House of Commons Hansard #11 of the 37th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was banks.


Financial Consumer Agency Of Canada ActGovernment Orders

11 a.m.

Willowdale Ontario


Jim Peterson Liberalfor the Minister of Finance

moved that Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions. be read the second time and referred to a committee.

Mr. Speaker, as everyone knows, Bill C-8 is a major bill, over 900 pages in length. It is, I believe, the biggest ever placed before the House. It is the outcome of a great deal of work and consultation in all sectors, including consumers and the members of the House of Commons. In fact, the latter had already seen this bill during the last parliament. At that time it was called Bill C-38.

With it, we aim to reform the strategic framework of the Canadian financial services sector, which comprises Canadian and foreign banks, trust companies, insurance companies, co-operative credit associations and other financial institutions. We have proposed a few minor changes to Bill C-38.

In essence this is the very same bill but with technical, grammatical and editorial improvements, as well as some clarifications where stakeholders identified points of confusion about the intent or application of the policies.

For example, the Canadian Bankers Association pointed out that under Bill C-38 it was unclear whether new financial sector holding companies could hold portfolio investments. The fact is that this is allowed and is now clearly stated. I thank the Canadian Bankers Association for its incredibly valuable input in the new bill, as well as that of all other industry and consumer driven stakeholder associations.

There can be no doubt that Canada's financial services sector is critical to us. It is critical as an industry, one of the truly great industries of the country, employing over 500,000 Canadians directly. It is highly export oriented, with more than 50% of the revenue from the insurers and the banks coming in from abroad. Most of the global taxes are paid in Canada, over 80%, and close to 90% of their global employees are in Canada. If we set out to devise through an industrial policy an industry that would be ideal for Canada, we could probably find none better than our financial services sector.

It is also important to us for the role it plays in our society and in our economy. After all, without financial intermediation, the capacity to deposit and withdraw funds, and to send funds around the world, where would we as individuals and our businesses be?

When we go abroad we find in many parts of the world that Canadian financial institutions are predominant in those foreign markets, giving a role of leadership not only to foreigners but also Canadians who want to do business in particular foreign jurisdictions. We have an important responsibility, therefore, to maintain the health and the vigour of this great industry.

Because they operate within a legislative framework determined by parliament it is essential that we have ongoing reviews of financial services legislation. This is probably the most extensive review that has ever been undertaken.

As a result of an extensive consultation going back to the MacKay task force which reported to parliament, the finance committee of the House and the Senate banking committee held extensive public hearings and reported back to us.

The minister then tabled before the House a white paper in June 1999, which again allowed for extensive consultation and input from all stakeholders. The bill was finally tabled last June as Bill C-38 and but for the election I am sure would have been law today. We are back to do the job, which is the culmination of all this great input.

There are four major themes in the bill. The first is encouraging the flexibility of our financial services both domestically and globally. To do so we have put in place a number of options and facilitating devices.

The first and probably most important is the holding company option. This means that our institutions will be able to compete in Canada with the foreign monolines such as credit card and lending companies that are coming here in an unregulated manner. We will give them that level playing field. It will also give them flexibility in the way they structure their Canadian and global operations.

The second point in terms of flexibility is that we are allowing a change in the ownership rules. This means that any shareholder, which under the current law would be limited to 10%, could go up to 20% of equity or 30% of non-voting shares. This is to give our institutions the flexibility to enter into strategic alliances and joint ventures with other institutions here and around the world.

The third area where we are helping them compete better is with respect to the merger review process. We have set out in the guidelines a process which must be followed for the major banks to enter into a merger.

This will offer certainty of process. At the same time it envisages hearings before both the Senate banking committee and the House of Commons finance committee. There is a great opportunity for public input because the final decision on mergers rests with the minister. He and Canadians must be convinced that any merger which takes place is in the best interest of all Canadians.

The second major thrust of the legislation is to encourage domestic competition in Canada. The reason for this is that we believe our customers are best served where there is vigorous competition in the marketplace.

How are we doing this? We want it to be easier for people to set up smaller banks or community based banks. This is why we are lowering the minimum capital that a bank must have or an institution must have from $10 million to $5 million. We think this will lead to new types of community banks.

We are also seeing under the evolution of this sector new banks associated with retailing institutions such as President's Choice Financial, a relationship between the Loblaws companies and CIBC which does their backroom work on a contract basis. This is a bank which now has over 400,000 customers and over $2 billion in assets.

Another way we are facilitating competition is with the new three tier size based ownership regime. If the equity is under $1 billion it can be wholly owned. Again this will help new banks to get established.

If the new size based ownership regime is between $1 billion and $5 billion, up to 65% of the shares can be owned or controlled by one shareholder and the rest must be the subject of a public float on the market. If the equity is over $5 billion, such as with our major banks and demutualized insurance companies, the rule is that these institutions should be widely held.

We are seeing new measures to encourage domestic competition with respect to credit unions, particularly those outside Quebec which do not have significant size and therefore economies of scale and are thus facing higher costs of operating and serving their customers who are also the owners of these unique community based institutions.

We have worked very closely with the credit union movement to help give them greater competitiveness. This is why, working with them, we have come up with an entity called a national service entity. This would allow them to combine to get economies of scale. It would enable them, for example, to issue a common credit card, and they could roll out new service offerings across provincial borders. This is a major step forward.

I will say a brief word about co-operative banks. This was a very important consideration brought forward by the MacKay committee and endorsed by the committees of the House and the other place. We have been working with the credit union movement to find out exactly what type of co-operative bank legislation should be brought forward. Unfortunately, the big group with whom we were working fell away from this project, but we have continued to study it and we will continue to study it, running on a parallel basis to Bill C-8. When the model is in place we will issue it and we will have extensive consultations, because we know there are provincial concerns and there are concerns within the credit union movement. We will subject that new measure to the same type of extensive input from the communities, the industries and the consumer groups, so that when we do come forward with the legislation it will meet the needs as expected.

A fourth way in which we are encouraging domestic competition here in Canada is through the entry of foreign banks via branches. This legislation was in place a couple of years ago, again as a result of extensive consultation, but we have enhanced it in this legislation to bring the foreign banking regime in Canada up to a level playing field with Canadian institutions, again requiring amendments in the legislation.

A fifth way in which we are encouraging domestic competition for the benefit of consumers is by opening up to the payment system the operations of life insurers, security dealers and money market mutual funds. This means that these new institutions would be able to have funds of a customer on hand and the customer would be able to exercise chequing privileges on that account, again enhancing competition.

The third major heading under this bill is the protection of customers. We think customers are best protected under any regime where there is maximum competition, so I have outlined what the government is doing in terms of enhancing competition. However, even with competition we have found in the past that there were those who remained unbanked; basic financial services were not available to them. This is why the government has taken measures under the heading of access. We are ensuring that Canadians have access to the financial services they need. We have introduced measures which would require the opening of accounts with a minimum amount of ID. Past credit or employment history, provided there is no fraud, would not be a bar to cashing government cheques.

As well, I have recently entered into a memorandum of understanding, a signed agreement, with eight of the large deposit taking institutions, which would make basic bank accounts available for Canadians. They are not all the same. This is not a cookie cutter, because we believe that competition will benefit consumers. However, each institution has come up with its own basic account with a minimum number of transactions, be they in person or via the Internet.

The costs are set forth and range among the five from $2.95 to $4 a month. We are making sure that those who can least afford it have access to the basic banking they need to get off welfare, to be able to deposit that cheque so it is safe and secure, and to pay their bills, including rent. This is important because, really, it is almost impossible to get off welfare if one does not have access to this type of basic banking.

As well, we have put in place rules for the closure of bank branches because that could be another way that access to basic services might be denied. We do not treat the banks as utilities; what we have said is that if they want to close a branch, that is their business decision. We are not going to force them to operate branches that are not profitable. That would undermine the strength of our financial services sector. However, what we have said is that they have to give notice. If the branch is in an urban area, they must give four months' notice so people can make alternative arrangements. If the branch is in a rural or less populated area, they must give six months' notice. This is so the community itself can find alternatives for the provision of these basic banking services.

Some of the alternatives will come from other institutions. With the closure of many branches in some of the western provinces, we have seen how provincial credit unions have come in and bought up those branches, at the same time ensuring ongoing employment to all of the employees who otherwise would have been affected. This is one of the virtues of giving notice. The federal government is also prepared to play a role in remote communities. Perhaps the post office could be the place people could look to for basic banking.

Another area where we have had the views and interests of consumers in mind is the financial consumer agency of Canada. Right now there are three federal departments in Ottawa that deal with enforcing our laws as they relate to consumers: Industry Canada, the Office of the Superintendent of Financial Institutions and the finance department itself. We are putting all of these operations under one roof. There will be savings in the costs of administration in so doing. It will be much more effective and efficient. We think this is a step forward for consumers.

We have had in place for a number of years the Canadian banking ombudsman. In this bill we are trying to expand the role of the Canadian banking ombudsman so that it covers all financial institutions. In an era of conglomeration where different types of financial institutions, such as banks, insurers and trust companies, are coming under the same ownership and the same roof, we think consumers would be better served if they could go to one dispute resolution centre for all their disputes regarding financial services, as opposed to having to find different ones depending upon what type of financial service they are having difficulties with. We also believe that the financial institutions sector will be better served by having this type of single dispute resolution centre.

Of course under the constitution we cannot mandate that entities which are not owned by banks have to come to this centre. That is why we have undertaken to work in very close co-operation with the joint forum of financial regulators from the provinces to find a way to bring together the disparate dispute resolution mechanisms aimed at helping consumers today. We welcome the efforts undertaken by Dina Palozzi of the Financial Services Commission of Ontario and Doug Hyndman from the British Columbia Securities Commission, who are heading up this task force which also has representation from the federal government.

The fourth major thrust of the bill is to ensure that on an ongoing basis we have responsible but responsive regulation of the sector. Of course safety and soundness have to be number one. That is why the bill has a number of measures which give enhanced powers to the Office of the Superintendent of Financial Institutions to intervene where there are difficulties, to remove directors if necessary and to impose fines where there is blatant disregard of our regulatory regime.

At the same time we want to ease the regulatory burden. This is why we are streamlining the approval system. Many approvals would be done on an exception basis: a request for an approval, if it goes to OSFI and is not denied within 30 days, would be deemed automatically passed.

It is critical as we go ahead that we have in place an evolving, dynamic regulatory regime, because we are seeing incredible changes with globalization, with exploding technology, with conglomeration and with consolidation, all of it taking place on a global basis. Our regulatory regime must be capable of keeping up with this. That is why in Bill C-8 we have reserved to the minister many areas of ministerial discretion. If it were there in black and white law, it would require an act of the House to change it. That is why we want, in many areas, to have this ministerial discretion.

As a minimum, within five years this law will sunset, again triggering, I hope, vigorous debate, with a telescope on the future looking at where the sector is heading, but because the changes in this industry and sector are so dynamic and so global, we cannot predict where they are going to be. We cannot predict what types of countermoves or accommodating moves we must make in order to ensure that we have a dynamic, competitive sector helping our consumers and competing globally. This is why we are committed as a government to reviewing the bill, not just five years from now but at any time sooner should it be necessary to do so, and then making the necessary changes.

