Debates of Sept. 18th, 2000

Financial Consumer Agency Of Canada Act

[Libby Davies, NDP, Vancouver East, BC]

Mr. Speaker, I thank the member for the question. In fact, earlier today our very excellent finance critic, the member for Regina—Qu'Appelle, made the point precisely that one of the real problems with the bill is that it gives unprecedented powers to one minister, rather than conferring powers on parliament as a whole where democratic and open debate takes place.

This is one of the real nasty bits in legislation that gets sneaked through. Canadians do not understand that this is being paraded as consumer protection but is really vesting control in the banks and in one minister. That cannot be healthy.

[Peter Mancini, NDP, Sydney—Victoria, NS]

Mr. Speaker, it is a pleasure to rise. Like others who have risen in the House today I want to say how good it is to be back. It is almost like we never left.

We are debating today the government's Bill C-38, the financial sector reform bill. One would think there is probably no greater institutions in need of reform than those in the financial sector. This is in some part a response to the great outcry of the Canadian people a couple of years ago when there was some discussion of bank mergers. We know where the Canadian people stood on that.

I want to make a few points. Many of the points with regard to my party's position on this issue have been made by our excellent finance critic, the member for Regina—Qu'Appelle. We bring a balanced review to this piece of legislation. He indicated, and we support him in that, that we will be opposing it at this point because while there are some good things in the legislation, there are many other areas that need reform and changes.

I think it is appropriate and I am glad to rise to speak to this piece of legislation. This summer, when I was home meeting with constituents and dealing with matters in the constituency, I received a phone call late one night from a local manager of the Bank of Nova Scotia, calling to give me a heads up to advise me that the next day they would be announcing closure of one of the small local branches that services a number of people. Luckily, he indicated to me, there would be no job losses. Some of those jobs would be moved to another branch.

It goes to the heart of some of the things we are talking about and some of our concerns. We have a huge monopoly in the banking sector of this country. Many of the rural and smaller communities are suffering when banks withdraw. I will touch on that briefly in a few minutes.

It is interesting that we have some differences of opinion. Clearly the spokesman for the Conservative Party could not understand why the NDP might oppose some aspects of the legislation. It says something that both the spokesperson for the Conservative Party and I think the Canadian Alliance were in tandem on a couple of aspects of the bill.

Let me start by saying we will bring a balanced approach to this piece of legislation. I do not think it behoves anybody to simply be critical of the government for the sake of being critical. We in this party like to give constructive criticism and bring the concerns of the Canadian people to the fore. There are some good things in this piece of legislation.

First, as has been mentioned, there is some help for credit unions. That help will come by allowing the creation of the single national service entity to support credit union membership. We of course would agree with this and I personally would agree with it.

The credit union movement in the country has always been strong. It is one that I would argue found its birth in Cape Breton. Reverend Moses Coady and Father Jimmy Tompkins began working with local fishermen in my part of the country a long time ago, helping farmers and fishermen organize so that they would have control of their own assets. They began building the local credit union and co-op movement out of Cape Breton. Out of that and out of the province of Quebec came the two strong legs of the credit union movement. We would support that.

The increase in power and organizational flexibility of credit unions in the long run will help them be more significant players in the banking industry. That is vitally important. For a long time credit unions have not been on equal footing with the banks nor have the same ability to compete with them.

When I was a young lawyer and first engaging in the practice of law, I wanted to set up my trust account at the credit union and found out that under provincial legislation in Nova Scotia it could not be done. I had to go to one of the chartered banks. That is being rectified. This bill goes some way toward recognizing the importance of credit unions.

Likewise, one of the positive aspects of the bill is the creation of the financial services ombudsman. This is not a new idea. As has been pointed out by the member for Regina—Qu'Appelle, this was an NDP initiative 10 years ago. A private member's bill introduced by a member of this party sought to establish that very thing only with real teeth so that consumers who felt that they were in some way being disenfranchised or unfairly treated by the banks had somewhere to go. We would support that. It is something that this party proposed more than 10 years ago. I am glad to see the government is finally catching up with some of the innovative ideas from this party.

The Conservatives wonder why we do not support the bill. There are some areas that require closer scrutiny. One of those, and it was mentioned by the member for Regina—Qu'Appelle, has to do with bank taxation.

The member from the Canadian Alliance was sympathetic to the banks. He said that they do not get the same breaks that many of the other corporations get. I think he mentioned Shell Canada and some other great big oil companies.

The banks, because of the historical position they hold, have a privileged position in this society. They have been protected. They have been nurtured and supported for over 130 years as major institutions. To suggest that when they report such record profits we should be sympathetic and they should not pay more taxes is not on the radar screen with most Canadians.

Indeed, I think the banks provide the bulk of credit to Canadians. They manufacture the money in our economy and they reap huge profits. It only seems sensible to me that when we assess how we tax those profits, the taxes should be levied on their profits before dividend distribution because those are huge profits made by the banks.

That is one area where we have concerns and we do not think the legislation goes far enough.

Another area that causes me some concern is in terms of bank closures. I will refer to the local bank in my community.

At the current time for the rural banks where there are no other deposit taking institutions within a 10 kilometre radius of the bank being closed, six months notice will be required. The legislation sets down requirements for when the banks have to give notice that they are closing their local branch.

I represent an area where there is a large component of senior citizens. I represent an area that has a large rural community where there may be one bank in the entire area. Again we are talking about monopolies.

I had an interesting experience this summer when I went to get gas. This is a bit of a side note. I went to the local corner store that for 80 years has provided petrol to the residents of Margaree Harbour. When I went to get gas I was told that the big companies would not sell gas to the corner store any more because it did not have enough volume. This is happening in rural communities all across the country. Now people have to drive five, six or ten miles to the nearest large conglomerate because those companies have a monopoly.

The same thing is happening with banks in many of the rural communities. I am thinking of Ingonish in my riding. I am thinking of the town of Baddeck. I am thinking of other smaller communities with one branch where people do their banking face to face. There ought to be some requirement that the banks maintain those outlets unless they can show for some reason that it is not profitable, that they are losing business.

