Madam Speaker, I heard some applause. It is a very odd way to start a pre-election period to have one of my Liberal colleagues applaud my rising to speak. Should I assume that he will agree with everything I say about his government in the next few minutes?
I am pleased to rise and speak to this important bill. It is an important bill because we have been waiting for it for over seven years, and that things kept being postponed in recent years. I see the Secretary of State for International Financial Institutions, who was acting as chair of the Standing Committee on Finance at that point. He knows what I am talking about on the subject of delays. There was a delay of at least two years in the government's introduction of a bill on financial institutions.
Everyone here can testify to the Bloc Quebecois' interest in this amendment to the laws on financial institutions. Two and a half years ago, when Mr. McKay introduced his proposals, the Bloc Quebecois presented a submission to the Standing Committee on Finance. Rather than question witnesses, that time we had decided to contribute to the debate on the amendments to legislation on banks and financial institutions in general by presenting a submission in more or less the following vein.
When we look at the way things are changing on the international scene, the first thing we notice is that they are moving very quickly with what they call the globalization of markets, especially with the increased opening up of a number of western countries in the financial sector, and the fact that, in the electronic commerce sector, the establishment of virtual banks is allowed. Banks without a national base in certain countries serving a certain clientele are being allowed to open what are called virtual banks. They offer consumers financial products without an actual physical location for the delivery of such products.
International competition is heating up. Even the six largest banks in Canada are small compared to American or certain Asian, particularly Japanese, banks.
What is needed is a legislative environment conducive to increasing the ability of our financial institutions to hold their own against international competition as well as the competition that will inevitably begin to appear—and of which there are already signs—within the markets of Quebec and of Canada.
The Bloc Quebecois supports the spirit of the legislation and several of its provisions. The competitive environment calls out for a bill such as this, which amends the Bank Act and legislation governing financial institutions in general.
That having been said, there are a number of problems with this bill and we intend to move amendments at report stage. I hope that members on the other side will give these amendments their attention, will note that we are open to 90% of what is in the bill; there is perhaps 10% of it that falls short and could be improved.
First, and not least, it is clear from a reading of the many pages of this bill and its schedules, a weighty 900 pages or so, that far too much discretionary power rests in the hands of one man, the Minister of Finance.
Throughout the bill, whenever there are provisions concerning banks, insurance companies, trusts, anything to do with the financial sector, the minister always reserves the right to determine, based on criteria known to him alone, whether or not an operation is acceptable. He alone defines certain concepts such as low-fee retail deposit accounts.
We know that the Minister of Finance claims to be concerned about improving the access of the most disadvantaged in society to banking and other services, but he is still leaving himself room to define in future what would be best for the least well off, such as those living in certain poorer neighbourhoods in Montreal or other large cities, or certain remote, rural areas.
There are way too many areas where the Minister of Finance, alone, has a decision making power and a power of life or death over certain transactions for us to be pleased with this bill.
Generally speaking, we would have liked more clarity regarding the decision making process and also more specifics regarding certain concepts, such as the minimum fee deposits for the poor. This is our first general comment.
The second one concerns consumer protection. It goes without saying that we cannot be opposed to any measure seeking to increase consumer protection.
However, we are opposed to provisions that duplicate and overlap those that are already included in the Quebec consumer protection act. Incidentally, consumer protection is an exclusive provincial jurisdiction. While there may be cases of specific protection with regard to banks, which fall under federal jurisdiction, consumer protection or the protection of privacy is, generally speaking, a provincial jurisdiction.
Yet, the bill constantly refers to new federal government initiatives in an area which, in the case of Quebec, is well covered by very comprehensive provincial legislation. We can think, among others, of the consumer protection act, the privacy act, the insurance act, the trust companies act, the Quebec savings banks act and the credit and securities act, all of which include provisions to ensure consumer protection.
There comes a time when a consumer no longer knows which legislation to turn to. Does the matter come under the jurisdiction of the federal government? Does it involve the new consumer protection legislation contained in Bill C-38? Or is it the Quebec consumer protection legislation which applies in this particular case? In short, in some respects, instead of improving consumer protection, I would say that certain clauses of Bill C-38 only add confusion. A lesser understanding means, of necessity, lesser protection for the consumer.
