill C-82 includes an amendment to the Bank Act to prohibit coercive tied selling. The government intends to bring the amendment into force on September 30, 1998. But before that date, the government wants to see two things achieved. First, it wants all financial institutions to adopt a policy on tied selling.
Under the policy, financial institutions will be expected to ensure that their staff clearly understand and do not engage in unacceptable sales practices. The policy would seek to maintain high customer and staff awareness of procedures for reviewing tied selling complaints. These procedures must be transparent, timely and fair if they are to be effective. In the case of the major banks, they have internal ombudsmen, all of whom will deal with and report on tied selling complaints.
Second, the government will be seeking guidance from the House finance committee. That committee has been asked to review tied selling concerns across the sector and the progress of financial institutions in addressing concerns through their policies. The committee will also consider how to differentiate between beneficial and anti-competitive forms of tied selling. The government has also asked the Senate banking committee to undertake a similar review of the tied selling matter. This process should enable the government to assess how the self-regulatory procedures have been working.
In the consultation paper, the government resolved to work with financial institutions and consumer representatives to improve access to basic financial services for low income Canadians and information about fees for all Canadians.
While the government is not proposing legislative changes in these areas, the major banks have made a number of commitments to address consumer concerns. For example, to improve access they have agreed to ensure that only two pieces of signed identification will be required to open accounts or cash cheques. This is decreased from the current requirement of three.
Also, employment will not be a requirement for opening a bank account and staff will be trained to follow these policies and be sensitive to the needs of low income people. The banks will also ensure that clear and understandable information about products and services, including low cost banking options and ways of minimizing service fees, is readily available in publicly accessible areas in branches.
Moreover, the banks are working with Industry Canada using Industry Canada's Internet site to provide information to help Canadians choose the right financial services for them, minimizing costs.
During the consultation process we heard convincing testimony about regulatory burden. We want to act on what we heard. Bill C-82 contains important changes for foreign banks, changes that will lower costs and improve operational efficiency which will benefit many Canadians. In particular, regulated foreign banks which own a schedule II bank will no longer be required to hold other financial institution subsidiaries through a schedule II bank.
The bill also proposes changes to ease regulatory requirements for near banks. Near banks are those entities which do not generally take deposits, that are not regulated as banks in their home jurisdiction, but do provide one or more banking type services.
The approval requirement for near banks will be reduced. Once they receive an initial approval to enter the market, they will not need further approvals. The condition is that their unrelated activities not include taking retail deposits.
In addition, the government plans to develop a new framework for the entry foreign banks, including a new branching regime. This regime will encourage new banks to enter the Canadian marketplace and allow existing foreign banks greater opportunity to compete. It should be noted, however, that this latter initiative will continue on a separate track from the legislation before us today.
Until the new entry framework is developed, foreign companies offering a limited range of financial services and now operating unregulated in Canada as well as new entrants that meet certain criteria will be allowed to continue operations as unregulated financial institutions.
Another element of the bill recognizes that banks are not all the same. Some do not need the retail deposit insurance offered by the CDIC. This is the case for banks which deal mostly in the wholesale market. The government will permit banks that do not take retail deposits to opt out of CDIC coverage, provided they are not affiliated with another CDIC member. This will reduce their costs and streamline regulatory requirements.
The bill extends the in house powers of financial institutions. Currently financial institutions can engage in certain types of businesses only through subsidiaries. After reviewing the types of business that must be carried out through subsidiaries, the government has decided to permit financial institutions, with the approval of the Minister of Finance, to carry on both information processing and specialized financing activities in house. These changes will reduce the operating costs associated with those activities by promoting effective management. Furthermore, the increased flexibility for specialized financing activities will improve access to venture capital for Canadian small businesses.
A number of changes are proposed to streamline the self-dealing regime. This regime implements control over transactions between financial institutions and persons who are in positions of influence over or control of the institution.
While the government believes that the basic framework remains sound, certain provisions of the regime impose unnecessary costs. Bill C-82 therefore streamlines the operations but the conduct review committee narrows the range of related parties and allows subsidiaries of the federal financial institution to transact with each other.
These are all important initiatives aimed to cut down regulatory burden. The initiative before us does not stop there. We are proposing to fine tune legislation.
Changes have been introduced in the area of corporate governance to encourage financial institutions to adopt appropriate processes to manage risks. For instance, the duties of the audit committee will be clarified. The rights of policy holders of insurance companies will be enhanced. For example, the bill proposes to reduce the number of policy holders' signatures needed to allow for a proposal nominating directors to be circulated in advance of the meeting.
Regulatory adjustments will be made to provide more flexibility to financial institutions seeking to enter into joint ventures. These adjustments will enhance the ability of financial institutions to make alliances, enter new markets and compete more effectively at home and abroad.
The legislation also includes a number of amendments to enhance access to capital for mutual insurance companies. First, such companies will be permitted to issue participating shares and second, flexibility will be added to the demutualization regime and it will be extended to apply to all mutual life companies, not just
the small ones. It should be noted, however, that a large mutual insurance company will be required to remain widely held once it is converted into a stock company.
A few days ago, the opposition raised the issue of transferring policies. This is an important issue and I would like to say a few words about it.
A solution to this problem will require more studies and consultations. The mechanisms of supervision and the contractual rights of those insured must both be taken into account. Consultations are already under way between representatives of the federal government and of the Province of Quebec. Following these consultations with the provinces concerned, we will be able to arrive at a satisfactory solution in the near future.
But I must add that Bill C-82 contains a great number of favourable measures. All major stakeholders and myself want to see this bill passed as quickly as possible.
There you have it, Mr. Speaker, a pretty significant package of changes, important to the well-being of consumers of financial services and that is just about all of us. It is important to the financial sector and this too is significant for all of us because this vital sector underpins the whole economy.
I urge the House to move quickly to pass this important legislation.