Sometimes this works to the advantage of the local credit union. What has happened in some of the communities in my riding is that when the bank withdraws, the credit union goes in and sets up and people then have access to community capital.

There are many other aspects I would like to talk about. My colleague from Vancouver East talked a little bit about the community investment and reinvestment fund. That is the kind of direction in which we should be going.

I hope we can bring a balanced discussion to this legislation. I hope that some of the important recommendations the NDP has brought forward will be considered in committee and we can improve the bill. There are some aspects that are good, and I commend the government for that, but as is our job in the opposition, we like to provide what I think are important, critical, constructive suggestions on how to make the bill better.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, I thank the hon. member from my beautiful home province of Nova Scotia and beautiful Cape Breton Island on his well thought out remarks.

The government holds a majority position and in many aspects it is blatantly arrogant toward the people of Canada, especially in rural and small communities. In order that small and rural communities can have adequate banking services, what does the member suggest that Canadians who are watching us today do to point out the deficiencies of the bill to the Liberal Party and to other parties who would support the bill?

[Peter Mancini, NDP, Sydney—Victoria, NS]

Mr. Speaker, because I get correspondence from people who watch CPAC and people who read Hansard , I know there will be people who will hear some of those suggestions. There are a number of things.

I would ask those watching the debate or reading Hansard to recognize some of the comments and other objections we made, such as the wide ownership rule. I did not get an opportunity to address it in my speech, but perhaps the single most important thing that this bill will allow is a concentration of ownership in the banks.

There was an initiative from Lester Pearson's government to prohibit any one particular group from owning, operating and directing banks because, as has been said by a Liberal leader, once we lose control of our economic house, we lose control of our sovereignty. It speaks to how far that party has moved to the right, away from what were once core Liberal values, that the initiatives of Lester Pearson ensuring that only 10% of a bank could be owned by any one individual are being expanded. It talks about how far to the right the Liberal Party has moved in its efforts, I suppose, to compete with the Canadian Alliance and the Conservative Party.

For people who are concerned about rural banking in their communities, who are concerned about foreign ownership of Canadian banks, I would urge that they write to their members of parliament. That is a legitimate course. Every so often I send out correspondence with cards that people can check and send back to me. People should organize petitions. They should telephone the office of their local member of parliament. That is the way direct democracy can happen.

Once people understand that we are moving in a direction where the wide ownership rule is being narrowed, for example, as has been said by the member for Regina—Qu'Appelle, one, two or three wealthy individuals or organizations might be able to take control of what are now Canadian institutions and control the banking, I think people will respond by writing to and phoning their members of parliament.

It is interesting that the member for Vancouver East identified the dinner that the Canadian Alliance leader is hosting where people are paying $25,000 a plate.

[An hon. member]

Wrong.

[Peter Mancini, NDP, Sydney—Victoria, NS]

I am being corrected on that. It is $25,000 a table.

For those Canadians who think there are vested interests who would like to have control of the banks, we understand that there are and they can afford to pay to influence government direction. Therefore I would urge people to contact their members of parliament.

[Lorne Nystrom, NDP, Qu'Appelle, SK]

Mr. Speaker, I do not think I will be going to that dinner. I wonder whether you will be going but I understand you cannot answer a question in the House so I will put one to my friend from Cape Breton instead.

It strikes me as very strange that the new Alliance Party, which is the old Reform Party, which was the old Social Credit Party at one time was very much in opposition to what the banks did to ordinary citizens. I remember the member for Souris—Moose Mountain for example railing against the banks and their insensitivity to rural communities in small-town Saskatchewan and the like.

I am wondering if the hon. member would conclude with me that perhaps with this big dinner in Toronto that is coming up for $25,000 a plate, and some of those folks would probably be bankers from the different banks, that it has probably caused the Reform Party, now the Alliance Party, to be a bit muted in its once traditional criticism of the banks. I can remember that used to be one of its favourite themes over the years. When my friend from Souris—Moose Mountain was a Social Creditor many years ago, he used to campaign among his neighbours about the powers of the banks being too big and too massive. That of course is the case for many of those people who all of a sudden have had a change of heart.

There is now a $25,000 a plate dinner which of course is not for ordinary people, which means the party has lost touch with the grassroots ordinary people. Does the hon. member think that might be the reason for the change of heart?

[Peter Mancini, NDP, Sydney—Victoria, NS]

Mr. Speaker, I know the Canadian Alliance purports to be a grassroots party, but I can tell you they are pretty rich roots. I cannot think of anyone in my own community who would buy tickets to a $25,000 a table dinner. It is a Bay Street dinner. It tells us something about who is controlling the priorities of that party. It tells us something about who is setting those priorities and who is in control of this new supposedly grassroots party.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Mr. Speaker, earlier today when I was preparing for my duties as I have the responsibility for House duty for our party, I was not informed that I would have to speak to this bill but I believe it is imperative that I do so. The bill before us contains over 900 pages. It is of critical importance in terms of updating the banking industry within the country.

Mr. Speaker, you have been watching the debate. I find it hard to believe that over the course of the day the government has put forward only one speaker for one of its bills, a bill that has in excess of 900 pages. When I think that through, it is another signal of the arrogance that the government has for this place and for the democratic process.

The majority of these 900 pages is technical in nature. Very little vision is included within the bill. The bill is not a signal of a fundamental direction that the government wants to take the country in with respect to financial institutions. It is a housekeeping bill.

I know from my critic position on the environment that the government has been in place for over seven years and has yet to pass an environmental initiative of its own. We should not be surprised that the government really has a very empty legislative agenda before Canadians.

We heard that the Prime Minister would like to go to the polls sooner than later, but he cannot find a reason to do it because he does not have anything that would strike the interests of Canadians in order for the Liberals to be returned to another majority government.