Another case concerns the protection of another category of consumers to which I have already referred, namely the most disadvantaged consumers. The minister has taken the trouble to include in Bill C-38 the concept of the low-fee retail deposit account. He says that it has long been argued that there are certain areas of major cities such as Montreal, Quebec City, Vancouver and Toronto that are greatly disadvantaged. So much so that when people in financial difficulty, people with less money than the Minister of Finance, the banks, and their branches in particular, show discrimination toward them.
When we undertook the process of reviewing the financial institutions legislation, we often ran into cases of people who had been totally denied permission to open an account because they did not have a fixed income, had not worked for some time, or could not produce any identification, and so on.
Now the minister is introducing his concept of the low-fee retail deposit account, but does not tell us what this will mean. This is a lovely concept that may appeal to certain consumer associations, but where is the minister headed with this “low-fee retail deposit account?” Who will this “low-fee retail deposit account” be aimed at? What sort of fee will it entail? Will it really be available to those who, in the past, have had trouble getting quality services without being discriminated against?
Let us not forget that a bank operates in a competitive environment and that a bank is there to make profits. We are not, nor have we ever been, against profits. It must be borne in mind, however, that banks, like most financial institutions in Canada, are active in a very regulated, and therefore protected, environment. They are protected by a decision of parliament: the public decided that the regulatory framework for Canadian banks would be a protective one. We would not want to let our banks go like that.
In return, banks have a responsibility to the public, as do those holding voting shares. This concern with the responsibility of banks is absent from the bill. We are not looking for measures that would make it impossible for banks to make profits. But some effort is required, particularly since—as I mentioned—the banks are working within a regulatory framework decided by parliament. Within parliament, people elected by the public decided to protect the banking sector. I would say that the banks therefore have a certain duty to the community that is absent from the bill.
When it comes to a real social and community role for banks, or to put it another way, if the banks are going to remember what they owe us for bringing in tight regulations to protect them, we would have liked the Minister of Finance to pay attention to our proposals, including the one from the member for Hochelaga—Maisonneuve, who introduced a bill on community reinvestment by banks.
He has been fighting this battle for a long time. He brought us in the Bloc Quebecois into the fray. We fight almost daily for community reinvestment in the most disadvantaged regions, the most remote regions in Quebec and in the rest of Canada, as well as in the most disadvantaged neighbourhoods in Quebec and Canadian cities.
What does community reinvestment mean? It means—and it relates to a practice that has been in existence in the United States since the start of the 1970s—ensuring that certain banks are accountable to the community in specific regions or disadvantaged neighbourhoods in big Canadian cities. It involves, for example, evaluating in a given year all of the deposits taken in by these banks in neighbourhoods where in recent years a rate of unemployment higher than the national average has been observed. It involves noting the deposits made in these banks by both individuals and businesses and the loans and advances given out by the branch to the community, in a disadvantaged community in Montreal for example, just to see whether a discrepancy does not exist between what it takes out and what it injects back into the community through loans and advances.
If there is a discrepancy, that is, if the branch in one of Montreal's poorest neighbourhoods, for example, took in more in deposits than it gave out in loans to individuals and advances and loans to SMBs in the neighbourhood, it would be considered to be a problem and the banks could be asked to make an extra effort to contribute to the community.
The banks in this community reinvestment environment would be accountable to the local residents and to parliament. At some point, an accumulation of bad reports on the banks or financial institutions in certain poor neighbourhoods in the major cities or in certain remote regions would provide sufficient authority, I would say, to influence in general terms community reinvestment by the banks right across Canada.
From a local point of view, provisions for reinvestment in the community such as those in the bill introduced by my colleague, which we intend to introduce again through amendments to the banking bill, would also mean that representatives of the community could meet annually with managers of the bank branch in their neighbourhood or region to discuss the contribution it was making to the community, look for ways of improving things and identify mutually interesting projects that the community's deposits could be used to fund.
There have been a number of good results in the United States. It seems funny to be citing the United States as an example of progressive measures but, in the United States, making communities and banks accountable has meant that, at a certain point, the banks—and this is unusual, it is not often seen in Canada—became known for contributing to the advancement of communities.
In fact, at one point, in certain of the poorest regions of the United States, some of the most down and out were allowed to cash government cheques for free.
They went to those branches and there was no longer any charge for government cheques. For the most disadvantaged, the fees charged for banking services were very low or not levied at all for the most common services. The banks had been offering this since the early 1970s.
It was also agreed, after various discussions with the community, with representatives of bank branches in the United States, to freeze funds for a number of days or weeks. When we met with consumer protection representatives, they told us that funds had been frozen for more than a week.