In conclusion, I thank the stakeholders, the institutions, the financial sector, consumers' groups, members of this House and members of the other House. I particularly thank finance officials who have worked so assiduously on this, as well as those in OSFI and the other institutions, for bringing the bill to fruition in what I believe is a very responsible and critical way. Because the bill has had input from so many, I believe that it behooves us as parliamentarians to give it serious consideration. Because we have already had the input, I ask that it receive speedy passage. I would hope that it goes from this Chamber as quickly as possible into committee, where the real detailed work can be done and the witnesses can be heard.

Financial Consumer Agency Of Canada ActGovernment Orders

11:25 a.m.

Canadian Alliance

Dick Harris Canadian Alliance Prince George—Bulkley Valley, BC

Mr. Speaker, I understand that I have approximately 40 minutes. I am asking for unanimous consent of the House to split any unused time with my colleague from Saanich—Gulf Islands.

Financial Consumer Agency Of Canada ActGovernment Orders

11:25 a.m.

The Acting Speaker (Mr. Bélair)

Is there unanimous consent?

Financial Consumer Agency Of Canada ActGovernment Orders

11:25 a.m.

Some hon. members


Financial Consumer Agency Of Canada ActGovernment Orders

11:30 a.m.

Canadian Alliance

Dick Harris Canadian Alliance Prince George—Bulkley Valley, BC

Mr. Speaker, Bill C-8 is a bill to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions. While we in the Canadian Alliance are very supportive of the bill in most respects, we maintain that the government has been very slow in modernizing the regulations in the acts that govern banking and financial institutions.

The government has been in power since 1993. This is the first major piece of banking legislation, or legislation covering the other types of institutions outlined in the bill, that the government has brought in. As a result of it being so slow to react to global conditions, the global economy and what has been happening in industry in other countries around the world, we have seen ourselves, our banks, our institutions, our securities companies and our life insurance companies being left considerably behind other countries that have been more forward thinking in modernizing the financial institutions in their country.

Canada should have played a more leading role in setting an example for other countries to follow. As parliamentarians know, we have one of the safest and finest banking financial services industry in the world. We have been for the most part very prudent in setting regulations and ensuring that Canadians had a good financial services system to serve them. At the same time, until 1993 we were quite forward thinking in providing the tools for our domestic banks to compete in global opportunities.

We had all the reasons to set Canada up as a standard throughout the world for other countries to follow. Unfortunately the Liberal government did not take that initiative. It has played the role of a follower rather than a leader. For all the talk about how much good the government has done and how much attention it has paid to this sector of our economy, it has not been the leader that it should have been.

That being said, I may now have some nice things to say about Bill C-8. It calls to modernize Canada's financial services industry. Canadian consumers have been demanding a more competitive financial services sector and more choices as to where they do their financial business. In addition, the players in the industry, the banks, the insurance companies and securities companies have been requesting more flexibility to catch up with their competitors in the global economy so that they can take part in opportunities.

By catching up, I refer to having the provisions to make acquisitions within Canada and having in place a formal merger approval process. If they decided that it would be in their best interests and the best interests of their customers to merge with another domestic bank, they would have a formal process to follow. They would not have to leave anything to chance nor would they have their proposals subject to interpretation by a number of different parties that have an interest in this merger.

Under the legislation there will be a formal process. One would assume that if this is a process that has some sound reasoning behind it, two banks will be able to sit down and say that this is the criteria they have to meet, these are the steps they have to take and if they do, they can expect, according to the legislation, approval of the merger. That allows them to do some long term planning.

In this business, as a bank or an insurance company, one has to be able to have that opportunity to look far beyond tomorrow, certainly in order to set one's business plans in place. We have some criticism with the five year sunset clause.

Even though the legislation took about seven years, and now the government has promised to review it in five years, I believe the financial services industry, while welcoming the five year renewal in relation to what we have gone through, would like to have the opportunity to see far beyond that. They would like to see 10, 15, 20 years down the road. The government perhaps could have put the sunset clause together a little differently or else left it out altogether. It could have simply had an ongoing review process where amendments to the act could easily be made rather than having a sunset review.

There are many aspects to the bill of almost 900 pages. While we have some areas of concern, I did state that it addresses many of the things the Canadian Alliance finance group, of which I am the critic when it comes to banks and financial institutions, has been pressing the government for a number of years to get with the program in relation to making some changes.

I think back to 1994 when I believe the first white paper was brought in by a former secretary of state who had many years in the banking industry. Nothing was done. I think back to a couple of years later when there was another study done. Again, nothing was done. Then we had the MacKay task force report which was about two years ago. Finally, we had the legislation ready to go and then the Prime Minister in his wisdom, wisdom and Liberals seems to be an oxymoron at times, called an early election. Bill C-38 died at that time.

While the secretary of state was delivering his address in closing, he thanked a number of people. I would like to point out to him that he forgot to thank the member for Prince George—Bulkley Valley. When I read over the legislation, I was quite flattered because I and our party were way ahead the government in the legislation.

In November 1998 I delivered a report to our caucus, and to anyone in the industry who cared to read it. It was called “Competition: Choice You Can Bank On”. It covered a whole myriad of things in the financial services sector. It was accepted by our party and was applauded by practically everyone in the financial services sector as a forward thinking plan for the future of financial services in Canada.

I am really flattered when I read the bill because our party and I used my 1998 report as a benchmark to scrutinize Bill C-38, now C-8. There is an astonishingly close similarity between what is in the legislation and what is in my November 1998 report. I am sure the secretary of state simply forgot to thank me. I know he read and reread my 1998 report in order to get a good grasp on what was needed to be put in here.

I want to talk about some of the points we support such as the legislation that allows a bank to develop into a holding structure. It is going to give banks far more flexibility to compete, particularly with foreign banks that are coming here, not necessarily establishing bricks and mortars but a credit card company, or banking by phone or lending by phone. This will greatly enhance our domestic banks to compete with foreign banks. Certainly we want foreign banks to establish their branches in Canada. It goes back to giving consumers choices. We support the new provision to allow the banks to restructure under a holding company.

We talked about increased access to the payment system which will allow life insurance companies and security companies to basically operate like banks as far as deposits and cash clearing. This will end the monopoly over the payment system that the banks have had and will increase the choices once again.

We talked about the ability for credit unions to expand into a national bank structure owned by one member one vote. We noticed that was not in the legislation, but we know that perhaps this will be dealt with in a separate piece of legislation. We are going to ask the secretary of state to put it on record. We support that principle.

The provision to allow banks to set up under a smaller capitalization is going to increase choice once again. Those parties will be able to set up smaller regional banks with an initial $5 million capitalization. I hope that investors who want to get into the banking business will take advantage of this provision. Again, we have increased choice for consumers.

I talked about the formal review process for mergers and we support that. We are quite pleased about the absence of the banks' ability to retail insurance and auto leasing through their branches. That has been left out of the bill and the prohibition still remains. There is no doubt that some day, sooner or later, the banks will be in the auto leasing and in the insurance business. I do not know if that is going to be such a bad thing. However, because that provision is not in the bill, it gives the auto leasing business and the insurance business, which is a very competitive and vibrant business in Canada, a chance now to begin to lay plans for the most assured entry of the banks into those businesses. It gives them some time.

I have talked to representatives from the industry and have said that the banks will not be out forever, but here is some breathing room. I told them not to miss the opportunity to start laying some plans for the impact of the banks coming into their business. I hope they are making plans to mitigate the impact of banks coming into that business.

When it comes to the financial consumer agency of Canada, our party has some concerns in as much as the agency will report to parliament through the Minister of Finance. We are quite concerned with the fact that within the bill there are tremendous powers given to the Minister of Finance. We believe those powers should be given to parliament, and by extension, the finance committee as opposed to the Minister of Finance.

I will talk about the financial consumers agency as an example. While the bill calls for that agency to report to parliament through the Minister of Finance, we would prefer that the agency report directly to the House. By extension, this would allow a review process to be done by an all party finance committee.

I think that would serve Canadians better in terms of openness and a non-partisan look at what the financial consumer agency has to say.

We hope we will be able to deal with this in committee. I know the government is anxious to make improvements to the legislation, perhaps through amendments in committee, and I am sure it will welcome that amendment with open arms and will get on with it.

I want to talk about the financial services ombudsman and, again, the financial consumer agency. I just hope and pray that this will not be another means for the Liberal government to give jobs to its friends, something we have seen so many times.

I expect a number of defeated Liberals may appear on these boards. I hope the government will be able to surprise us and that we will see some people who have never expressed any type of strong Liberal leanings, as impossible as that may sound, when it comes to government appointments. We will look forward to that. I see the hon. member nodding his head again so I know he likes the idea.

We will support the bill, of course, but we will raise our concerns through amendments. I want to straighten out the secretary of state. He seems to have the idea that regulating low cost bank accounts of $2, $3 and $4 a month will somehow get Canadians off welfare. I fail to see the direct correlation between having a bank account and getting off welfare.

There are a number of reasons why people are on welfare. First, people, through circumstances that are no fault of their own, are unable to work. We have a responsibility to look after such people through the social welfare system.

Second, there are those people who simply do not want to work and just love welfare Wednesday, and they will never work whether they have a low cost bank account or not.

There are other people on social assistance who would dearly love to work but unfortunately, in a number of the provinces and throughout the country, there simply are no jobs. This situation exists because while we have been able to generate quite a bit of revenue from our export economy, our domestic economy still needs a lot of help.

That means that the federal government, working in co-operation with provincial governments, could do far better in providing an environment that would ensure a buoyant economy right across the country, and not just in pockets where there are conservative governments such as in Ontario and Alberta, which have booming economies despite the deterrents presented by the Liberal government.

We would prefer that the government, instead of counting on low cost bank accounts to get people off welfare, took a serious look at how it has been curtailing economic growth and how this has not helped investors and businesses create new jobs for people on welfare.

I know my colleague from Saanich—Gulf Islands has a lot of good things to say about the bill, both from a supportive point of view and a critical point of view.

I look forward to committee, as I know do members of the government, the secretary of state, his parliamentary secretary and everyone connected with the bill on the finance committee. They are very anxious to see the amendments we put forward. They will appreciate the wisdom of them and be very supportive.

Financial Consumer Agency Of Canada ActGovernment Orders

11:50 a.m.

Canadian Alliance

Gary Lunn Canadian Alliance Saanich—Gulf Islands, BC

Mr. Speaker, I am pleased to stand on behalf of all people of Saanich—Gulf Islands to speak to the bill. We saw it in the last parliament as Bill C-38; it is now Bill C-8. It died on the order paper when the election was called.

We owe a huge thanks to the member for Prince George—Bulkley Valley who just spoke. He wrote a very detailed, in depth report titled “Competion: Choice You Can Bank On” back in November 1998. I had been elected for just over a year at that time and remember receiving a copy of the report. It was very detailed and very long.

He went into every possible detail of financial institutions and banking and how we could improve it for consumers and give them more choices. There was broad consultation with the industry. I was impressed by how much work went into the report and by how much knowledge he had on the subject.

A few years later we in the opposition see exactly what work we have done. Actually the government adopted a lot of it and of course never gave any credit for it.

I applaud the member for Prince George—Bulkley Valley. He has done a phenomenal amount of work in the financial services sector over the last few years. He can be proud when he sees the government actually adopting a number of his measures.

Let us talk about what the bill will do. As we have seen in the last few years, a number of major banks wanted to merge. They put forward proposals to do so which were all quashed by the government.

I am pleased to see that the government has finally come out with a formal merger process so that at least financial institutions know where they stand. They literally invested millions and millions of dollars to go through the process, only to be stopped in the end. Some would argue it may have been for political reasons, that the Minister of Finance was annoyed because he did not get advance notice. That is not the right reason to stop mergers.