I remember when leadership was commonplace by the Government of Canada. My first thoughts are the issue of free trade. Many members across the way actually opposed that initiative in 1988. That bold initiative transformed the country. Our trade with the Americans at that time was at about $90 billion. Today, compliments of free trade and its successor, NAFTA, trade with our American cousins is $320 billion a year. That was the kind of initiative and vision that was taken by a government that knew Canada needed to maintain its competitiveness in this increasingly global world. In contrast, when I look at this particular act it is merely housekeeping.

There are five basic principles that are going to be covered in this bill: the promotion of efficiency and growth within the financial institution sector; measures to empower and protect consumers; initiatives to encourage further domestic competition; the regulatory environment within the financial institution sector; and finally, the bill provides for a five year review of the legislation, as has been the case in the past. Those are the five points we are going to review.

One of the very contentious issues that was brought forth about financial institutions is that it would be permissible for a single shareholder to own as much as 20% of a financial institution as opposed to only 10%. To some individuals that is a major problem but to me it is a reflection of what is required to spur more competition and to bring more individuals within the financial sector.

I think everyone knows that bashing banks is a very popular function. We also know that they have achieved their solid performance and their strength within our society because of a protected environment which we fostered and nurtured over a number of years. At the time that was probably the best financial policy for us to have to ensure that we had a solid sovereign banking system. We only have to look at the commodity crash and the financial institution crash that took place along the Pacific Rim three years ago and what happened to its financial institutions.

Today we have more deregulation. Foreign competitors can come in and offer products to Canadians. The more competition there is, clearly the better.

However, we need to afford the banks an effective way to be able to defend their position within our economy. When people see the record profits in terms of what the banks actually bring in, it is healthy to keep this in perspective.

My learned colleague, the hon. member for Brandon—Souris, who is our party's new finance critic and temporarily replacing another very learned finance critic, Scott Brison, the former hon. member for Kings—Hants, pointed out a very unknown fact. One in two Canadians own a bank share or bank stock. It may be through owning the exact share on a direct basis. It may be through participation in a mutual fund. There is a virtual array of stocks in numerous funds of that nature. It could be due to the fact that they are a contributor to a pension plan. Pension plans invest heavily in our banking institutions.

The return on investment is not exorbitant for banks when we look at the size of the financial institutions themselves. The ROI for banks may not be much greater than a lot of other successful companies on a percentile basis, but the record profits that show up are related to their actual size.

There is one comment that was brought forth by our cousins in the NDP. Usually when it comes to money issues, financial initiatives and issues related to taxation or the like, I disagree with the socialist wing of the House on almost every single occasion, with the exception of what was brought forth in the comments made by the hon. member for Vancouver East. She touched on something very appropriate, that we need to ensure that banks must open accounts for any individual to cash federal cheques for non-customers, provided that identification is provided. A minimum deposit and employment cannot be a condition of opening an account.

We see discrimination of Canadian citizens who are indeed at lower income levels. The more we can do to ensure that the banks do their part and that they are much more welcoming for individuals of lower income, the better. Banking institutions have to be open to all individuals. The comments made by the hon. member for Vancouver East were dead-on on that aspect.

This is an initiative to ensure that the banking institutions modernize and recognize the very fact that how we bank today is drastically different from what we did only five or ten years ago, even only two years ago. I suspect many members of the House now bank via the Internet. I started to do that about six months ago. We pay our banks en masse through telebanking. We use ATMs to do the majority of our banking functions. How we deal and interact with our banks has changed. That is why it is imperative we have legislation which reflects that reality.

We also have to understand that the government has missed out on one aspect in particular. That is with respect to how it would potentially deal with the issues of mergers. There was the fracas when the finance minister claimed that he learned the Royal Bank of Canada wanted to merge with the Bank of Montreal over the news while he was brushing his teeth or while he was drinking his morning coffee and reading the newspaper that day. This finance minister has probably been the most connected to Bay Street in the history of Canada, yet he was not plugged in enough to be able to know what was going on in the financial sector. To be quite honest, I find that very hard to believe or an incredible event.

The finance minister missed an enormous chance to upgrade the financial institution sector within Canada during the merger debate. I remember the CEOs of the Royal Bank, the Bank of Montreal, the TD and the CIBC were willing to make blood promises in terms of how this would benefit Canadians to permit the merger process to proceed. I am not advocating a position by any means on whether to permit the mergers at that time was right or wrong. However, it was definitely wrong to cut off discussions at that point in time.

For instance, they were willing to make a blood promise on maintaining the number of rural banking institutions. They were willing to make a blood promise in terms of increasing and augmenting the risks of lending funds to the small business sector. I remember reading that they were willing to make another blood promise in terms of holding the line, if not rolling back, en masse, service charges to customers.

Whether those blood promises would have been in the best interests of Canadians or whether to permit the mergers are questions that Canadians and legislators never had a chance to publicly debate because the finance minister chose to be a populist. He said that banks were unpopular. He was not going to proceed to give them anything because it may jeopardize his leadership aspirations down the road. I suspect that was likely the greatest issue during the debate at that time.

We are here to talk about improving and modernizing the banking sector, the financial institution sector. I hope we see legislation in the near future that will augment and increase the fundamentals of the economy. If we look at our rates of taxation, Canada has the second highest corporate tax rate as a per cent of our economy of all G-7 nations. We know that as a per cent of our economy our personal income taxes are the highest of the G-7 nations. We also know that as a per cent of our economy, the dollars we spend paying down the interest and not really addressing the national debt is an immense drain on our economy.

Instead of a 900-page bill, which the government does not care to have its members defend or even talk about its attributes, I would like to see some vision to get our economic fundamentals in order. Let us do what the Progressive Conservative Party has advocated and pay down our national debt in a legislative way. We need to lower taxes.

[Dale Johnston, Reform, Wetaskiwin, AB]

Where did you get that idea?

