Madam Speaker, I feel privileged to enter the debate on this bill. I think the motivation that gave rise to the bill is a very commendable one.
I believe at the beginning of the last parliament, the 35th Parliament, the industry committee undertook a major study on access to capital for small business. That study has continued to guide the hon. member who just spoke on behalf of the government side in this debate. It certainly influenced him and it influenced a lot of other people.
The issue here is the availability of credit to individuals and to businesses. We need to be very careful that this credit is available in a fair and equitable manner and in a competitive marketplace where the people who are providing the capital do so in a fair and reasonable manner.
The issue before us is that banks, chartered banks in particular, be forced. I know the hon. member who is presenting this bill said that there is no coercion involved. That word perhaps is false. There is coercion involved in this bill.
At the outset of the bill its summary clearly suggests rather directly that the banks shall. It says that this enactment amends the Bank Act and provides that certain branches of banks must take measures to facilitate access to credit to persons who have a residence or place of business in the federal electoral district in which the branches are located.
Throughout the clauses of the bill the words “shall” and “must” are located. The issue is very clear that there is definitely an element of coercion involved in this bill.
The purpose of my remarks is not to suggest that the banks are doing an exemplary job in providing access to capital to small business or to individuals. That is not the issue. The issue is that the banks are doing that sort of thing. Are they doing it as well as they should?
My hon. colleague opposite said that the industry committee receives quarterly reports from the way in which the chartered banks are lending money to the various businesses. It is very interesting. The most recent of those quarterly reports is dated September 30, 1997. I did a comparison with the first report dated December 1995. I compared what has happened to the lending patterns of the chartered banks in that time.
It was very interesting that in December 1995 the banks were lending more money to small businesses, that is from zero to $25,000, than they were in 1997. The total number of dollars available in fact decreased during that time period. The number of people however who received those loans increased. This really meant that more people were getting smaller loans than was the case two years previously.
When we look at the other end of the scale, the number of those who borrowed $1 million to $5 million dollars had gone down. However, the total amount available in credit was considerably higher. Therefore, there were fewer people borrowing more money.
This is all part of the banks' profit picture. It is true that the banks can argue that they are profitable organizations. Nobody will debate that. We all know that they are highly profitable. They are so profitable indeed that many people would criticize their profitability.
Let us not forget that there are a lot of other profitable businesses in this country. The issue here is not to criticize the profitability but rather to look very carefully at whether their pattern is such that we can take exception to the accessibility to the lending and the borrowing that we need to do in order to run our businesses and our own individual lives.
This bill restricts itself only to chartered banks. It also restricts itself to branches in chartered banks. There are two difficulties with this.
First of all, there are many other deposit taking institutions that are not chartered banks. I look particularly at the credit unions, caisses populaires and trust companies. Those are probably the most commonly recognized as being deposit taking institutions.
These institutions are very community centred, very involved in the community. They take money out of the community and lend money back into the community. To distinguish one particular group by saying that it must but others can do whatever they feel I do not think is quite fair. I do not think that was the intention either. Perhaps it was; I do not know.
I suppose it could be argued that because the banks have 85% of the deposits in Canada therefore in each community that is the case. It may follow or it may not. In fact in many cases it does not follow. There are other ways of depositing money.
The issue is one of reinvestment. How do we reinvest? If a bank takes substantial sums of money in deposits from a particular community, ought it not reinvest in the same proportion as it receives deposits from the community? The bill is not clear as to whether that is how it would work or whether it would not work that way. It is not known.
I would like also to refer to another provision in the bill which I think has a serious shortcoming. It suggests that a disadvantaged community is a community in which the unemployment rate once during the previous 12 month period was equal to or larger than the national average. This is to be done on an electoral basis.
An electoral district does not have a constant boundary. It changes every 10 years, but nevertheless it does change. The issue now becomes one of being very micro centred. A community goes beyond an electoral district.
If we take the city of Montreal it can in one sense be considered a community. If we look at the unemployment statistics for that community—and I agree there is more than one electoral district—it would as the larger community certainly qualify as being a disadvantaged community. Not only that one, but we could go right across Canada and most of our major centres would qualify as disadvantaged communities under that definition. If we break it down small enough into certain sections there would not be a disadvantaged community in that sense. In other cases there would be very much the opposite situation.
I suggest that there are some shortcomings in the bill. The intention may have been reasonable but the way it is worded will cause us a lot of difficulty.
Also we want to recognize the intent and purpose. Certainly my purpose on the industry committee and certainly my purpose as a parliamentarian is to make sure that there is a sound and stable financial institutional system in Canada. Our chartered banks have served us very well, but there are some very severe shortcomings. The issue is that some of our chartered banks are perhaps moving into areas that are to the disadvantage of the small borrower, the small lender, the small depositor.
I know the pressures that have come with quarterly reports have caused the banks to perhaps change their behaviour slightly but not enough to make a material difference. The intention may be okay but I think there are some difficulties.
I would also like to suggest that there is a major change coming. It is happening already in the whole financial institutions area and in particular with regard to banking and banking services. We are getting into electronic banking in a big way. In fact there are electronic banks that have no branches.
What would the legislation do in that regard? Non-branch banks also take deposits out of what would have been defined as a disadvantaged community. Would the same requirements that are imposed on chartered banks with branches be imposed on them? If not, one group is being preferred over another and it does not create fair competition or equality of competition. I do not think that is fair.
For that reason, if for no other, I would say let us vote against the bill.