Our interest has to be consumers, to ensure that their savings and investments will be secure in these institutions. We should also allow the institutions to compete more in the global economy and offer more choices for consumers. I am pleased to say, as my colleague has stated, we believe that will happen.

There are a couple of very positive aspects to the bill. We are pleased to see that the government left out the auto leasing and insurance sectors at this time. I agree with my colleague. I do not think it is appropriate to bring them in at this point in time. There was a lot of lobbying by financial institutions that wanted to get into the market. They recognized that they had huge lists of people to whom they could market and offer package services, from auto leasing to insurance to banking services.

The insurance and auto leasing sectors right now do a very good job and are very competitive. As the hon. member pointed out, it is inevitable that there will be changes in the years to come. We should prepare for them, but it is the right decision at this point in time not to go down that road.

I do have some concerns with the creation of a financial consumer agency of Canada. The agency will report directly to the Minister of Finance. We have seen over the last few weeks what happens when the government makes appointments based on politics, appointments which report to a minister as opposed to parliament where there is complete openness and transparency.

Even when in opposition the Liberals recognized that the ethics counsellor should report directly to parliament. In their very first campaign book in 1993, the Liberals stated that the ethics counsellor should report directly to parliament so that there is openness, transparency and a level of trust for the Canadian people. There have been decisions in recent months that have raised many concerns, yet members of parliament have no access to the reports.

The same concern is raised here with the financial consumer agency. It would report directly to the Minister of Finance, the same minister who I believe will be responsible for appointments to these agencies or boards, which may become a political dumping ground for defeated candidates or large donors to the government.

Some would say that is a bit biased, but the facts speak for themselves. We have seen that so much in the past. It does not end.

Let me read a recent press release. This is enough to make anybody throw up. On Friday, February 8, it stated: “The Minister of Citizenship and Immigration today announced the appointment of Lou Sekora of Coquitlam, B.C. as a part time citizenship judge”.

We all know that Mr. Sekora was defeated in the riding of Port Moody—Coquitlam—Port Coquitlam in the last election. When I phoned a few of my colleagues on the other side, Liberal members of parliament who are good friends, to tell them about the appointment, they started to laugh. They thought it was absolutely hilarious. It was pure, blatant partisanship.

Again, our concern is when there is not openness and transparency. I have a lot of respect for the Minister of Finance but when this type of legislation is introduced it lends itself to abuse. We tend to question whether appointments are based on politics or on the real needs of Canadians. That can happen down the road. I believe the finance committee should be given the opportunity to scrutinize and re-look at these appointments.

Those are some concerns we have in the official opposition. Again, I only speak from the record. We also see the massive problems with the ethics counsellor. We will be voting on that tomorrow night on the Canadian Alliance opposition supply day motion, where members of the government will have an opportunity to correct the very same wrong they have put into this legislation. They will have the opportunity to vote on a motion to have the ethics counsellor actually report to parliament and not to the Prime Minister.

I am sure my colleague from Prince George—Bulkley Valley, who is quarterbacking the legislation for the Canadian Alliance, will submit proposals to the bill when it goes to committee. However, there are a lot of positives in the bill that we are pleased with. It will give consumers more options and the financial institutions the environment where they will be able to compete globally, and we are going to a global economy. Those are some areas with which we are quite pleased.

The government member who first spoke on the bill talked about how it would help people on social assistance. It is an incredible stretch to suggest that lower service fees on bank accounts will help people on social assistance. It borderlines on preposterous to even suggest that.

The former premier of British Columbia, Mr. Glen Clark, came up with an idea somewhat similar to that by opening a credit union in one of the poorer neighbourhoods. He thought it would help those people. If the government really wants to help the people who are struggling to find jobs and get back on their feet, it should adopt some of the tax cut proposals put forward by the member for Medicine Hat over the last three years when he was the finance critic. We were pleased to see that the government, almost wholeheartedly, adopted a lot of the proposals contained in the member's 1998 report entitled “Competition: Choice You Can Bank On”, but we would have liked some things to have gone further.

If the government really wants to help people on social assistance who are struggling, who do need tax cuts and who do need a stronger economy where the business community can thrive, it would create economic opportunities for meaningful, long-lasting jobs. That would really help them. We will continue to push these ideas forward.

Under the new U.S. administration of President Bush, our neighbours to the south have embarked on a massive tax cut in the neighbourhood of $1.6 trillion. It believes that the economy is beginning to slow down in the United States. I agree with President Bush that those tax cuts will likely create more government revenues and create more meaningful and lasting jobs. It is the private sector that invests money into the businesses which creates opportunities for employment.

I do not believe the government can create lasting jobs. It can create short term jobs and do all types of funding, but at the end of the day it does not really create any kind of security for people.

I am pleased to speak to the bill and look forward to it going to committee. I am absolutely confident that we will be putting forward some amendments that will strengthen the bill. This is a time for all of us to support the bill, send it off to committee where the experts from the industry can scrutinize it and give us their input and then put forward some positive solutions to the bill.

Financial Consumer Agency Of Canada ActGovernment Orders



Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, I am pleased to speak on this important bill, Bill C-8—the former Bill C-38—to reform the financial institutions and create the financial consumer agency of Canada.

From the beginning of the process leading up to this bill, the Bloc Quebecois has been closely associated with the suggestions made through the Standing Committee on Finance.

In September 1998, the Bloc Quebecois also submitted a memorandum expressing its view of the MacKay report, which is behind financial institution reform. We made a number of recommendations in it geared to the modernization of the financial sector and especially of the environment in which the financial sector and the banking sector more specifically were evolving.

We realized the importance of renewing the regulatory and statutory context of financial institutions, which had not been renewed for five years. We were in fact behind the time in some respects, something that was becoming a cause of concern when we could see how quickly the North American and, more specifically, the Canadian financial sector was changing. We were somewhat frightened by the thought of developing in a context that was already several years out of date.

We were the first to ask the federal government to change the rules on the ownership of financial institutions, which prevented businesses from acquiring other businesses in complementary sectors, since the financial institutions act did not permit it.

I would like to quote the brief the Bloc Quebecois tabled in 1998 with the Standing Committee on Finance, in which we asked the government, among other things:

—to change the rules on ownership to permit and encourage the amalgamation of small and medium-sized financial institutions into financial holding companies, as suggested by the MacKay-Ducros Report.

At the time, we supported, and we continue to support, changes on ownership rules to enable groups, such as insurance companies, investment companies or a brokerage firm. The aim was to build strength so that, with markets opening in the financial sector and competition appearing from outside the country and even from within it, the quality of services provided by them could be assessed in a healthy business environment and consumers advised of what they would get for their money.

We warned the government against the rule of 10%. Let me explain that, because I think it is worthwhile to do so. It is a bit complex, but when we take the time—and I have the time to do it this morning—it is easy enough to understand.

Before the minister introduced his bill, a single individual could not hold more than 10% of the banks' shares. This meant that 90% of the voting shares of a bank were allotted among the public. An individual still cannot hold more than 10% of a bank's voting shares and 90% of these shares must be allotted, that is they must be widely apportioned among the public.

With the changes proposed in the bill, we have a totally different situation. The 10% rule becomes the 20% rule. This means that, in the case of major banks—this applies to them—with equity of $5 billion or more, a single individual cannot hold more than 20% of the shares, whether that person is a Canadian or a foreigner, while 80% of the shares of these major banks, again those with equity of over $5 billion, are allotted to the public.

The bill proposes two other categories regarding ownership. The second category includes banks with equity of $1 billion to $5 billion. For these banks, the degree of ownership is different from that of major banks. In the case of these middle size banks, a single individual can own up to 65% of the shares. The other 35% must be widely distributed among the public.

This is a major change. We still wonder why, considering that the 50% plus one rule is the generally accepted one for full control of a business, 65% of the voting shares of a bank such as the Laurentian Bank, for example, which has equity of less than $5 billion, could be owned by a single individual. The other 35% would be allotted among the public in a democratic fashion.

This is a revolution, a financial one, of course. I call it a revolution because, up to now, the philosophy that has driven all successive governments since passage of the Bank Act many decades ago was to give the financial institutions' shares a wide distribution, to prevent an individual from holding too much control over the banking institutions or the financial institutions in general; as everyone knows these institutions have a strategic importance in the economy.

The practice of widely distributing the voting shares of a financial institution to prevent one individual from holding extraordinary power over the Canadian financial sector or even industrial sectors stems from a policy that was renewed from decade to decade.

We have to realize that the financial sector is a public interest sector in the sense that multimedia companies, companies in conventional industries or anywhere else have to be able to rely on a solid, open and transparent financial sector, one that will not be detrimental but rather useful to them.

Having a single individual controlling a financial institution, that could be a lending institution for SMBs, could give rise to touchy situations as far as conflicts of interest are concerned.

Here is an example. The main shareholder of a medium sized bank owns more than 50% of the voting shares of the bank, which makes loans to small businesses. But the main investor or shareholder of the bank is also involved in the same industry as a small business that is asking for a loan from the bank.

The shareholder who owns more than 50% of the voting shares and therefore has full control of the bank making loans to small businesses will have the final say on the loan request of the business in the industry where the main shareholder is also involved. The main shareholder of a bank can also be an industrialist in a given industry.

In the past, we have avoided this kind of situation where an industrialist involved, say, in the steel industry, who has full control of a lending institution can sideline his competitors because such control allows him to have the last say on loan requests from competitors. This has been avoided in the past through widely held ownership of financial institutions and especially banks.

We now have a dangerous situation where, in banks with a capital between $1 billion and $5 billion, a single person can own up to 65% of voting shares. That individual has full control.

We do not like this. In Quebec, we have one institution in the category of medium sized banks in Canada, and that is the National Bank, the bank used by SMBs in Quebec.

We think it is very dangerous for an institution such as the National Bank to end up with rule changes whereby one person could hold 65% of shares, while the remaining 35% would be held by a wide range of members of the public.

Some said that there were no longer any problem, that it had been addressed with Bill C-8, formerly C-38, and that in any event the National Bank now had equity capital topping $4 billion, which could soon reach, and even exceed, the $5 billion ceiling, putting it into the category of a major Canadian bank.

In that event, the same ownership rules applying to those banks would also apply to the National Bank. No one individual could hold more than 20% of shares, and 80% of other voting shares would then be widely held, thus eliminating the problem.

There are two ways of looking at this: the first is that the National Bank does not yet have $5 billion in equity capital, and it could be months before this ceiling is reached. Also, it is clear from Bill C-8 that—even if a bank reached a certain level of equity capital, even if the National Bank had over $5 billion in equity capital—the Minister of Finance has full discretion to determine the number of years or months needed before this bank can reposition itself in a new category with respect to percentage of shares.

A three year period is specified. In other words, 10 months or a year from now, the National Bank could reach a level of equity capital exceeding $5 billion, which would put it into the category of a major bank subject to the ownership rule of 20% of the voting shares being held by a single shareholder, whereas the other 80% are widely held. It could be considered as such, but it is up to the Minister of Finance.

Several clauses of the bill refer to the finance minister's discretion. The Minister of Finance is given so much decision-making power that, with this bill, the government is all but crowning him legislative emperor of the financial institutions sector.

Towards the end of the bill, entire paragraphs contain a provision saying that the minister may do this and that. Finally, this is a bill that could be called discretionary from the minister's point of view. It is all about discretion.