[John Herron, Progressive Conservative, Fundy Royal, NB]

The hon. member from the Alliance has just asked where I would get the idea that the Progressive Conservative Party wants to pay down debt and lower taxes. I will read from a note of earlier today which in fact says that in many instances the policies of the Progressive Conservative Party and the reform alliance are almost identical. This is definitely the case when it comes to one of the most important issues for Ontarians which is fiscal policy, including taxation, debt reduction and the overall management of Canada's pocketbook. I ask the member for Brandon—Souris if he knows who actually wrote those words. It was the Canadian Alliance MP from the riding of Markham who endorsed the Progressive Conservative economic plan. That is where I get those particular ideas that he referred to.

I would like to be able to ensure that we pay down debt in a legislative way to ensure that those individuals who want to invest in the Canadian economy will do so because they are not doing that today.

That is why the Canadian dollar is at a mere 66 cents. That is why it is perhaps at its lowest levels in a modern era compared to our principle trading partner, this time being the Americans.

My concern is that it is a very clear signal that foreign investors are challenging whether investing in this country is the right thing to do in the future. We need to send out some signals that we will not threaten any provincial profits by excessive rates of taxation, both from a personal income tax perspective and from a corporate tax perspective, and that we will get our economic fundamentals in order by paying down debt.

The high dollar helps our trade ratio to some degree, but in the long term it is a signal that Canadians as global competitors are becoming poor. Our capacity to buy goods in the global market has indeed been weakened.

Obviously the government has very little vision or interest in the legislative agenda of the great nation of Canada. There are 900 pages and so far we have heard from one government speaker. I do not know whether this has ever been done to this degree in the history of the parliamentary process. It has been amazing to watch it unfold. There have been 900 pages and one government speaker.

If the government is lacking vision let individuals speak who are ahead of their time. Some people call the Right Hon. Joe Clark yesterday's man. He will be in the House to actually augment the parliamentary system in the next number of months. He is an individual who wanted to pay down debt and balance budgets in 1979 when everybody thought it was a kooky idea.

He may have been yesterday's man because he was ahead of his time yesterday. We need to be able to show the kind of fortitude and leadership that Mr. Clark demonstrated with his budget in 1979. We need to see the same kind of vision and fortitude that we saw with the free trade agreement in 1988. In both instances it was done by Progressive Conservative prime ministers. That is what we need to be able to see to augment and maintain our position in the global community, not just technical bills on banking institutions. We need to get our fiscal house in order by paying down debt, lowering taxes and investing in our priority areas of health care and post-secondary education.

[Libby Davies, NDP, Vancouver East, BC]

Madam Speaker, I appreciate hearing the comments of the hon. member, and particularly his concern that it is very curious members of the Liberal Party are not speaking to this bill. Neither is the Canadian Alliance.

This strikes me as bizarre on such a major piece of legislation, 900 pages that will affect every Canadian who has a bank account. As I mentioned in my remarks people are outraged about the way the banks operate. There is a huge amount of interest in ensuring that consumers get a fair shake or deal. It is quite alarming to note that government members are not even willing to debate the issue. What are they afraid of?

The hon. member has expressed his concerns and those of his constituents. However I know one concern of the NDP is that there is an absence of a community reinvestment provision within Bill C-38, particularly for regions of Canada such as the hon. member represents where there is economic disparity, where local communities are hurting.

To have reinvestment by these vastly profitable banks is something that would be very healthy for local economies. It would help small businesses, individual entrepreneurs, the local economy and would have a spin-off effect. Should we not be legislating that kind of community reinvestment in the banking industry? I would appreciate hearing whether the member and his party supports that and whether or not they will put pressure on the government to do that.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Madam Speaker, the member for Vancouver East brings forth a very interesting issue but something that would have perhaps been even more difficult to do in a modern context even a few years ago.

Banks sometimes may be the only visible financial institution within a small town. They obviously would benefit from revenues from profits from Visa cards, small business loans, mortgages and all the financial products they sell. It is very difficult in this modern context to look at companies such as Citicorp, ING Direct or many other companies that are basically virtual banks which provide their products by electronic media. Obviously their direct investment within those communities or even in the country would be essentially nil.

This has provided Canadians with more competition and more choice. I support categorically being able to put a ratio in terms of what their investments would actually be. This is why I am a little reticent from my perspective to merely bank bash. The issue is far more complex than it use to be.

When we deregulated financial sector institutions on February 14, 1997, we said it was okay for Citicorp, MNBA and ING to have access to some small business loans, profitable mortgages, personal loans or even credit card business. Yet the banks were losing some of their most profitable dollars. Now they are in a situation where they are hard pressed to find new products to deliver to maintain their position.

As I said before, bank bashing is not in anybody's interest. One out of every two Canadians owns a bank stock in some way, shape or form. The role of parliament and the role of legislation is to keep financial institutions in check and to define roles and regulations that are responsive to consumers.

I compliment the member for Vancouver East on her commitment to having a regime that would ensure that low income Canadians are not discriminated against at our banks.

[Lorne Nystrom, NDP, Qu'Appelle, SK]

Madam Speaker, would my friend in the Conservative Party agree with me that there should not be a change in the wide ownership rule?

For many years we had regulations brought in by the Pearson Liberals which stated that a person could own no more than 10% of the shares of any bank. That was done to protect the Canadian banking industry, to keep it Canadian. At one time there was a rule that said no more than 25% of the shares could be owned by foreigners. That rule went by the wayside during free trade.

That will be changed. It will be moved from 10% to 20% of voting shares and 10% to 30% of non-voting shares for big banks with equity of more than $5 billion a year.

Medium size banks are defined as banks with between $1 billion and $5 billion in equities per year. There is concern in the province of Quebec that the National Bank will come under different rules. In terms of medium size banks the rules indicate that only 35% is to be widely held. In other words, somebody could buy 65% of the Banque Nationale. The member mentioned ING Direct, Citibank or Chase Manhattan which could go in there and buy the Banque Nationale, the Laurentian Bank or the Bank of Western Canada.

Would he agree that the same rules should apply to medium size banks in terms of being widely held as applied to the large banks? Does he also agree that going to 20% opens the door to more foreign control influence in our banking system, something that now is truly Canadian?