In the United States, based on a concept called community reinvestment requiring the banks to be accountable to the community, this led to certain provisions, among them ones including those forbidding branches from freezing funds.
Based on this development of community reinvestment, some U.S. banks even decided to reduce to a minimum the mortgage charges to first-time property owners. This they did as a result of discussions with the community on the possibility of a two-way relationship between the least well-off in the area served by the bank and the bank, since it stood to gain in the long term from the improved financial position of the members of its community.
We would have liked to see the Minister of Finance take this type of novelty a little more seriously, not that it is really a novelty because it dates back to the 1970s in the United States. We would like him to lend an attentive ear to the arguments raised by my colleague from Hochelaga—Maisonneuve and all the members of the Bloc Quebecois relating to the possibility of reinvesting in the community.
We are not asking the banks to take over from the government. After the carnage wrought on social programs by this Liberal government, I believe we might even have been entitled to call upon the banks to compensate for it, but we are not, despite the billions of dollars in profit the banks are raking in.
We are not against the banks making profits, as the banks' profits are also, to a certain extent, our profits. The trust funds, the pension funds of the people of Quebec and of Canada also make profits.
What we are saying instead is that the banks have the means of balancing out the deposits they receive with the reinvestment they can make in certain communities that are worse off than others.
There was another problem relating to the people who were the most disadvantaged and were living in the least advantaged areas of major cities, or in remote areas. The closure of branches of banks and financial institutions in general was, is and always will be the problem with this bill.
Some regions do not or no longer have access to quality banking services, because branches were closed. It was no longer profitable for major Canadian banks to provide remote communities with complete services, as can be found in major centres.
There are poor neighbourhoods in Montreal—earlier we mentioned Hochelaga—Maisonneuve—where one must look hard to find a bank branch that provides full services. There are no longer such branches. Why? Precisely because it was not profitable for the banks to provide these services.
Since the community groups that appeared before the committee raised this issue time and again, we expected the bill to include provisions to prevent, in certain communities, people from being treated like second class citizens, like nobodies, because they have less money than those living in neighbouring communities.
There is nothing in this bill to prevent branch closures in those areas where poverty is a more serious issue than in other neighbourhoods or other regions of Quebec and Canada.
The only measure included in this bill—and I doubt any consumer association will applaud this initiative—is a requirement to give a six month notice before closing a branch. But whether a branch closes immediately, or in two, three, four or six months, it will close at some point. Entire communities will get fewer and fewer services from Canadian financial institutions, particularly banks, because this bill includes no provision to protect them.
The appointment of an ombudsman is a step in the right direction, but it is clearly not enough. The bill should show that the Minister of Finance wants to prevent people from not having access to banking services and to the so-called new economy.
There is no political will in this bill, not even the desire to find ways to prevent the most disadvantaged in our society from being totally excluded from the financial sector and the banking services available elsewhere in Canada.
In addition to the issues for consumers, the bill contains an enormous problem. It concerns the ownership of Canada's major banks and major financial institutions.
I listened to the Secretary of State for Financial Institutions discussing the importance of the flexibility given the financial institutions to enable them to continue their activities, to meet their competition and to respond to the development of new markets.
There is, however, a difference between the flexibility found in certain aspects of the bill and the fact that some of our financial institutions and banks could literally be given to foreigners, for example, or to a single investor, who could wield either total or partial powers of life and death over these institutions or their administration.
We supported flexibility from the start. Indeed, when we tabled our brief with the Standing Committee on Finance over two years ago, we proposed a more flexible regulatory framework in fact, so that the small and medium banks could join with other financial institutions, something the existing legislative framework does not currently permit, but the bill would.
Therefore, a bank could join with a trust company, with an insurance company or with other stakeholders in the financial sector to create a sort of consortium, a firm that could meet the challenge of the major international institutions either in the Canadian market, because they will no doubt penetrate it, some of them already have—there is the MBNA, for example, and its virtual banks—or in international markets by ensuring that strategic alliances will give us significant blocks to meet the international competition there.
I have to hand it to the Secretary of State for Financial Institutions, he did a good job. I want to salute him in passing, because he chaired the Standing Committee on Finance for several years. He worked very hard on this bill and he delivered the goods when it comes to flexibility for financial institutions, strategic alliances and the right way of making them more competitive.
Where I part company with him and with the Minister of Finance, however, is when it comes to bank ownership. An individual's right to hold a certain percentage of shares varies with the size of these banks in Canada.