Therefore, even if the National Bank reached a level of equity capital above $5 billion, the finance minister could decide to consider it as belonging to the category of 20:80 percentage ratio of voting shares only in three years.

Moreover, subclause 393(2) gives the finance minister the power to specify a later day as the day from and after which the financial institution must comply with the new provisions of the law. So, this creates a situation where, even if the National Bank reached a level of equity capital exceeding $5 billion within the next year, the minister could decide that the new category or ownership rule will apply only in three, four or five years.

This period of three, four or five years is an eternity in the financial sector. Anything can happen during that time. The National Bank might not be protected from a takeover by a single individual or by speculators for resale, thus enriching only one, two or three individuals instead of everyone.

Can we take that chance? As I said, three, four or five years is an eternity in the financial sector. Anything can happen during that time, especially when one realizes the speed with which changes take place. Ought we not to set some criteria for this ownership issue in order to avoid having the negative effects of the new provisions blow up in our faces in the coming years in connection with the National Bank or some other financial institution?

Just to provide hon. members with a slight idea of the speed with which changes can take place, I will quote from the MacKay-Ducros report, which is what led to the bill being drafted by the Minister of Finance and his secretary of state.

The latter indicated that two virtual banks had cropped up within two years, as the MacKay-Ducros commission sat. In less than two years, these two virtual banks started up: the Citizen's Bank of Canada, a subsidiary of the Vancouver City Savings Credit Union, and ING, the subsidiary of a major Dutch financial conglomerate.

BNA and the Capital One Corporation, both of these American credit card specialists, have begun Canadian operations, again during the less than one and one-half years the MacKay-Ducros commission was sitting.

A number of special financing corporations began to operate in Canada, among them Finova and Heller Financial. Nine new pooled investment fund companies also started up within that same period of under two years. From September 1996 to May 1998, the number of pooled investment funds available in Canada rose from 954 to 1,079, again in under two years.

Because of the rate these changes occurred during the deliberations of the MacKay-Ducros Commission, which in fact caused the commission to make certain adjustments at the end of its deliberations, anything can happen to the National Bank.

We, as Quebecers, need guarantees and additional safeguards, within the bill, to reassure us in this regard and essentially eliminate the negative effects of the new rules of ownership, by taking specific criteria included in the bill into account.

The Quebec finance minister and the deputy premier, Bernard Landry, wrote the federal Minister of Finance last June to express his concern on the way the situation was changing and on the first draft of his bill.

The Quebec finance minister and deputy premier, Mr. Landry, said in a letter to the federal Minister of Finance that with respect to the National Bank public interest in the present matter had to be defined according to four criteria, which he identified and which would complement the bill before us this morning, to the satisfaction of the opposition. These criteria, included in Bill C-8, could eliminate the risks I have just mentioned.

The criteria are as follows:

First, we should evaluate the effect of the change on the banks' current activities, including the services available.

Second, the effect of the change—

In the case of a change in ownership of the National Bank, for example.

—on the head office and the branches, including on professional jobs or jobs requiring certain expertise.

Third, the effect of the change on the economy and technological development of Quebec.

Fourth, the effect of the change on the financial sector and on Montreal's role as a financial centre, including the keeping of the ultimate decision-making centres in Montreal.

Mr. Landry continued, saying:

We think that the legislation should contain provisions ensuring respect for these measures, which would be taken to prevent the unfavourable effects of allowing one person to hold more than 20% of the voting shares in a bank in the previously mentioned areas.

The opposition, the Bloc Quebecois, is not alone in its concern. All of Quebec is worried.

That is why, when the secretary of state told me about the evolution of the bill in this respect, he told me it would be different from the first version. He indicated that, with the publication of the new Bill C-8 on the reform of financial institutions, the Minister of Finance had released new guidelines.

In light of these guidelines, I can tell the House that it would not take much to satisfy us with respect to the ownership rules. In fact, all that it would take is for these guidelines at the very heart of Bill C-8 to be included, so that the minister has a legislative obligation to take into account not only the interests of the Canadian financial sector, the solvency of those who wish to change the ownership of voting shares in a bank such as the National Bank, and the experience of such shareholders, but also the regional effects of such a decision.

It would be easy to take the secretary of state's guidelines and include them in Bill C-8.

The bill already contains a suggestion of them. It would simply be a matter of completing them with the guidelines that accompanied the bill and that were released by the Minister of Finance and his Secretary of State when Bill C-8 on the reform of financial institutions was introduced a few days ago.

Clause 396 defines certain criteria to which I more or less alluded, namely: the best interests of the financial system, the experience of the shareholders and their track record, their character and integrity, their competence and experience and the impact of any integration of the businesses and operations of the applicant with those of the bank on the conduct of those businesses and operations.

We could add, at the end of that clause, criteria such as the impact of the proposed transaction on the safety and soundness>of the bank, on direct and indirect employment at the head office and in the branches, including professional jobs or those requiring special expertise, on the needs of consumers, on the bank's businesses and operations, on the bank's prospects in the context of the global marketplace, on the best interests of Canadians and, where the bank operates principally in one region, such as Quebec, on the best interests of those living in that region.

We could even add to these guidelines the last paragraph found in the document provided by the government, which reads as follows:

A proposed transaction that would lead to a change in de facto control of a former Schedule I bank with equity between $1 billion and $5 billion, and raises major public interest concerns, would be subject to a similar public review process as a merger between large banks.

In the guidelines on the rescheduling of banks previously listed in schedule 1 and whose equity is lower than $5 billion, thus, in the government's reference document, there are some provisions that alleviate our concerns, if we find in the thrust of the bill a reference to the criteria that I have stated, including to the last paragraph, which deals with public interest, and which also calls for public review.

Why is the government not doing this? This morning, during a briefing with high officials, we were told that introducing these criteria and guidelines in the thrust of the bill might constrain the government and prevent the finance minister from having some flexibility.

I do not understand why the finance minister agrees to introduce guidelines and criteria such as those in clause 396 of Bill C-8, and talks about the interest of the Canadian financial system and about more criteria. Regarding the additional criteria contained in a guideline, which he says he wants to apply in case of a change of ownership of the National Bank, why are those criteria already included in the bill less constraining than those in the guidelines he has made public and intends to follow?

That is the question we must ask ourselves. When talking about the interest of the Canadian financial sector is no problem, but it is when it comes to the interest of the regional financial system, that is the Quebec system, I do not see openness, I see a problem. The fact is the Minister does not want those guidelines to be included in the legislation because that would impose upon him the obligation to take all these effects into account. That is what is preoccupying.

If the bill only referred to guidelines on medium cap banks, this would be a step in the right direction and we would consider supporting the bill.

Frankly, I must say there are other problems. However, we intend to propose amendments to this bill. For instance, there is the issue of consumer protection. I will come back to this issue later. We intend to propose amendments that will improve the bill generally. If it were not for the major irritant, the change of ownership rule applying to medium size banks, we would be a bit more willing to work with the government in order to pass this bill rapidly.

Up to this point, there has been a positive evolution. I recall that about eight months ago, the Minister of Finance did not want to hear about guidelines or evaluation criteria regarding ownership changes for medium size banks. Today, after the election, the government is introducing guidelines. This is a step in the right direction, even if it is not enough.

I believe that the government has shown a good disposition until now, showing an increasing openness, which we find satisfactory. It would only need to go a small step further and I believe that we would be ready to fully support its efforts in that direction.

We have other concerns with this bill. As I said earlier, we will be bringing amendments throughout the legislative process leading to passage of Bill C-8.

I mentioned before the widely held voting shares of the financial institutions, including the banks. The concept of widely held shares was used to avoid the problems I raised earlier. But this has caused more problems, since with these widely held shares, any person holding a mere 10% of the shares—the maximum soon to be 20% of the shares—has effective control over the bank and the board of directors.

In the past, we have mentioned and wholeheartedly supported the proposals of the Quebec association for the protection of savers and investors. Its 12 proposals call for a greater democratization of the decision making process and of the board of directors of the banks and financial institutions in general.

These proposals are as follows. It may be time for the finance minister to pay attention. While he portrays himself as the great champion of democracy, he has allowed the boards of directors of the banks to act as if they were feudal lords and to completely ignore the needs of the small shareholders and investors. They do not even need the support of this majority of shareholders to appoint each other to key positions. I appoint you, you will appoint me, and we will keep things in our little inner circle.

The Quebec association for the protection of savers and investors' proposals are as follows, and we support them and will continue to support them strongly.

First, the association asks that the positions of chairman of the board and chief executive officer be two separate positions.

Second, the association asks for a reduction of the barriers regarding election to the board of candidates chosen by the shareholders, instead of candidates being chosen exclusively by the board or by the executives in place and instead of a system where I appoint you, you appoint me and we appoint ourselves.

Third, the association asks that the number of boards where a member can sit at the same time be limited. To avoid conflicts of interest, this might be a good idea.

Fourth, the association asks for the implementation of a process that is more democratic for the election of board members, through votes that are separate and cumulative and without any restriction to the list previously drawn up.

Fifth, the association asks for the elimination of potential conflicts of interest between board members and those who supply goods and services to the institution. Too often we see a board member who is also part of a business that supplies goods and services to the financial institution. It is easy to make such a business flourishing in such an environment.

Sixth, the association asks that it be mandatory for financial statements to be submitted for review and discussion during the shareholders' annual meeting.

Seventh, the association asks that the directors' compensation policy be submitted to the shareholders' approval. It would be interesting if most shareholders could determine what amount a board member receives for the services he provides.

The association asks for the adoption of a code of procedure for shareholders' meetings.

The association calls for businesses to fully record the minutes of all shareholders' meetings and to send those minutes to all shareholders.

The association calls for a reduction of barriers to the right of shareholders to make proposals for and during shareholders' meetings. They do not have that right today.

The association calls for giving securities commissions the right to decide if shareholders' proposals are in order. It is the board of directors that has that right at present; consequently, this right is exercized only by a very small group of people.

The association calls for limiting the powers granted by proxy to executives for shareholders' proposals not yet discussed by the shareholders or for extending these powers with corresponding means to all shareholders having registered a proposal.

Moreover, the association calls for giving access to all shareholders in the name of the real shareholders. Finally, it calls for relaxing the legislation in order to allow for communications between shareholders.

Those are proposals to improve decision making within financial institutions to ensure that decisions are not made by a small number of people on behalf of the majority of shareholders, who are small shareholders.

We would have liked to see these proposals included in the minister's bill since, as we said earlier, banks and boards of directors of banks especially operate in a somewhat archaic, feudal way that is not quite democratic. The association has done excellent work up until now to heighten people's awareness about the fact that they own a few shares, but that they do not have any say. A limited number of individuals all have the power to determine what is good for all the shareholders and what is not.

Throughout the process, we are going to propose amendments relating to matters of this type. In the event we obtain a favourable response from the government, hon. members can be assured that we are not in opposition just to oppose anything the party in power happens to present. If something is good, we will support the government's efforts. In the past seven years we have demonstrated that we are prepared to support good provisions coming from government for the good of the population in general. We are not here to block the progress of government, particularly when the public interest is very much involved, as is the case with reform of the financial institutions. We shall continue to work very seriously in order to improve this bill.

The minister tells us, moreover, that the bill is in place in order to improve the environment in which all Quebec and Canadian businesses evolve, so that they may better face the major challenges that arise, particularly as borders are opening up, as globalization sets in. As a result, major competitors that are highly efficient internationally will be able to compete in our markets, and we and our businesses will be able to compete with them anywhere in the world.