The Alliance is not participating in this debate so I ask the more progressive of the two conservative parties in the House to respond to that.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Madam Speaker, I think the hon. member asked me two questions. I have a problem with moving it from 10% to 20%. I am not as concerned by that aspect given the fact that the Canadian banking sector has indeed far more foreign investment, far more foreign competition, far more foreign involvement than it had before. If that is a result of the situation then in order to maintain our sovereignty we need strong Canadian banks. My initial reaction to 20% is that I am not overly concerned about it. That is something that we can flesh out during the clause by clause process.

To address the hon. member's second question, I think the 65% issue is a very real concern. Perhaps it is potentially something that should be discussed and addressed at the committee level, particularly relative to the National Bank or the Laurentian Bank. It is something that warrants further debate. I am not at all close to investigating the 20% ratio to the same degree, but I can see where 65% is an area of concern as a start.

[Lorne Nystrom, NDP, Qu'Appelle, SK]

Madam Speaker, I am glad the member of the Conservative Party is willing to take a look it. The concern in that regard would be a takeover of the National Bank or the Laurentian Bank. Then we would have the headquarters moving out of Montreal, out of the province of Quebec and indeed out of Canada, if it were bought by a foreign entity. It seems to me the same rules should apply to mid-size banks as apply to larger banks.

Would the member be in agreement that it is kind of puzzling the National Bank, which is quite large and not that much smaller than the smallest of the big five or six, should come under different rules, particularly when we look at the politics of the national union, and be treated differently because of where its headquarters are located than those in the rest of the country?

[John Herron, Progressive Conservative, Fundy Royal, NB]

Madam Speaker, as I said to the hon. member before, that is something we can flesh out during the clause by clause process as the bill goes to committee. That is why we are supporting actually sending the bill to committee so that we can start analysing these 900 pages since the government is not interested in debating them in the House.

Ultimately I think a higher ratio is probably a natural progression as smaller banks move into becoming medium banks.

[Réal Ménard, Bloc, Hochelaga—Maisonneuve, QC]

Madam Speaker, I am pleased to take part in this important debate on a bill that, disappointing as it may be, still merits consideration.

For those just joining us, this is a bill concerning bank reform. Bank reform is connected with democracy and with our conception of equal opportunity.

If we have anything for which to fault the government, it is that it has been, and continues to be, extremely timid about something that would have enabled us to set down a resolutely social-democratic foundation, one that was strongly in favour of equal opportunity and would have enabled us as parliamentarians—I take advantage of the presence here with us of the hon. member for Quebec to say this—to finally fight poverty effectively. I will have an opportunity to come back to this.

Anyone who has been keeping abreast of the way the banks have been changing, as well as their strategic positioning, can see that there are whole areas, whole communities, in which there is no bank or branch. A few years ago, Option Consommateurs, a body which obviously, as its name implies, is concerned with defending the consumer in the area of finance, did a survey on where banks located their branches.

It was found that the map showing where there were no bank branches corresponded rather perfectly with the map of poverty. As I clearly recall from having seen the map, whether in Cape Breton, Newfoundland, eastern Montreal or southern Ontario, whole communities are being deprived of financial services.

I would like to begin by reminding hon. members that the government mandated a task force some months ago. This task force went down in history under the name of its chairman, Mr. MacKay. He and twenty or so commissioners looked at the Bank Act and at all the vehicles available in relation to the existing credit needs across Canada and made extremely specific recommendations to the government.

The MacKay commission was concerned about banks closing branches in certain Canadian communities without giving any advance notice or giving a second thought to the impact the loss of access to credit can have on a community. With this in mind, I have to say it will be difficult for the Bloc Quebecois to support Bill C-38 if the government decides to maintain the status quo.

Members of the Bloc Quebecois know full well that, since 1993, our colleague, the member for Saint-Hyacinthe—Bagot, has been extremely preoccupied with all social justice and consumer protection issues. I understand that, through him and through me, our party will be bringing forward amendments in committee as well as at report stage. I hope such an important debate will not suffer from partisan politics. I hope that, when they vote on the amendments that will be put forward, all members will have only one consideration in mind, which boils down to the following question: will the proposed amendment improve the bill and enhance consumer protection? That consideration must override any partisan objectives.

Before going into the substance of the amendments I wish to propose with the help of my colleague, I must say that we will not support Bill C-38 because it seems to suffer from a serious imbalance.

When we consider the Bank Act, we realize that there is a balance to be achieved in the ownership of the banks. There was consensus, a rule within the world of Canadian banking to the effect that no one could hold more than 10% of the shares of the banks. This formula meant relative success.

I say “relative” because we must not think that the banking sector is not a concentrated sector. There are six or seven chartered banks, defined under the first schedule of the Bank Act, controlling a significant portion of the capital held by the banks and holding much of the power relating to the banks. Nevertheless, it appeared that the rule of 10% was a sort of guideline, a safeguard, a rule of caution that permitted too high a concentration.

I think that the member for Quebec, who is following this matter, like many others, knows as I do that there is a provision in the bill allowing the mid-size banks to hold 20%. A single shareholder could hold 20%. We do not fully understand the rationality of all that. As my colleague for Quebec has pointed out, there are even banks in another category that could be held by a single owner.

We do not quite understand the rationale of changing this balance, which was considered healthy in the world of banks. We can count on the fire, the determination, even the tempered aggression of the member for Saint-Hyacinthe—Bagot to wage a proper battle. We hope the members on the government side will understand common sense at least once in their life and will comprehend the need to vote in favour of the Bloc's amendment.

For the time being, I would like to discuss a matter I have been familiar with since 1996. I know that when I rise in this House that I still look like I am in my thirties and that the years have stood still. However, the fact is that this is already my second term and I am pleased to announce that I will seek a third one. I am taking this opportunity to mention that, as we know, the Bloc Quebecois is first in the polls.

Therefore, I believe that the hon. member who left the Conservatives to join the Liberals must have some regrets about such an ill-advised move, because in Quebec the party that is most popular among Quebecers, that is number one in the polls, is definitely the Bloc Quebecois.