I still have a lot of trouble with this and I have had no answers to the many questions I asked the Minister of Finance in meetings of the Standing Committee on Finance or here, during oral question period.
I have had no answers as to the reason for such amendments. Why, for instance, when it comes to the largest bank in Canada, the Royal Bank, will an individual now be able to hold 20% of shares? It has gone from 10% to 20% of voting shares. Why is it that when it comes to the largest bank in Canada, it can now be 20%, but no more? The limit is set at 20%. Does anyone know why? The reason is that it is dangerous, according to the Minister of Finance and the secretary of state, his spokesperson.
It is dangerous because an individual holding too many shares in a bank could have unprecedented power over the policies of that bank. He could also create problems for market competitiveness. I will come back to this shortly.
This is the percentage for the largest bank in Canada—a maximum of 20%.
But when it comes to the largest bank in Quebec, the National Bank, whose capitalization is in the middle range, an individual may hold 65% of voting shares.
Why this distinction? I have asked this of the Minister of Finance. Why different treatment? When it is a matter of protecting a major Canadian bank, then the maximum is 20%, but when it is a matter of protecting the biggest Quebec bank, it can be up to 65% of voting shares. It was enough to have 50% plus 1; with 65%, I do not know if the constitutional debate has so obscured people's vision that it is no longer seen that a majority for a single share holder is over 50%, that is 50% plus 1. Now it has gone up to 65%. Even 50% plus 1 would have been too high anyway.
The principle of what is called diffuse bank ownership, i.e. allowing capital to be broadly distributed in the hands of a number of individuals, relates to several fundamental elements in the banking sector. First of all, its stability, and second the fact that it might be unwise for a single individual to have considerable power over the savings of individuals.
The fundamental aspect underlying this division of ownership is to avoid cases of unfair competition, which I shall explain. A rich industrialist in the manufacturing sector could buy up 65% of voting shares in a bank like the National Bank.
For those who are not familiar with it, the National Bank is the bank of small and medium sized businesses in Quebec. It is the one that makes the most loans to these businesses. The industrialist purchases 50% plus 1—no need of 65%—of the voting shares of the National Bank. That business person, who is involved in a given economic sector, could decide to refuse to lend money to someone who wants to borrow from the National Bank to invest in the same manufacturing sector in which the bank owner is involved.
Certain things were possible in the past, are possible today and will be possible in the future. In fact, this is why, in the past, a single individual could not hold more than 10% of the shares of a bank. Currently, we can see at shareholders' meetings that a person who holds 10% of the shares of a bank has a great influence on the direction in which it is going.
So, we have a situation where a business person involved in a given sector could refuse to grant a loan to someone who wants to borrow from his bank, because that person is in the same industrial sector. The business person would in effect get rid of a competitor because he controls the capital and has the power to decide whether the other business person who wants a loan will survive or not. Such situations could occur in the future.
There is also the possibility of takeovers by foreign interests. Under the provisions of this bill, what would prevent the Royal Bank from being the target of a takeover bid? Why should we, in Quebec, put up with the risk that a foreign investor could get 50% plus one of the shares of the National Bank, thus taking control of that institution, moving its head office and its decision making centre elsewhere, eliminating specialized jobs and adversely affecting Quebec's economy? We are not prepared to take such a risk and rather resent the situation.
This is why we are asking that there be no difference between the treatment given to major Canadian banks and to our largest bank in Quebec. If the percentage of voting shares that can be held by a single individual is increased from 10% to 20% in the case of major Canadian banks, the same change must be made for Quebec's largest bank.
Not only does it require an increase from 10% to 20%, as in the case of large banks, but if an individual had 10% of the voting shares and wanted to increase his share to 20%, he would be subject to what the minister calls at page 56 of the bill, in clauses 395 and 396, an “approval process”.
A set of criteria would determine whether the fact of increasing one's holdings by ten percentage points met the following criteria. I would add others, but I will begin by identifying those that are there. I would also have some questions for the Minister of Finance and his secretary of state on a provision that strikes me as a bit odd. There are no doubt answers, as the minister always has answers. They are not always the right ones, but we will not go into that.