As disciples of globalization, we support this policy and this government approach. However, we are well placed to see that the government gives up when the time comes to take action in very specific areas to support business. It is simply not there for them.

I am going to give a few examples—we will be coming back to this a bit later in the session but I think this is a good time to do it—examples relating, for example, to gasoline and petroleum products. Instead of going in the right direction and increasing the powers provided under the Competition Act to hold major oil companies accountable and allow us to take steps to prove that there is collusion among them to set prices that are detrimental to consumers, the government chose not to do anything. It chose not to strengthen the Competition Act, not to suspend the excise tax for a while, which would have given a reprieve to independent truckers who are being gouged at the pumps. The government also chose not to suspend the GST on heating oil for a while to give a break to those who use that type of heating fuel.

Some businesses that rely heavily on oil for their finished products have seen their costs go up by 15% to 20%. This is a huge increase. It is their profit margin. But the government did not come to their help.

As for employment insurance, we asked that the system be improved and we also asked for lower contributions, particularly in light of the tragic situation of labour intensive businesses.

Just take the restaurant business. During the election campaign, I was made aware of the fact that in the restaurant business 40% of the taxes paid by businesses are payroll taxes. This is enormous. It is more than the income tax paid by these businesses to the federal government.

There again the government should be sensitive to the plight of Quebec businesses. Instead of saying “we have the answer, we reformed the financial sector and thus ensured the profitability of businesses”, the government should do something else.

The same goes for shipyards. Why did the federal government, which claims to care about the development and growth of high potential businesses, not implement the shipbuilding policy that we have been advocating for years?

We will come back with the bill and we hope there will be good provisions from the government, because before the election it seemed prepared to pass the bill introduced by my colleague from Lévis.

Mines are a very promising sector in terms of expansion and job creation. The mining sector is not what it used to be. It has been modernized over the years and is very capital intensive. In Quebec alone it accounts for 17,000 jobs. However, it is suffering considerable problems due to fluctuations in international prices.

The government could have drawn on its willingness to help businesses, increased, for example, financial provisions for mining companies. It could have increased tax deductions for exploration, and to give the country a shipping and rail transportation network that would make the mining sector in Quebec and Canada more competitive.

There is no mention of that. Generally, the government talks of supporting business but when it is time to do something specific, it is not there.

In the case of e-commerce as well, it is said that over the next three years 180,000 jobs could be created in Quebec and Canada. The federal government has not shown any desire to shoulder this sector. One hundred and eighty thousand additional jobs is a lot. There are 95,000 at the moment.

In short, these are examples, and we will be coming back to them. For the time being, the financial sector is under consideration, thanks to Bill C-8. Rest assured that, if the government responds favourably to our amendments, we will support this bill.

In the meantime, it must demonstrate a little greater openness. There is already a little more than there was last year. We hope that by the time the bill is passed it will be a matter of fact.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.


Peter Stoffer NDP Sackville—Musquodoboit Valley—Eastern Shore, NS

Mr. Speaker, it gives me great pleasure to rise in the House today to discuss Bill C-8, the financial sector reform act.

The member for Regina—Qu'Appelle, who has been a member of the House since 1968, has been a very active member of the finance committee. A former colleague of the House did yeoman work for the people of Canada and for the House of Commons, Mr. Nelson Riis. Mr. John Solomon did great work in the finance committee by bringing forward financially related matters to the House of Commons for all Canadians. It gives me great pleasure to congratulate them and thank them for their work on behalf of all Canadians and our party.

We could not help but notice that members of the Canadian Alliance were patting themselves on the back, saying what a great job they had done and how the Liberals had incorporated many of their aspects into the legislation. We in the New Democratic Party would also like to congratulate our member from Regina—Qu'Appelle for many of his motions and ideas over the years that are finally incorporated into the bill. Also, I will be splitting my time with the great member for Winnipeg North Centre. I will take the first 10 minutes and she can take the remaining 10.

I will go over some of the positive aspects of the bill. Before doing so, let me indicate that the bill is 900 pages thick. It changes 4,000 statutes of legislation. It is incredibly complex. There is no one in the House or in the country, even with an array of lawyers, who can figure out exactly what it all means in the end.

Anyone who says he or she understands it completely is simply not telling the truth. I certainly do not profess to know all about it nor could I even attempt to, but our member for Regina—Qu'Appelle has studied it thoroughly. He and his staff have gone over it fairly extensively and have come up with their own concerns about and recommendations on the piece of legislation.

One positive aspect of it is that it expands the access to the payment system, which is one of our long held positions. This is a measure that increases competition by allowing insurance companies to offer chequing deposit accounts. Most important, and this is something that I personally really like seeing, it helps credit unions compete by allowing the creation of a single national service entity to support credit union membership. This is a long held New Democratic position.

Also, as members know, there are a lot of people throughout Canada who have complaints about banks. Besides bashing the post office, bashing the banks in one way or another, whether it be for service charges or closure of an institution or facility in a rural town, is one of the great Canadian pastimes. We bash the weather, the post office and banks.

An article appeared in a daily newspaper in Nova Scotia on Saturday about something that Scotiabank has done. It is simply outrageous that Scotiabank, a fine reputable institution like that, would send out to unsuspecting people in the country cheques in the amounts of $500 to $5,000. They sent these out mostly to senior citizens, saying, “here you go, folks, here is a cheque for $500 to $5,000”. A lot of people had no idea what this was all about until they cashed the cheque and spent the money. Then they found out that in essence it was a cash advance on their credit cards. They did not ask for it. No one told them it was coming. It just appeared in their mail one day.

Mr. John MacLeod, the business editor of a daily newspaper, pointed out quite accurately that someone in Scotiabank should have his or her head taken off for this one. It is absolutely scandalous that a bank with this reputation throughout Canada, one of our longest serving institutions, should do that to unsuspecting people. It is simply misleading. It is like the negative billing option with the cable companies. That is exactly what that bank did. As long as banks partake of that kind of practice they will never have the confidence and goodwill of Canadians that they need in order to move forward in the financial sectors.

If we had a Canadian financial services ombudsman and a consumer protection agency, which the bill offers, it would start the consultation process whereby the banks can legally be forced to provide a low cost account. This is a position we have held for a long time. We have to offer those people on low and, in many cases, no incomes the opportunity to use financial services at a low cost that is more beneficial to them.

I must say in jest that for anyone to say this will get people off the social assistance rolls, it simply is not on, as much as we would like to see that happen in a very positive way. I could not quite understand why the secretary said that. That simply is not on.

The bill also formalizes a process of collecting data on small business lending and does not expand the banks' business powers into the areas of auto leasing and insurance networking. This is a long held position of ours, in spite of a recommendation by the MacKay report which said that they should.

Some of the negatives in the bill are very clear. It abandons the wide ownership rule, which means that instead of the 10% ownership rule it would be 20%. That means we could have two people very closely related to one another owning 40% and 60% and so on. That consolidates too many financial services into very few hands.

We believe that down the road the bill and other legislation that will probably come to follow it will eventually lead to full bank mergers and full institutional financial mergers. That would mean that instead of having the broad range of competition within Canada that we see today or that we have seen before, we would see a lot more competition from foreign interests such as Europe, the United States or Asia. That may or may not be a good thing for Canadians, but one thing is clear: a lot of Canadians have no deep understanding, no clear understanding, of what the legislation means to them in their daily lives. Another thing the bill does, which is rather ironic to be talking about, is concentrate far too much power in the hands of the Minister of Finance; we call it the new banking czar.

In the area of parliamentary reform, where we are talking about loosening the powers of the PMO, various ministers and the government side in order to give members of parliament more say, clout and power in representing their constituents, it seems rather ironic that we are talking about a bill that does the complete opposite and gives far too much power to the Minister of Finance. In fact in many ways the devil is in the details. By obscuring the facts, the full impact of the legislation may not be understood by many people. The bill is riddled with regulatory clauses changeable by order in council, which means that the order in council can ignore the wishes of parliament and make changes by decree, thus avoiding the House of Commons and any legitimate debate in the future.

Another failure of the legislation is something the United States has but we have yet to incorporate. I am talking about a community reinvestment act. This would provide the opportunity to force the banks to reinvest a certain percentage of their profits in their local communities. This would be the same as it is in the United States. We believe it would go a long way in assisting the more extremely rural areas.

One thing the legislation does not do is to in any way stop rural bank closures, which is something that a lot of people in rural Canada are greatly affected by. For example, what about the closure of the banks in Sheet Harbour or Musquodoboit Harbour or anywhere in the country where there are small rural communities that need access to financial institutions? The legislation paves the way to make bank closures even quicker, especially of the branches. The argument of course is that foreign companies like ING Bank and others can come into the country and have virtual banking, with no need for the bricks and mortar.

However, a large percentage of Canadians depends on bank branches. They need to see a teller. They need to understand specifically how to fill out the forms for their regular chequing accounts, how to fill out their bank books and everything else. In fact last week one of my constituents passed on and his wife was left with no idea of how to balance a cheque book or do any aspect of banking. Her husband did it all. In how many families in the country does that situation exist today? If the male member of the family passes on and leaves everything to his wife, as in that particular case, can she understand all the intricacies of her financial account and everything else? This happens all the time.

Financial Consumer Agency Of Canada ActGovernment Orders

12:50 p.m.


Dennis Mills Liberal Toronto—Danforth, ON

Mr. Speaker, the point made by the member for Sackville—Musquodoboit Valley—Eastern Shore about making sure that our rural communities are not being forgotten in the legislation is a valid point. This was a key point raised in the caucus task force of the Liberal Party.

Along those lines I have another point that is in line with the member's thoughts. In 1993 we had a crisis in the country, and it was the attitude of the major financial institutions toward small businessmen and businesswomen. The access to capital for these men and women was a travesty. A number of us from all parties on the House of Commons committee on industry worked together and designed a report for the House which was called “Taking Care of Small Business”. The focus was on businessmen and businesswomen.

I am concerned that in the last few months I have been hearing from my constituents more and more that the old attitude is starting to creep back in, with the banks losing their sensitivity toward the small business fabric of the country. So throughout the debate I hope that members from all sides will remind each other that there should be a very direct signal given to the financial institutions that the commitment of the House toward small businessmen and businesswomen will in no way, shape or form be diminished by the legislation.

Financial Consumer Agency Of Canada ActGovernment Orders

12:55 p.m.


Peter Stoffer NDP Sackville—Musquodoboit Valley—Eastern Shore, NS

Mr. Speaker, I thank the hon. member from the governing party for his statement. He is absolutely correct. We have to keep our eyes on the ball regarding individuals in small businesses. They are the backbone of our economy. We have to ensure as legislators that any financial bill that comes forward takes into account the special interests and needs of small business. If we all do that then the bill will be a positive one and will move things forward. We must think not only of small businesses in the rural areas but of young people getting into young entrepreneurship programs throughout the country. We must make sure they have access to capital within Canada which meets their needs and meets the changing demands of our new economy.

Financial Consumer Agency Of Canada ActGovernment Orders

12:55 p.m.


Judy Wasylycia-Leis NDP Winnipeg North Centre, MB

Mr. Speaker, I am pleased to follow my colleague from Nova Scotia in putting on record concerns and comments from the New Democratic Party with respect to Bill C-8. It is interesting to note that the debate has just turned to the whole issue of sensitivity of banks to the communities they are supposed to serve and, by implication, the role of government in ensuring that the banks live up to those commitments.