My colleagues on this side of the House will agree that we are very confident that we will win the riding of Compton—Stanstead, where we have a very good candidate.

Having said that, I would like to continue on the issue of community reinvestment by banks. In 1996, I travelled to Washington to meet Joe Kennedy Jr., who quit politics in a context that there is no need to mention here in this House—things happened with the maid and he had to resign—but this does not fundamentally belong to the public domain.

In the United States, they have a second generation of legislation on community reinvestment by banks. I took a very close look at the purpose of what is called the community reinvestment act, the CRA, to make it clear for all parliamentarians.

I think members will agree with me that it would be perfectly possible to have a provision in the Bank Act that would be very closely patterned on that legislation.

A regulated financial institution is required to show that its deposit facilities, the branches, are serving the deposit and credit needs of the community for which it has been given a charter—and this is very important and I emphasize this—it has an obligation to help meet the credit needs of the local communities associated with that charter.

A very interesting point is that the United States has someone similar to the superintendent of financial institutions, someone who takes an annual look at what the various banks are doing to meet the credit needs of the community as a whole.

Naturally, when one owns three SMEs, is independently wealthy, and is a prosperous businessperson, one has no trouble obtaining credit. But when one is in Hochelaga—Maisonneuve or Saint-Sauveur or certain areas of Rosemont, my colleague must realize, or certain parts of Trois-Rivières—I would qualify this somewhat for Chambly, but I think there are areas of poverty in Chambly—when one is in certain communities where poverty is widespread, the fact is that the banks are no longer there.

I will give an example. Twenty years ago, in Hochelaga—Maisonneuve, there were 20 banks. How many are left today? Four. To all intents and purposes, there are no banks in my riding.

If we had legislation allowing the superintendent of financial institutions to assess how the chartered banks are meeting the credit needs of all communities, we, as legislators, would have a mechanism for putting pressure on the banks.

The banking system in the United States is far more fragmented. There are local banks, regional ones and ones that are more nation-wide. However, if a bank wants to expand and do business in more than one state—such is the control the American legislator has over the banks—if a New York bank wants to expand to Illinois for instance, it must respond to the credit needs of the entire community. A rating of A, B, C or D is given, and made known to the public.

The American system is not, first and foremost a coercive one; it is a system focused on consumer protection. It is understandable, however, that when the First Bank of America has a poor rating on its dealings with disadvantaged communities and that rating is released to the public and the consumer associations become aware of it, it is pretty hard for that bank to justify that it is a good corporate citizen. The entire American system, while not coercive, is based on pressure from the public and from consumer groups.

I have been involved in a few battles in my life, but this one is an important one. I would like to think that all hon. members of the House are going to support the amendment the Bloc Quebecois is going to introduce.

I have sensed a certain openness in the minister. Examination of the white paper the government has made public, and of this bill, does lead one to feel that any openness is rather cautious and has not reached maturity. The government could have gone a lot further than it has, but there is a desire to have low-fee retail deposit accounts. There would, of course, have to be a definition of everything that this would mean, but it seems to me that the community reinvestment act would be part of the philosophy.

The American legislation exists within a framework of four monitoring bodies. I would like to give hon. members a few examples of the form community reinvestment by the banks may take.

It could be low cost operations. As we well know, for every banking transaction there is a charge, whether for a debit, a credit, cashing a cheque or paying a bill. It could be $1.75, $2, or $2.75. Certain American states permit exemptions in banking business for the most needy. This is an example of the very specific form bank community reinvestment may take.

It could also be in the form of accounts set aside for consumers writing a limited number of cheques. It could also be the banks in certain parts of the northeastern states that have agreed to provide mortgages for home improvements in low income sectors. It could also be an economical chequing account including a minimum account. It could be the processing of five cheques at no charge every month or the cashing of government cheques for free. I think generally this is already the case in Quebec and Canada. I do not think that a person receiving income security or who has an old age security cheque has to pay charges. This should be checked, but I do not think there is a charge on these cheques.

Armed with this information, I did my duty as a parliamentarian and introduced, as I mentioned earlier, a bill in 1996, which I have to say got a lot of support from my colleagues in the Bloc Quebecois. It was in such a moment that I really felt we formed a strong parliamentary team. I criss-crossed all of Quebec to get bank books signed. I do not know if the members recall that. It was a sort of petition in the form of a bank book. I was in the riding of Frontenac—Mégantic and I went to Quebec City, and I have warm memories of that visit. My colleague, the member for Québec, met me. We visited the Saint-Roch mall, which had been renovated.

Quebec City truly made a considerable investment. I was there not too long ago. I sensed that throughout Quebec people were strongly in favour of having legislation similar to the United States legislation on community reinvestment by banks.

My bill had five major objectives. To achieve fairness in community reinvestment, which was the object of my bill, the banks located in poor communities would have had to review their operations, systems, rules and practices and then measure the gap between the deposits and the loans granted to designated people in a given community.

Once that review had been completed, the banks would have had to table a report indicating which measures they intended to adopt if a gap was found between the deposits received by the banks and the loans granted by them in their communities.

Third, and this was perhaps the most important aspect of the bill, the superintendent of financial institutions would have had an obligation to propose evaluation criteria that were likely to promote the implementation of the notion of community reinvestment. A report was to be tabled in the House by the Minister of Finance to allow us to understand, to have a global idea of the effort made by banks in poor communities. I believe that was an excellent bill.

Bill C-38 allows us to take another look at this provision and it is our hope, as parliamentarians, to encourage banks to be present in every community.

In conclusion, I remind the House that when banks are not present in communities, other groups take over. I recently spoke about pawnbrokers. Pawnbrokers exploit poor people.

As parliamentarians, we must realize that when banks are not present in poor communities, they are replaced by others, but this is not always to the benefit and well-being of consumers.

I invite all members to reflect on these issues, to show openness and to support the amendment that the Bloc Quebecois will move in favour of community reinvestment by banks.

[Ghislain Lebel, Bloc, Chambly, QC]

Mr. Speaker, I listened carefully to the brilliant speech by my colleague, the member for Hochelaga—Maisonneuve.

