moved that Bill C-38, an act to establish the Financial Consumer Agency of Canada, be read the second time and referred to a committee.
Mr. Speaker, I am very pleased to rise to speak to Bill C-38 concerning our financial institutions, which I introduced to the House last June 13.
This is the seventh major initiative of the government dealing with our financial institutions in the last four and a half years.
Early in 1996 we brought in Bill C-15 which enhanced the powers of the Superintendent of Financial Institutions to undertake early intervention with respect to troubled institutions, thereby enhancing the safety and soundness of our entire system.
In 1997 we entered into the WTO agreement on financial services, enhancing the access of Canadian financial institutions to foreign markets throughout the world. Again in 1997 the government brought in Bill C-82 to strengthen consumer protection by prohibiting coercive tied selling.
In 1998 probably one of the most important measures was passage of the bill which allowed the mutualization of some of our major insurance companies and put over $10 billion in the hands of policyholders.
In 1999 we passed the bill dealing with foreign banks being allowed to operate as branches in Canada, utilizing the capital of their global entities in order to enhance their capacity to lend to Canadians.
In June 2000 the money laundering bill was passed, which is a direct blow to organized crime by clamping down on money laundering through our institutions.
Our seventh initiative is Bill C-38. As we all know this is a tremendously important bill in size and in consequences. It amends 22 acts and establishes one entirely new act that covers almost 900 pages. It is so important because as we know our financial services sector is truly a driver of our economy.
There are more than 500,000 Canadians employed in this sector. Its payroll is in excess of $22 billion annually. It accounts for approximately 5% of our gross domestic product, and close to $50 billion annually in exports from this country. It also pays over $9 billion in taxes yearly to all levels of government. This is the most heavily taxed industry in Canada.
Given the direct and indirect importance of the financial sector, one of which I am extremely proud, the strategic framework within which it operates must foster opportunities for growth, for export and for job creation, to the benefit of our economy as a whole.
Bill C-38 implements a policy framework which ensures that the sector continues to make its crucial contribution to our economic well-being by enhancing its ability to compete in the new world of globalization and rapid advance in technologies, by making it easier for these institutions to seize opportunities both in Canada and abroad, and by following a balanced approach that is in the interest of consumers and the sector itself.
As we all know Bill C-38 is the culmination of a process of very extensive consultations. This process began in June 1996 when we announced the creation of an advisory committee to review the payment system. This was followed in late 1996 by the establishment of the task force on the future of Canada's financial services sector, a task force which was known as the MacKay task force and which reported to us in September 1998.
Following that report the House and the Senate finance committees held extensive consultations throughout Canada and reported back to us by the end of the year.
All this advice was considered very carefully in the preparation of the June 1999 policy paper which gave the government response to all consultations and input from colleagues in the House. Over the past year, following tabling of this white paper, more extensive consultations were undertaken so that we could enact in legislation the results of all the undertakings and considerations. I tabled that bill in the House last June 13.
More precisely, Bill C-38 encourages the efficiency and the growth of Canadian financial institutions in international markets, fosters competition within the country, enhances the protection of consumers of financial services, and improves the regulatory framework.
In terms of promoting efficiency and growth we have a holding company structure which will give greater flexibility for these institutions to compete with monoline institutions doing a single type of business. They will enjoy a lighter regulatory regime through that holding company.
In terms of ownership we are permitting up to 20% of the shares of larger institutions to be used for strategic alliances to allow our banks to enter into joint ventures with other institutions both domestically and abroad. We have enhanced the range of permitted investments for our financial institutions.
Through guidelines, we have stressed the possibility of mergers, thus recognizing that such mergers can be a viable strategy. A new transparent review process will be put in place to evaluate mergers and to protect public interest.
In terms of fostering domestic competition we will be allowing new entities to establish with lower capital requirements. We will have three levels of institutions: those with equity exceeding $5 billion, those with equity under $1 billion and those medium size ones in between. Finally large banks with equity over $5 billion will be required to be widely held under the new 20% ownership regime. This new ownership regime will encourage the establishment of community banks.
We have also included provisions whereby co-operatives, credit firms and credit unions could get involved in the establishment of a national service entity. Such an entity would allow co-operatives to adopt a national structure, while fostering competition with large Canadian and foreign institutions.
By accommodating new entries into our payment system for life insurance companies, for securities dealers and for money market mutual funds we will see enhanced competition domestically.
Looking at what the bill does in terms of empowering and protecting consumers, it will ensure access to basic financial services regardless of income or place of residence, including access to low cost accounts and a process that will govern the closure of any branches.
It establishes the financial consumer agency of Canada to strengthen the monitoring of protection measures for consumers and to extend the scope of consumer awareness activities.
It establishes the independent Canadian financial services ombudsman to deal with disputes with institutions.
In terms of improving the regulatory framework we have a streamlined approvals process. We have significant amendments to the governance and oversight of the Canadian Payments Association, and we have new powers for the Superintendent of Financial Institutions to deal with potential risks.
This is an era of extremely rapid change and global competition. We recognize that our financial institutions must have flexibility and freedom to adapt to changing times. The world will not stand still. Nor will the sector. Nor will we. This is why constant attention to fostering competitiveness and to ensuring safety and soundness are so important and are for the benefit of all Canadians.
In keeping up to date we have ensured that this legislation has a five year sunset clause, unique among institutions in the world, to ensure that constant review processes are in place and to ensure that our institutions can adapt.
Second, the government is prepared, if it deems appropriate to do so, to reassess the legislation before the scheduled five year period between reviews, to ensure that the framework remains adapted to a rapidly changing market.
Third, the bill allows for many key elements to be dealt with by regulation so that we will not have to come back to the House through the cumbersome procedure of legislative change in order to allow our financial sector to adapt.
The legislation provides a new policy framework that will keep our financial institutions strong, safeguard the interests of Canadians, continue to contribute to job creation and economic growth, and maintain the safety and soundness of our financial sector.
I thank colleagues for their very valuable contributions to the bill. They will see many of their ideas and suggestions reflected in it. It is because of the extensive consultation and co-operation of all members that the early passage of the bill is supported by consumer and industry groups alike. We in the House look forward to early passage.