I will begin my discussion by referring to the government's own discussion paper of June 1997 from the task force on the future of the Canadian financial services sector. In that report it is noted that:

Canada, like other modern economies, has traditionally relied on government to provide some assurance that financial institutions are reputable and well-managed, and that they will meet their commitments. In our society, it is accepted that ownership of a regulated financial institution is a privilege, not a right.

It is important that we look at Bill C-8 from that vantage point and from those words by the government and acknowledge that it provides a significant framework for financial services in the country today.

I would assume that there is also an acknowledgement on the part of government in Canada today that access to basic banking services is a right. I hope I am correct in making that statement. I hope that is the basis upon which we are proceeding, because it is fundamental to this discussion and critical to the analysis of this very comprehensive, very detailed, very complex piece of legislation before us. We could spend months analyzing and scrutinizing 900 pages of legislation. It is a very important piece of legislation and I hope it gets a thorough debate in the House before it goes on to committee.

There are many areas of concern with respect to the bill that I could focus my attention on, but I want to do one thing this morning and that is to focus on the question of access. Are we as members of the Parliament of Canada fulfilling our responsibilities to ensure that in legislation, in the laws of the land, people, regardless of where they live and regardless of their economic circumstances, have access to basic banking services?

I would suggest that right now that is not being fulfilled today and it will not be fulfilled under the legislation. I would assert that many individuals and many communities are being discriminated against by the actions of the big banks and the inaction of the government. It has been noted before in the House that many communities have been hit hard by bank closures. They have virtually wiped out that right to access personalized banking services.

The hardship facing rural communities, many that have lost all of their banking services, was mentioned this morning. I do not need to mention the many older neighbourhoods, inner city communities of large centres across the country that have been abandoned by the big banks. I would like to give a case study of Winnipeg North Centre.

Winnipeg North Centre, which has a voting population of well over 60,000, is noted for the significant degree of economic hardship and high element of poverty. It is known for its higher than average proportion of senior citizens. It is known for the strength of small businesses that have built the community. While they are prepared to stay, they are suffering daily because institutions like the big banks are abandoning our communities. That community, which I represent, has suffered enormously by the actions of the big banks and the inactions of the government.

In the almost four years that I have served as the member of parliament for that area, we have seen six bank branches close. In a very needy and very committed community, we have been left with a very small number of banks branches that people can access for basic banking services. It is an appalling situation. People, especially low income citizens, senior citizens and small businesses, have been left virtually abandoned without access to banking services.

What has the government said in the face of this? First, delays in the legislation, which offers a tiny initiative, a step forward with respect to bank closures, have caused the problem. The horse is out of the barn. The government's delay with respect to the review of the financial services sector, and now the delays with respect to putting in place meaningful proposals to stop bank closures, has caused the problem. This is the issue we are dealing with today.

What is the point in talking about improved access for low income Canadians when banks in their neighbourhoods keep closing? What is the point of talking about access for people living in poverty who want to get off of welfare and break that cycle of dependency when in fact there are no banks left to access? That is the kind of situation we are talking about.

What is the point of a bill that talks about four months' notice of a closure, when there are no other alternatives? What is the point of legislation that does not first ensure that the banks are living up to their commitments and providing the services that people have need of, expect and are entitled to by right of belonging to a civilized society?

The citizens in my community have been dealt one blow after another. Each time one of the big banks closed a bank branch, they rallied. They came forward and said that a message had to be sent to the big banks and to the government saying that they would not stand for this. They are hurting their very livelihoods and security as members of the community. We continue to run up against a brick wall.

We have tried to appeal to the sensitivities of the big banks, to no avail. We have tried to get through to the Minister of Finance, to no avail. What did he say in response to appeals to him to intervene? He said the government could not really tell a private business what to do and believed that the Bank of Montreal had lived up to the spirit of the bill. That most recent closure in my community was really the linchpin and the final straw in terms of people's feelings of being abandoned. This bank did not even give constituents in my area four months' notice. I realize that the bill has not passed. We have nothing to hold over banks' heads to say that they have broken the law. Is there not enough goodwill on the part of the banks and is there not enough power in the hands of the finance minister to make a difference and make banks to live up to the most basic elements of human decency and dignity? There was no adequate notice nor a single bit of consultation with the community about the impact that it would have on people in that area, not one shred of decent consultation.

The bill states that in some cases if there are questions about profitability, there should be consultation. I know for a fact that all of the branches which are closing in my area are profitable. The profits are just not big enough to satisfy the big banks.

Surely the government has a role to play in providing some access to basic banking services. Surely the legislation has to live up to that basic fundamental question. Are services available to all citizens regardless of where they live and how much income they make? Is access guaranteed as a right by virtue of belonging to a civilized society? The situation is no.

The government and the banks have failed communities like mine just because they are hard pressed, low income, older neighbourhoods and inner city communities; just like they have abandoned rural communities. They have failed those communities. The bill hardly does anything to ensure that the situation is reversed and that fundamental right of access is guaranteed to all citizens. That is one reason why we cannot support Bill C-8.

I hope that in the committee process the government takes these concerns seriously. I hope it is open to amendments to ensure that there is some meaningful process in place to ensure that people have access to banking services, that communities are not abandoned by the big banks, that there is some recognition of the loyalty that customers have had in the banks over the years and that banks are not left to simply play the casino global marketplace without concern for the communities that have made them profitable in the first place.

Financial Consumer Agency Of Canada ActGovernment Orders

1:05 p.m.

Canadian Alliance

Ken Epp Canadian Alliance Elk Island, AB

Mr. Speaker, I listened with interest to the speech. I have a lot of sympathy for what she is saying. There are a certain number of people in our society who do not have big bank accounts and who simply need the basic banking services in order to cash a cheque. Sometimes it is a welfare cheque or payment for work. All they need is the ability to cash the cheque. I agree with her that it should be available.

However, to say that banks be forced to keep a whole branch open in order to provide that service is perhaps stretching it. For example, she said that banking services are a right. A lot of us think access to food is a right. We do not want to have our Canadian citizens starving to death.

Would we then pass a law that states that grocery stores must stay open in a community whether they continue to lose money year after year? If they lose money, where will the money come from? Eventually, they would not be able to pay their operating expenses and their employees. They would not be able to stay in business. Would she apply that same criterion to grocery stores as she would to banks?

I am sympathetic to what she is saying. However, I think there are entirely different ways of providing basic banking services than just forcing branches to remain open when they are experiencing a loss or perhaps are way under target in terms of what the profit in a branch should be.

Financial Consumer Agency Of Canada ActGovernment Orders

1:10 p.m.


Judy Wasylycia-Leis NDP Winnipeg North Centre, MB

Mr. Speaker, with respect to the issue about how banks are different from the neighbourhood grocery store, we all have to keep in mind that we are talking about regulated financial institutions that have a responsibility to serve society according to a prescribed framework and set of laws. There is a responsibility upon the government to ensure that those regulated financial institutions live up to their obligations as set out under the law. We are dealing with something quite different than corner grocery stores.

As the government itself acknowledged in a discussion paper, and as I said earlier, a regulated financial institution is a privilege, not a right. There are certain powers and benefits that have been bestowed upon the banks and that commitment to the Canadian people has to be honoured.

On the question about viability and serving communities, I want the member to know that I am not just talking about people living in poverty who need to find access to basic bank accounts. I am talking about entire communities that happen to be inner city, older neighbourhoods, not suburbia and wealthy communities, that are being abandoned by the banks because they are just not producing a big enough profit for the bank in question. I am not talking about keeping banks open that are not profitable.

In the case of Winnipeg North Centre, eight bank branches have closed in just five years. There is no information about whether or not they were profitable because the banks are not forthcoming and because the government does not require them to prove that they are profitable.

The legislation makes provision for a consultation process in the event that there might be seen to be some negative impact on the community. I am telling all members that there is a huge impact on my community. I do not think it is probably different from a lot other rural communities and older neighbourhoods.

The fact of the matter is the banks are calling the shots. They do not have to prove whether or not they are making a profit. They do not have to deal with the impact on the consumers, citizens and the spirit and health of that whole community. They are abandoning communities and we will have to pay the price down the road. The government has a responsibility to hold the big banks to account for that basic principle and to ensure some element of decency on that whole question of how many bank branches are reasonable, where they should be and what communities should have access to them.

Financial Consumer Agency Of Canada ActGovernment Orders

1:10 p.m.

Canadian Alliance

Inky Mark Canadian Alliance Dauphin—Swan River, MB

Mr. Speaker, I listened with interest to the response to the last question. I have the same problem. I come from a constituency which is rural based. Over the last many years the banks have basically left many of the small communities. In fact, there was a case where one of the major banks gave up and the credit unions took over.

I know that a lot of the small communities have a small population base. The credit unions tend to be very people and service oriented. I can say that from my own experience having sat on a regional credit union board for many years. What would be the member's solution to ensure that financial institutions stay in small communities in rural Canada?

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1:10 p.m.


Judy Wasylycia-Leis NDP Winnipeg North Centre, MB

Mr. Speaker, that is a very important question. How do we deal with that situation?

First, we try to get the government to amend its legislation to have some teeth when it comes to bank branch closures. The onus should be on the banks to prove that they are not profitable. There should be a moratorium on any closures until the community has been informed and there is evidence that a particular branch is not viable.

Second, we should give greater support to credit unions that are reaching out, filling the vacuum and creating some hope for rural communities and as in the case of my constituency in the inner city urban communities as well. We have to do moret.

Financial Consumer Agency Of Canada ActGovernment Orders

1:10 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Mr. Speaker, it is with pleasure today that I rise to speak on Bill C-8. Since it is my first time rising in the House for an actual speech since the resumption of parliament, I would like to take this opportunity to thank the people of Kings—Hants for the honour and privilege of representing them again. I also thank them for their unswerving support in the fall byelection when my leader was elected as their representative during a very critical time in the history of our party. I do not think they wanted me back. I think they wanted to keep my leader just a little bit longer but the unnecessary fall election precipitated changes for which we were not in control.

The global financial services sector has undergone more changes in the last 10 years than in the previous 150 years. No major regulatory reform has occurred in the financial services sector for the last 10 years.

In 1993 Canada was ahead of the U.S. in terms of regulatory reform affecting the financial services sector. Today we are far behind the U.S. in this critical area of our economies, particularly with the last vestiges of the Glass-Steagall act being gone now from the U.S.

The government has dilly-dallied, dithered and delayed at every opportunity. It has really been dragged to this point, kicking and screaming, to actually address some of the issues of the financial services sector.

In 1998, when the MacKay task force came out with a comprehensive set of recommendations, which balanced consumer interests as well as competitiveness issues for Canada's financial services sector, it represented what should have been considered a recipe, not a buffet.

Instead of taking that report, working with it, treating it respectfully for its tremendous contribution to the debate of this important public policy area and implementing many of the recommendations, the government chose to cherry-pick some of the more politically palatable recommendations of the MacKay report.

In fact, the government made public policy based in many cases on perception as opposed to dealing with the realities. Public policy and changes in public policy should always be based on reality and not on perception.

Before I go further, it is important that I declare I have involvements in the financial services sector. I have an involvement with an investment bank, not one of the chartered banks but with an investment bank. As such, while there is no direct linkage or effect of the legislation on independent investment banks, it is important that I do declare that as an interest.

Currently Canadian chartered banks are delivering on the whole, if one looks at it from a realistic perspective, reasonably good value to Canadians. We have a stable and an efficient system with among the lowest service charges in the industrialized world. We have 500,000 Canadians working for banks with a payroll of $22 billion, and exports of $50 billion per year of services. Ultimately, at the end of the day, over seven million Canadians actually own bank shares directly or indirectly.

