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.