The bill provides that any particular transaction aimed at, for example, increasing by 10% the shares held by an individual would be subject to a set of criteria. The minister identifies eight of them. The first involves the minister considering: a ) the nature and sufficiency of the financial resources of the applicant or applicants as a source of continuing financial support for the bank;
That is right. That is reasonable. They cannot have anyone holding shares do just anything and interrupt the continuing business of the bank. They will also consider: b ) the soundness and feasibility of the plans of the applicant or applicants for the future conduct and development of the business of the bank;
This applies to amalgamations, combinations and the like. Under the third criterion, the minister would consider: c ) the business record and experience of the applicant or applicants;
Other criteria are: d ) the character and integrity of the applicant or applicants or, if the applicant or any of the applicants is a body corporate, its reputation for being operated in a manner that is consistent with the standards of good character and integrity; e ) whether the bank will be operated responsibly by persons with the competence and experience suitable for involvement in the operation of a financial institution;
That is quite right. One must be very responsible, particularly with other people's money. Let us not forget that these are our deposits in all the major Canadian banks. f ) the impact of any integration of the businesses and operations of the applicant or applicants with those of the bank on the conduct of those businesses and operations;
This is the clause that covers the particular case I mentioned earlier. A business person buys the majority of shares in a bank and refuses to make a loan to a competitor in his industrial sector. The minister will take this into account. There is nothing wrong with that. g ) the opinion of the Superintendent regarding the extent to which the proposed corporate structure of the applicant or applicants and their affiliates may affect the supervision and regulation of the bank, having regard to
(i) the nature and extent of the proposed financial services activities to be carried out by the bank and its affiliates, and
(ii) the nature and degree of supervision and regulation applying to the proposed financial services activities to be carried out by the affiliates of the bank;
This is normal. They have to comply with certain rules. Rules are made to be complied with. So even without this criterion, should the superintendent decide that the applicant or applicants are not complying with the rules, the Minister of Finance will take this into account.
Finally, the same clause also includes the following provision: h ) the best interests of the financial system in Canada.
We would like to see the Minister of Finance add other criteria to the bill. We are going to move certain amendments to round them out. As members know, Quebec is now a distinct society. We are familiar with the historic words. The Prime Minister has already admitted that Quebec is a distinct society. The fact of the matter is that Quebec is indeed a distinct society financially. It has jurisdictions and institutions to which it is attached. The National Bank is an institution we wish to keep, particularly for its contribution to the economic and financial development of Quebec as a whole and of Montreal in particular as an international financial centre.
Incidentally, Quebec's minister of finance, Mr. Landry, wrote a letter to his federal counterpart on June 7 to express his concerns about the new legislation and to ask for safeguards regarding the public interest of Quebecers.
Four criteria should be added. That is not asking too much. We know that with the very specialized and competent human resources that are available in the House of Commons we can draft provisions covering these four additional criteria, which would apply strictly to Quebec, given the special nature of the National Bank.
First, Quebec's minister of finance is asking that we take into account the changes that affect the banks' current operations, including the services available in Quebec and in Canada, because the minister does not mention the services available in his criteria. Service to consumers does not seem to be his main concern.
In proposing an increase in the percentage of the voting shares of a Quebec or Canadian financial institution held by an individual, the government should take into account the impact of that change on the level of the portfolio.
The first additional criterion when the Minister of Finance decides whether or not he will accept that a shareholder can increase his share in a bank should be the impact of the change on the bank's current operations, including available services.
The second criterion that the Minister of Finance should add to the list that I mentioned earlier is the effect of the change on employment. That is important. Why is employment not considered in the criteria proposed to us by the Minister of Finance in clause 396?
Does this mean that employment is not important for the Liberals, for the Minister of Finance and for the Prime Minister? Not important to them? Minister Landry and the Bloc Quebecois are calling for an examination of the effects on employment of this additional participation relating to voting shares, both at headquarters and in the branches, including professional positions and those requiring specialized expertise.
It is important to maintain these specialized resources if we want to have financial strength for Quebec. These are not to be found on every street corner.
The third criterion is the effect of change on the economy and the technological development of Quebec. This too is important. On the Canadian level, this does not even appear to be the object of any specific criteria for the federal Minister of Finance. This is scandalous.
Finally, the effect of change in the financial sector of Quebec and the role of Montreal as a financial centre, particularly as far as keeping final decision-making centred in Montreal is concerned. These criteria must be maintained.
I wish to inform hon. members that the Bloc Quebecois will be presenting amendments for this purpose at the report stage, in order to ensure that this important bill is complete. With a bit of good will from the other side, that could be accomplished. We support this bill overall, but the three points to which I have referred are so problematical that they will force us to vote against it tomorrow morning.