It is important that we balance consumer interests, which are essential and need to be adhered to, and the interests of bank shareholders because in most cases they are the same people. Many of the investment vehicles that Canadians are relying on for their future post-retirement financial well-being, such as pension funds or mutual funds, have been invested in banks.

It is very difficult to invest in a mutual fund in Canada without investing in a bank. The percentage of the TSE that is consumed by banks in terms of investment capital is significant. We are fooling ourselves if we try to divide consumer interests from shareholder interests consistently because the two can be balanced, and the MacKay report demonstrated that.

It is also easy to bash banks, with the possible exception of politicians. Bankers are probably the least popular group in Canada. We should remind ourselves that it is not a legitimate reason to attack banks. We should actually base our attacks on some specific issues as opposed to simply doing it because by bashing banks we can make ourselves as politicians marginally more popular.

There are several positive features in the legislation. A negative feature, however, will be that it will lead to a dramatic increase in the level and layers of bureaucracy. The legislation will give the finance minister unnecessarily great and sweeping powers to intervene. It will require banks to publish information that arguably is of no practical purpose except to appease some of the advocacy groups.

On the positive side, the ownership and capitalization rules will be less restrictive. It will be easier to start a small bank. That is very good for the level of choice that Canadians will have ultimately in their banking services. Banks will have wider investment powers.

I am looking forward to changes in the co-operatives act, which will enable credit unions to compete more directly with banks and improve the competitiveness factors and services available to Canadians particularly in rural communities.

Foreign banks will have more flexibility in Canada. While that is a positive feature from a consumer's perspective, and we are supportive of foreign banks having greater access, we should recognize that foreign banks are gobbling up market share in Canada. Whether it is an MBNA or an ING, whether it is in the credit card business, small business lending or Internet banking, foreign banks can come in here without the impedimenta of bricks and mortar or legacy costs of bricks and mortar and compete directly with our Canadian owned banks on very specific areas of niche businesses.

By cherrypicking those businesses it expose the napes of our Canadian banks to a lot of competition. These foreign banks are not necessarily playing by the same rules in terms of commitments to communities, reinvestment and that sort of thing.

While we are supportive of greater levels of foreign competition from the perspective of individual consumers, we have to be careful that we do not handcuff our Canadian banks, expose them to this competition, and at the same time jeopardize the returns of many Canadians who are investing in these banks.

There will be greater access to the payment systems for life insurers, securities dealers and money market mutual funds. That will lead to greater levels of products and services and a greater variety of products and services for Canadians.

There will be a more transparent merger review process. It is still lengthy and demanding, but at least a basic set of ground rules is established by the legislation. At the end of the day the finance minister will still have the final say. I believe that the competition bureau should at the end of the day be able to rule on this matter.

We should not be sucked back into the vortex of the highly politicized merger debate that erupted in the House a couple of years ago when the Liberal caucus witch hunt on banks occurred. They referred to it as the Liberal caucus task force on the financial service sector, but it turned out to be a witch hunt.

The ministerial discretion provided by the legislation in any number of areas is significant, with sweeping powers to approve or reject mergers and order effective changes to the payment system.

I have heard my colleagues in the New Democratic Party refer to the minister becoming a banking czar of Canada with the legislation. I do not think that is far off. With the leadership considerations of the Liberal Party of Canada, the dual role of a finance minister who may be a leadership candidate at some point in the future, the potential for politicization of this very important public policy debate is high.

The last time the minister had an opportunity to negotiate with banks to get conditions from banks such that the interests and concerns of Canadians were met adequately before mergers were to proceed, he simply slammed the door. I believe on December 14, 1998, he just slammed the door on bank mergers for short term political interests instead of negotiating..

At that time the Bank of Montreal and the Royal Bank had committed, if the mergers were allowed to proceed, to a doubling of lending to small business from $25 billion to $50 billion. They also committed to the establishment of a new bank for small business lending, a reduction in service charges and an increased number of staffed outlets. These are some of the types of things that actually could have benefited Canadians if legitimate discussions and negotiations were to have occurred, but they did not because of politics.

The five month approval process for a proposed merger is a long time in the hyper-competitive global financial services sector. We recognize the importance of the process but we also have to recognize the speed with which changes occur and conditions change in this environment.

The cross pillar merger restriction is a matter of government policy but it could, in many ways, be wrongheaded if we look at what is happening elsewhere. In fact it is intuitive to expect that a cross pillar merger would lead to greater levels of security not less, and that it would be beneficial.

As a result of the legislation, the government will have power to intrude to a greater extent in the financial services sector than in any other Canadian industry. Banks and other large financial services firms with equity in excess of $1 billion would need to do public accountability statements on an annual basis describing their contributions to the Canadian economy and to society, such as small business lending practices, charitable donations, community involvement and the location of any branches opened or closed.

I have banks in small and rural communities in my riding. It is very important that we work with the banks to ensure the continuation of services in these communities. We have to be cognizant that banks are not the only necessary service being provided to Canadians by the free market. Certainly financial services are necessary to all Canadians but so is food and shelter.

The logical corollary of the government's arguments, as presented in the legislation, would be that ultimately we would need to force companies like Sobey's and Loblaws to provide free food to Canadians regardless of income. In fact people building apartment buildings would have to build some extra apartments because there will be a need to provide free apartments by the private developers to individuals regardless of income.

We should start first with Canada Post. Certainly Canada Post, as a crown agency, should be giving out free stamps to people regardless of income if the government is to follow its own logic.

We need to ensure that a bank closure in a rural community goes through the same process as a grocery store closure. Surely, food is as important as banking services.

What I am trying to point out is that there are near toxic levels of hypocrisy in the legislation in the way it treats one sector and does not deal with the realities of what we enjoy in Canada as a free market. There are now more banking outlets in Canada as a result of technology than there have ever been. Any one of us can withdraw money at a grocery store with a bank card. We can use also use bank cards to buy groceries.

Technology has made a huge impact on improving banking services for Canadians at the grassroots level. I believe that in areas where the Bank of Nova Scotia has no branch outlet it has been working proactively with the post office in order to provide some level of service. There is nothing at the end of the day, particularly for senior citizens, that beats actually dealing with a human being as opposed to an automated teller.

The credit unions' ability to take over banking services in some of these communities is the type of transition that needs to be encouraged. Sometimes the government's approach to some of these issues is very wrongheaded and is based on the anachronistic notion that somehow governments should regulate and overregulate until eventually the private sector will do everything the government tells it to do. The effect of that over the long term, if we apply it to every sector in the economy, would actually be very negative for all of us.

We will be supporting the legislation because by and large the positive changes are long overdue and simply cannot be delayed further. This piece of legislation was another victim of the early election call.

We are supporting the legislation despite some of the less positive elements of it. Another area of the legislation that on the surface sounds very good but has some real problems is the new consumer agency.

First, there is no reason why the agency could not report directly to parliament as opposed to the minister. The agency would be paid for by the financial institutions. Ultimately this agency, as well as the increased regulatory burden on our agencies, will lead to increased costs for the banks. There is no way around that. The costs will ultimately be passed on to consumers or will result in a lower return for about seven and a half million silent Canadian investors who are depending on the returns for their retirement incomes.

The new agency and the regulations could have a less than desirable impact. As a result of the law of unintended consequences, many of the positive impacts that people foresee from this agency and this greater level of regulation may not come to pass. Canadians might see higher costs for banking services as the costs are passed on to them in the end.

I am concerned that we may be further exposing our already disadvantaged Canadian banks in terms of the global environment. We seem to be handcuffing Canadian banks while exposing them to foreign competition.

Under the legislation bank holding companies in Canada would need ministerial approval for most categories of permitted investments. In the U.S., financial holding companies need only notify the federal reserve board 30 days after making a non-bank acquisition. These are some of the disadvantages that could lead to significant problems down the road for the Canadian financial services sector.

I hope that in 10 years we do not look back at this legislation and other policy movements by the government and see that they were in fact the beginning of or the planting of the seeds of a foreign owned Canadian financial services sector.

We all like to complain about the banks. I have done it a lot myself. However, if there is a worse thing for a guy like me from Cheverie, Hants county, Nova Scotia than dealing with one of the big banks based in Toronto, it would be dealing with one of the big banks based in Zurich, New York or Chicago, a bank with no vested interest in the future of this country. The need for strong, Canadian-owned financial entities becomes particularly important in the context of national unity.

I hope we do not look back at this legislation and other decisions that are being made in this place at this time as having been the beginning of the end of a strong, Canadian owned financial services sector.

Some of the Luddite elements of the legislation are at best egregious and wrongheaded. Less generously, I think they are dangerous for the future of the Canadian owned financial services sector and these jobs that Canadians depend on as we enter an exciting 21st century.

The opportunities available to Canadians in the global environment are almost limitless, but we have to ensure that the Parliament of Canada and Government of Canada do not limit those opportunities by trying appease to the politics of the short term.

Financial Consumer Agency Of Canada ActGovernment Orders

1:30 p.m.


Shawn Murphy Liberal Hillsborough, PE

Mr. Speaker, I appreciate the opportunity to speak to Bill C-8 which would implement the new policy framework for Canada's financial services sector.

At the outset I wish to reaffirm the government's commitment to provide a fair and balanced framework that preserves the health and strength of the sector, while at the same time allowing its evolution to proceed to the benefit of all Canadians.

The new policy framework is guided by four overriding principles. The principles are: First, the financial institutions must have the flexibility to adopt to the changing marketplace to compete here and abroad.

Second, there must be vibrant competition. This is necessary to ensure a dynamic and innovative sector.

Third, consumers, and I am talking about personal consumers and small businesses, regardless of income, regardless of whether the consumers be big or small or whether they reside in rural or urban areas, must receive the highest possible standard of quality and service.

Last, the regulatory burden should be lightened wherever possible, consistent with sound, prudential and public interest objectives.

Although each of these fundamental principles that guide the new framework is equally important, I have chosen to focus my remarks here today on the issue of consumer protection.

As we all know, the financial services sector plays a very important and vital role in the everyday lives of Canadian consumers. Financial institutions take consumers' deposits, supply access to payment services, such as cheques and point of sale debits, and provide mortgages and car loans. In short, financial institutions permeate every aspect of our financial lives.

While having regard to everyone, I am talking today about consumers and businesses who are all dependent on financial institutions. It is vital in Canadian society that consumers have protection when dealing with financial institutions.

The dramatic changes brought about by globalization and technological innovation, which other speakers have indicated here today, have contributed to a much more complex business environment. While consumers benefit from a far greater choice of products and services, these choices at the same time are being made more difficult by the greater complexity of products offered by financial institutions. Consumers often lack information to enable them to make the wisest choice. This lack of information may leave them exposed to unfair or abusive commercial practices.

To promote a better balance in the delicate relationship between consumers and financial institutions, it is important that the legislation, Bill C-8, ensure that consumer rights are protected adequately. The legislation, which was introduced here last week, would address the situation and better protect and empower all consumers of financial services.

Bill C-8 would implement a number of measures that go further to protect consumers than any previous legislation and, at the same time, and this is important, would address the need to provide financial institutions with an environment that is conducive to their continued growth and success.

We believe that in order to be effective any consumer protection legislation must include the following criteria: an assurance that all Canadians have fair access to Canadian banking services; accessible oversight and redress mechanisms; and strong consumer safeguards including an accountability framework.