I have just learned something and I thank the member for it. With regard to community reinvestment—I am sorry but that is what I had in mind—I thought the obligation to give money to a particular sector or a particular activity was automatic. I see this is not the case.

My colleague seems to have a good knowledge of all the aspects of the American banking system. In the United States, where they have community reinvestment legislation, have banks or bankers been exempted from paying taxes elsewhere in compensation for these investments in the community?

I am wondering if such compensation exists. Has the member studied this side of the issue? I agree with the kind of reinvestment he is proposing, namely a reduction of service fees for low income users. In the United States, has the government found a way to compensate the banks by taking less money from them?

The member will understand why I am asking this question. When the current Minister of Finance brought down his 1999 budget, the Bloc Quebecois spoke out against the fact that the minister was being very generous to the richest, namely the banks, and that they should be paying a lot more taxes than they had been up to that point. Despite a slight tax increase in that sector, it clearly was not enough to create social justice as well as tax fairness.

I want to ask my colleague from Hochelaga—Maisonneuve if the Americans do the same kinds of favours as our good finance minister does to his banker friends.

[Réal Ménard, Bloc, Hochelaga—Maisonneuve, QC]

Mr. Speaker, I thank my colleague, the hon. member for Chambly and notary in a former life, for his question. His question falls, it seems to me, half-way between wholly financial concerns and his endless thirst, which I acknowledge, for social justice.

That said, the hon. member for Chambly is right. I could never produce for the hon. members any examples of hypocrisy off the top of my head that would equal the actions of the Minister of Finance, because I do not know of any. The fact is that our colleague from Hyacinthe—Bagot could be more accurate than I.

I believe that in the last budget we raised the matter of $180 million in taxes the banks had to pay from 1994 on. We were not all that comfortable with the idea that it was necessary to lighten the fiscal burden of the banks because we acknowledge their right to make money. They operate within a highly protected environment under the Bank Act and schedule 1. Thus there is no true competition in the banking sector. There will perhaps be more in future but that has certainly not been the case in the past.

In conclusion, in order to provide my colleague with an accurate answer, I do not believe there is any interconnection. From my examination and understanding of the community reinvestment act, it is my belief that its objective is definitively to provide better access to credit to all communities in the United States and that we must not look for connections with income tax and other tax matters. They are, in my understanding, totally independent of each other.

[Christiane Gagnon, Bloc, Québec, QC]

Mr. Speaker, I would ask my colleague to be a little more specific about how Bill C-38 will upset the financial system in Quebec.

Earlier, he mentioned percentages, the percentages of shares that could be held and how Bill C-38 would be at odds with practice in Quebec. What the Bloc Quebecois says in its dissenting report is that Bill C-38 on bank mergers would pose a threat to the National Bank, for instance, which is the bank for SMBs in Quebec. What specifically would happen—that is what I am asking my colleague for the benefit of those watching—and could he expand a bit on the difficult balance faced by our banking industry?

[Réal Ménard, Bloc, Hochelaga—Maisonneuve, QC]

Mr. Speaker, I thank the member for Québec. As members know, I respect her and what she stands for and, of course, continues to stand for.

I think that the most eloquent answer came from Quebec's minister of finance, one of the best as we know to have sat on the government benches. With the House's permission, I will quote what he said to the federal Minister of Finance last December at the meeting of finance ministers:

We made known to you our concerns with respect to your planned amendments to the rules governing banks in Canada. Your proposal would provide different treatment for banks with large, medium or small capital. In the case of large banks, that is those with over $5 billion in capital, it would be possible for an individual to hold not 10% but 20% of the voting shares.

The status of banks with $5 billion or less in capital is different. They can opt for a limited ownership regime.

The important thing to understand is this:

A given individual could have in excess of 20% of the voting shares, up to 65% for banks that have between $1 billion and $5 billion in capital, and up to 100% for those that have less than $1 billion in capital.

So, there is a risk that banks with less than $5 billion in equity could be owned by a single individual holding all the voting shares. But the banks that provide the greatest support to small and medium size businesses in Quebec are banks like the National Bank and the Laurentian Bank, which would be reclassified in the small bank category or in those with capital of less than $5 billion.

This is a legitimate concern because we believe that having a number of voting shareholders is a safeguard for democracy, since it goes against a concentration of ownership.

I hope I answered the question of the hon. member for Québec, whose intellectual curiosity is almost insatiable.

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, it was a very interesting summer for the Canadian Alliance. We chose a new leader. Canadians across the country are excited. As the NDP members were complaining this afternoon about the cost of my leader's fundraising dinner, I will tell them that Canadians are willing to pay to listen to the new leader. I am sure that if NDP members wanted to do fundraising they probably would not be able to attract too many people. I presume that is why they were complaining.

It my pleasure to speak to Bill C-38, an act to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions.

When we talk about financial institutions, Canadians in general have some concerns. They are concerned about the way in which banks have been operating, about the monopoly they have had over the years and about how their profits have been increasing. These concerns arise from the fact that there is not much competition in the financial sector and that historically the banks have been protected. There were reasons in the past for doing that, most importantly to ensure the viability of the banking system in Canada, which at that time worked.

As we know, the business environment in Canada and around the world has changed. Today the environment calls for choices for the consumers. Canadian consumers have seen how much they benefit from deregulation and what happens when a government lets businesses loose. Lower costs for long distance telephone calls shows how a competitive environment can help Canadian consumers.

The demand by Canadian consumers, and rightly so, is for choices in the banking sector. The Canadian consumer is looking for lower service costs and better services. To some degree the negative image that the Canadian consumer has was brought on by the banks themselves. I am sure the banks can do a better job in letting the Canadian consumer know of the services they can provide.

There is the recent example of Air Canada and Canadian Airlines and the disaster it turned out to be during the early stages of the merger. Canadians are strongly concerned about the lack of competition in the airline industry. The government is dragging its feet as it does most of the time in coming up with solutions Canadians are looking for.