With respect to access, I would note that many Canadians, for a variety of reasons, do not have access to basic financial services or are unable to access services in a way that fully meets their needs.

As members may recall, an agreement on access was reached in February 1997 between the major banks and the federal government. In that agreement the major banks committed to improving access to basic services for low income individuals by establishing minimum identification requirements for opening accounts and for cashing government cheques.

Bill C-8 would legislate key elements of that agreement. Banks would be required to open an account for anyone who has basic identification, and neither employment nor a minimum deposit will be a condition of opening such an account.

The legislation includes regulation making authority regarding the provision of such a low cost account. The government has agreed however to hold off introducing regulations for the time being. Instead, it has recently concluded a memorandum of understanding with individual banks regarding the provision of the low cost account.

While the low cost account offers a range of choices to consumers, it adheres to certain standards that will ensure that all Canadians have access to a bank account at an affordable price. This will help ensure that all Canadians have access to basic banking services and will address the concerns of consumers who do not feel comfortable with the new technology of automated banking services.

The financial consumer agency of Canada would monitor the banks' compliance with these undertakings and would consult with consumer groups representing low income Canadians as to how the self-regulatory approach is working.

Should the FCAC find at any point in time that the banks are not respecting the terms of the agreements, the government at that time will not hesitate to exercise its regulation making authority to require banks to offer a standard, low cost account with specified features.

Another area that merits government attention is branch closures. The legislation calls for a four month notice period to provide consumers, especially low income and disabled consumers, with the ability to make alternate arrangements. It also consults with community leaders, to bring everyone into the picture for a proper consultation. This issue was recognized in the MacKay task force and it is being legislated.

The financial consumer agency of Canada would be a regulatory agency, an information gathering and public advocacy agency, with the ability to regulate a whole milieu of consumer interests that are now dispersed throughout other government departments.

In summary, I state that the framework of Bill C-8 ensures that consumer protection will be at the forefront of Canada's financial services sector for the 21st century.

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1:45 p.m.


Peter Stoffer NDP Sackville—Musquodoboit Valley—Eastern Shore, NS

Mr. Speaker, the hon. gentleman from the governing party mentioned the positive sides of the bill, but there are negative sides to it as well. He mentioned consumer protection but there is no community protection.

There is no protection to stop a bank from closing its branches in rural areas affecting people who desperately need those services. There is no community reinvestment act in the legislation which, by the way, the United States has in its legislation.

Would the member and his party be amenable to amendments in these areas in future discussions of the bill?

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1:45 p.m.


Shawn Murphy Liberal Hillsborough, PE

Mr. Speaker, the learned member raises two issues. The first issue was with regard to bank closures and communities. My response to him is that banks have a fiduciary duty not only to their depositors who in many instances are low income and disabled Canadians but to their shareholders. They cannot be legislated to keep banks open when they are not making a profit.

Regarding accountability, banks will be required to file annually an accountability statement so that Canadians from coast to coast will be able to judge how banks are contributing to the economy and to society generally from a regional basis, from a provincial basis and from a national basis.

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1:45 p.m.


Peter Stoffer NDP Sackville—Musquodoboit Valley—Eastern Shore, NS

Mr. Speaker, I welcome the new member for Hillsborough who replaced George Proud who did yeoman's work in parliament on behalf of Prince Edward Island. I not only thank Mr. Proud for his work, but I also welcome the new member to the House of Commons.

The bill provides an awful lot of power to the Minister of Finance, the new banking czar, as the member for Regina—Qu'Appelle put it. We have grave concerns about what that kind of power would do to the Minister of Finance. Has he or his party thought about the ramifications of the bill to the people of Canada?

Financial Consumer Agency Of Canada ActGovernment Orders

1:45 p.m.


Shawn Murphy Liberal Hillsborough, PE

Mr. Speaker, I assume the member is speaking about the merger issue. Everything has to go through OSFI. It has to go to the competition bureau.

Any merger has to go through a lot of steps, but it has to go back to government. We cannot have mergers being approved by some other agency. They have to come to the government and the Minister of Finance.

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1:45 p.m.

Canadian Alliance

Ken Epp Canadian Alliance Elk Island, AB

Mr. Speaker, I am delighted to be able to enter into the debate on Bill C-8, which will establish a new organization of government, the financial consumer agency of Canada. It also involves the amendments of a number of acts.

I am aware that we cannot use props so I cannot show the people of Canada the size of the bill without actually reading from it. I will just open it at random here and read one of its sections:

That subsection (6) does not apply in respect of a particular transaction if the bank is acquiring control of an entity whose business includes an activity referred to in paragraph 2(b), other than a specialized financing entity.

That is only one of three parts of section 390(7) on page 480 of the massive bill. We obviously see that the task of the opposition in bringing a critique to the bill is mammoth indeed. For us to go through and decipher the meaning of even one paragraph almost stretches the brain to capacity.

I will not be able to go through it entirely. Nor is that the purpose. However I want to go on record by saying that I agree with the bill in principle. We should send it to the finance committee forthwith, so that we can do some detailed study, along with our researchers, and listen to the witnesses that come before it.

I had the privilege of being on the finance committee in the previous parliament. We spent quite a bit of time on what was then Bill C-38, which was essentially the same bill. We heard from many different interest groups. Some were very much in favour of the particular legislation going forward. Others came to us with very specific concerns.

In fast summary I could mention three of the groups had great concerns. Those who ran automobile dealerships and automobile leasing companies were very concerned that we should not, in amending the way banks operate, give them the ability to become involved directly in automobile leasing. I have not read every word in the 900 page document, but as far as I know that prohibition is still maintained and we will not have the problem of having banks in automobile leasing.

The second group was the insurance people. They do not want banks to sell over the counter insurance because it would be deemed very unfair in the competitive field. I am not saying I agree with it but that was their argument. They made us a very strong presentation. I believe it is upheld in the legislation as well.

The third group that was very significant in its impact statements to the committee represented the down and outers in society, the people who do not have large financial holdings and in many cases no holdings at all.

They require basic banking services. They were concerned with monopolization and the concentration of the finance industry in fewer and fewer holding companies that they would be even more disadvantaged. They gave presentations to the committee. I believe the bill addresses their concerns to some degree. I have some philosophical questions about the way it does, but it is an interesting concept.

I will talk very briefly about different parts of the bill, the financial consumer agency of Canada act. It is appropriate to commend the Secretary of State for International Financial Institutions for the openness that is apparent on that side of the House in listening to the debates and incorporating into the legislation the various concerns we as a party and Canadians are bringing to the debate.

I also commend the member for Prince George—Bulkley Valley, one of our members in the Canadian Alliance, who has worked very hard in bringing forward ideas, concepts and principles that should be incorporated in the way our financial institutions are run. He has done commendable work. It is interesting that many of the things that he first came up with in his report are incorporated in the legislation.

To all the people out there listening in radio land I say that the work of a good, effective opposition is useful in parliament. We think we could do better if we were on the government side, but we on the opposition side are influencing the government. We should debate each other in a respectful manner, not the way we were forced to debate in the last election campaign. We should debate issues forthrightly and talk about the different options. Then debate is useful. An effective opposition is very important.

I also emphasize that we need a very strong financial sector. Sometimes the in thing to do is to bash banks. Many of us receive complaints from our ridings about the way people are treated in banks. We have to respond to them. Usually we try to get them in contact with the right people so their problems can be solved. Many of the complaints we hear about banks are specific.

Having strong banking and financial sectors is absolutely critical. We ought not to get into a malaise of complaining about them all the time, although it is appropriate through legislation and other presentations for us to put forward the wishes of our constituents and the fact that they deserve good service from banks.

Consequently I appeal to the banks to make sure they run their businesses properly. They should do this so that legislators do not have to come up with too many 900 page documents to regulate and control how they do their business. My first choice would be for them to make their decisions in an honourable fashion so that the public does not have reason for complaints or to come to us as legislators with a cry to bring in regulations and laws to control and restrict the behaviour of banks.

In a very real way banks have to exercise a serious social conscience. They have to make sure that they are treating their customers fairly. They have to make sure that all depositors and all people who have invested in banks are giving their money in trust to organizations that are credible and solid. The last thing we want is a financial organization that is tenuous and cannot be depended upon. It is very important for the banks to do this work. It is also very important for the government to bring in regulations and a framework for financial institutions which permit that to happen.

I will comment on some specifics with respect to the Bank Act. There is a change in the way banks are governed. One important point is that the ownership of banks is now more flexible.

Greater Toronto Airport AuthorityStatements By Members

2 p.m.


Derek Lee Liberal Scarborough—Rouge River, ON

Mr. Speaker, I congratulate the Greater Toronto Airport Authority for its recent initiative in instituting a new ground transport taxi permit system at Toronto's Pearson International Airport. The GTAA has demonstrated industry leadership in developing a fairer system, which benefits the travelling public.

The new system lowers economic barriers to entry for new taxi drivers. The cost had exceeded $200,000 in the secondary market. The public will no longer have to bear the imputed cost of this entry capital. The number of licences issued will now match demand, and market sensitive fees will generate fair revenues for airport overheads.

I also thank the city of Mississauga mayor and council for working with the GTAA, allowing access by licence holders to city taxi permits on a restricted basis for use in connection with airport ground transport.

The public is now seeing better service and more efficiency at Toronto airport. We are excited by the future potential of our new airport terminal now being built by the hardworking Pearson airport team.

AgricultureStatements By Members

February 12th, 2001 / 2 p.m.

Canadian Alliance

Leon Benoit Canadian Alliance Lakeland, AB

Mr. Speaker, most people in the world struggle from day to day to buy the food they need, but most Canadians have earned enough already this year to pay for their food for the entire year. The reason is that farmers in Canada are so efficient and so good at their jobs.

What thanks do they get? I thank and many Canadians thank farmers, but the government really does not seem to care. If it did it would be fighting to remove export subsidies and other trade distorting subsidies in Europe, Asia and the United States. That would increase the price farmers get for their grain.

If the government cared, it would lower taxes and unfair user fees so farmers' costs would go down. If the government cared about farmers, it would fix the regulations that hurt farmers. It would lower freight costs and allow new marketing opportunities for farmers.

Unfortunately the government's record on agriculture speaks for itself. Now is the time for the government to do the right thing. It really would not hurt to thank farmers for providing the best, lowest priced food in the world.

Karl David HoefelStatements By Members

2 p.m.


Sarmite Bulte Liberal Parkdale—High Park, ON

Mr. Speaker, I rise today to salute and congratulate one of my constituents, Mr. Karl David Hoefel, who on Friday, February 2, received the medal of bravery from the Governor General of Canada.

Bravery decorations recognize people who risk their lives to save or protect others. Specifically, the medal of bravery is awarded for acts of bravery in hazardous circumstances.

On August 28, 1999, Mr. Hoefel saved two women from drowning at North Beach Provincial Park. When he heard cries for help from swimmers who had been swept to the deeper waters of Lake Ontario, Mr. Hoefel and his wife entered the high surf on an air mattress and, guided by the voices of the victims, made their way to the closest one and helped her back to shore.

Mr. Hoefel then re-entered the dangerous waters and battled waves until he reached the second woman approximately 1,500 metres away from shore. Both struggled to hold on to the rapidly deflating mattress as they drifted to shore.

Mr. Hoefel certainly deserves to be recognized for his actions, which can only be described as selfless and heroic. He is truly an example to all Canadians.