The government's go slow approach can be seen in this bill itself. It took seven years of foot dragging on the part of the government before it was able to bring forward some kind of legislation that has opened up the banking industry to higher competition.

We in the Canadian Alliance will live with this bill because we see it is opening up the financial sector as demanded by Canadians. We have a lot of concerns on many issues. We feel the financial sector is not completely open. There are other levels of bureaucracy being installed in here. Nevertheless there has been enough in this bill to allow competition to take place.

Members will remember the bank merger fiasco that took place and the hue and cry made by Canadians, and rightly so. Canadians felt there would be too much concentration of banks and less competition. Therefore there was a need for this kind of bill to come forward allowing the consumer to make choices and opening up the sector. Once the sectors are opened up, banks can merge and become global players in today's market.

As the critic for international trade I see the opportunity for banks as markets are being opened up all over the world. Definitely Canadian banks have a role and they can play a leading role in that they need to have bigger capital, bigger markets and a bigger pool of expertise as well. That is fine, but Canadians are concerned about what happens to the domestic market. Is it going to suffer at the expense of banks going into the international arena with mergers and consolidations?

That is a concern to our party as well. It is important that the Canadian banking sector be opened up to other players who can get in and pick up the niche if Canadian banks feel that they want to be out of the domestic market. Personally, I think it would be foolish for them to do so. Nevertheless, we need to allow competition to take place. Canadians need to know that they have choices and this bill to some degree will do that.

We have heard from our Bloc colleague as well as our colleague from the NDP. A very vague answer was given by my colleague from the PC Party in reference to medium size banks. Clearly, if we open up financial markets there are players who would be willing to pick up the niche. Medium size Canadian banks can become big banks, but we have to let the market forces play to some degree. Let them consolidate. Let them ensure they can seize the opportunities that are presented.

The question that will always remain is, what will happen to the Canadian consumer? We feel that with competition opening up, Canadian consumers will be very well protected. They will benefit from the opportunity of financial services that will open up in this country.

I will give an example. As the critic for international trade and with my work on the foreign affairs committee, I see the role of the Export Development Corporation. The committee heard from numerous witnesses involved with international trade who recognized the need for greater availability of capital for them to do business overseas. Close to 43% of the GDP is tied to exports and Canadian companies are always looking for capital. This is one area where the banks can now take advantage and should be able to offer to Canadian companies this opportunity by giving this service. In the past and until now they have been curtailed by EDC. EDC is kind of a crown corporation. It does not pay taxes. It has been politicized for so long that even many Canadians do not know what EDC is and what its role is.

We feel that the government competes directly with the banks through the Export Development Corporation. The Canadian Alliance feels that this competition should be abolished and that EDC should get out of the business of short and medium term export financing.

It is in the interest of all Canadians that banks are able to play a vital role in our economy. As it expands and we go into global markets, it is the banks that will be in the forefront to seize this opportunity in partnership with Canadian companies to create an economic environment that will benefit all Canadians. That is a key element in why the Canadian Alliance is in agreement to some degree with this bill which will allow the banks some flexibility.

Of course as usual the government has ensured that there are some tighter controls as well. It has introduced the financial consumer agency and the ombudsman. To some degree it looks very good. It looks like the government is trying to ensure that Canadian consumer interests are protected. However we have our past experience with the government. Who is going to be there? Will all the appointments be at arm's length or will they be more patronage positions for the Liberals to fill?

Every time the government introduces some kind of control or bodies where it has the absolute authority, perhaps a parliamentary committee could look at the appointments instead of the finance minister looking after those appointments. That would give tremendous confidence to everybody over appointments to these boards.

We notice that the government did not go very far in expanding the credit unions' role. That is one sector where it could expand and provide Canadian consumers with choices. We sincerely believe that choices for Canadian consumers will in the long run work to bring lower service costs, lower fees and better services to consumers. That does not mean to say that at this time the banks are not trying to provide service to consumers, they are. However with greater competition, innovative ideas will come forward. In order for the banks to retain their business they would definitely listen to the consumers. At the end of the day that is where the Canadian consumer is on all this opening up of the market.

In conclusion, the Canadian Alliance will be supporting this bill based on the fact that it provides more and better choices for the Canadian consumer. We would like to see more competition in the market and I am sure our critic will bring in some amendments to ensure that that happens.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, again it amazes me that the Alliance Party, the former Reform Party, thinks that competition always has to be in terms of foreign competition. On the airline policy, it would like to have more American carriers up here which eventually would destroy our Canadian airline industry. It also wishes to have more foreign control of our financial institutions which would probably mean the end of Canadian control of our banks.

When talking about the banks, as they do about the post office, most Canadians do not say very many positive things about the banks but they do speak about the poor service or bank closures in their communities.

This bill will give a tremendous amount of power to an individual finance minister. He or she will have tremendous powers and will become a banking czar, taking away parliamentary responsibilities or even the ability of members of parliament, duly elected by the people of Canada, to have any input. This is similar to the minister of fisheries whom we now call the fishing czar who has tremendous powers within his ministry which override the will of parliament.

Could the hon. member comment on the fact that the bill would make the finance minister a banking czar who would sometimes override the will of parliament?

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, I would like to respond to my colleague from the NDP. We definitely have a philosophical difference in how we would like to approach this for the benefit of the Canadian consumer. I am sure at the end of the day the member is thinking of the same thing, how the consumer can be protected, I will give him that but we have different ideas of how to do that. He wants government regulation. I tell him to look back in history and he will find that is not what has worked for Canadians. There are examples that at the end of the day competition, deregulation and less government control have benefited the Canadian consumer and the Canadian public.

Concerning his question about the finance minister becoming a powerful banking czar, I share the same concern with him. We do not want the finance minister to become a powerful czar. Nevertheless we feel that the parliamentary committee could have a role, at arm's length, as I said. It would ensure the finance minister would not have that much of a powerful role. Parliament has to play a role, MPs have to play a role and the committee could play a definite role in ensuring that one person does not have that much control.