Debates of March 27th, 2001

Financial Consumer Agency Of Canada Act

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

moved:

Motion No. 2

That Bill C-8, in Clause 19, be amended by replacing line 15 on page 11 with the following:

“committed by a natural person, and $500,000”

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

moved:

Motion No. 9

That Bill C-8, in Clause 98, be amended by replacing lines 24 to 26 on page 62 with the following:

“out by the affiliates of the bank; h ) the best interests of the financial system in Canada; and i ) the impact of the transaction on the security and soundness of the bank, on direct and indirect employment at the head office and branch offices of the bank, particularly professional and specialized positions, on the location of the centre of decision making and management of the bank, on the needs of consumers, on the business and activities of the bank, and on the future prospects of the bank in world markets, the best interests of Canadians and, where the bank operates principally in one region, the best interests of those living in that region.”

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

moved:

Motion No. 10

That Bill C-8, in Clause 113, be amended by replacing line 21 on page 72 with the following:

“tail deposit account available to each customer for a monthly fee of 3 dollars and that has the prescribed”

Motion No. 11

That Bill C-8, in Clause 125, be amended by replacing line 14 on page 79 with the following:

“on either of those activities. For greater certainty, the closing of the branch can only take place for reasons of financial non-profitability.”

[Dick Harris, Canadian Alliance, Prince George—Bulkley Valley, BC]

moved:

Motion No. 14

That Bill C-8, in Clause 314, be amended by replacing lines 32 to 36 on page 478 with the following:

“entity,

(ii) the association is permitted by regulations made under paragraph 396( a ) to acquire or increase the substantial investment; or

(iii) the entity is an association and the investment is not restricted by regulations made pursuant to paragraph 396( d );”

Madam Speaker, I would like to speak primarily to Motion No. 14, which was put forward by the Canadian Alliance.

Let me preface my comments by saying that one of the things the government sought to do as a result of the MacKay task force, and indeed, one of the many recommendations in the MacKay task force, was to give flexibility or give provisions in the bank legislation to allow for the progressive restructuring of the credit union system in Canada.

We have met continually with the people from Credit Union Central, the credit unions out in B.C. and representatives of that group. They have told us that they are prepared to restructure their operations so they can expand their service to Canadians, so that in the event there are bank mergers of domestic banks and there is a perception that competition is going to be tough, they want to fill that void. In order for them to do that, they have to restructure their operations. They want to be able to bring more branches in under an umbrella type of structure. In order to do that, they need to have some flexibility.

I believe I am correct when I say that the 10-50 rule applies to credit union structures now. As I recall it, one can either have a 10% interest or a 50% interest only. I am sure that the parliamentary secretary will tell me if I am on the wrong track here, but I believe that is the gist of it.

What they want is to have flexibility on the participation between the umbrella group and the branches that would be operating under this new business structure. I know the parliamentary secretary is warm to this proposal by the credit unions and by Credit Union Central.

This amendment would in fact give the credit union parties looking for this change the flexibility to set up their new structure and the flexibility to fill the void in customer service at the ground floor consumer level.

I know that the secretary of state for banks and financial institutions knows about this desire on behalf of the credit unions. I am of the opinion that the government has perhaps said to the credit union people who have been talking about this that it does not have a problem with this but that perhaps the credit unions should show the government how to do it. The government has sought the advice of the people in the credit union structure.

This amendment reflects a suggestion by the credit union people to the government on how they can be given that flexibility. I will close here and just assume that the Parliamentary Secretary to the Minister of Finance will see the wisdom of this amendment and ask his colleagues to say yea when it is called.

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, I want to tell you how proud I am that the occupant of the Chair is a woman. Women often have to work really hard to get certain prestigious positions. So, it is always with pride that I take the floor when you are presiding over our proceedings.

First, I would like to say that the Bloc Quebecois supports Bill C-8, and to reassure certain groups, we agree that the bill ought to be passed as quickly as possible so we can have a swift and smooth transition.

Nonetheless, the bill as it stands does not meet all the requirements of certain groups.

The most important thing for Quebec is to protect the largest bank in Quebec, the National Bank. This is a very important concern for our nation. This bank is the Quebec's largest bank, and Quebec businesses have their money there.

This bill will make the National Bank more vulnerable than the big Canadian banks, and that is unacceptable. This bill provides for a three tier system, as far as individual control of banks goes.

I would like to explain once more something I have already talked about in the House, and I think I made myself clear at the time. Let me just go over the general concept to show the people who are watching, as well as you, Madam Speaker, what is going on in that system that we want to create and that seems acceptable to us.

As we all know, for the big Canadian banks, the Royal Bank for example, voting shares that one shareholder can own increase from 10 to 20%. So, for banks with assets worth $5 billion or more, one shareholder could own 20% of the bank's shares.

The problem is, however, and this is the case in Quebec, that small banks, those with assets worth less than $5 billion, the Minister of Finance is allowing one shareholder to own up to 65% of the bank's voting shares. This means that one shareholder could purchase 65% of the shares of the National Bank. That individual would control the assets of the Quebec people. It is incredible. Why is there such a difference?

Why is one shareholder allowed to own 20% of the Royal Bank's voting shares, but when it comes to the National Bank, a single shareholder, it could be a foreigner, if he has the money and holds 65% of the bank's voting shares, could decide to transfer the bank's head office, lay people off, transfer the bank's assets, transfer Quebecers' money outside the country because he is a foreigner, and the whole company will be administered in a foreign country?

So, those are the people's concerns. What will happen? In fact, jobs will probably be lost, and it is unacceptable to think that only one individual can manage most of this financial institution's assets. That is why we are denouncing this situation.

However, there was a certain change while this bill was being studied. Mr. Landry, now the Premier of Quebec, made demands that were incorporated in this bill. However these demands are like guidelines on the reclassification of the banks that were included before in schedule 1, banks with equity capital of less than $5 billion, of which the National Bank is one.

The idea was to include these guidelines in the bill, but they remained guidelines. It is a small step, but not enough for us. We must really ensure that these guidelines are incorporated in the bill. I would like to quote some of them:

All transactions involving a reclassification will be evaluated on the basis of merit. It will have to be shown that the operation will add to the bank's growth potential and that it will lead to better customer service.

The guidelines also state:

In determining whether a transaction involving a reclassification is in the public interest, the Minister of Finance shall take into consideration all the factors he considers relevant, including the security and solidity of the bank, the direct and indirect jobs, the location of the decision-making centre and the management of the bank, the needs of consumers, the bank's business and activities and the bank's prospects for the future in the context of world markets.

These elements, as they are not in the bill, may be amended by the minister as he sees fit. This is a matter of concern for us. It is all very nice that these guidelines were accepted, but what bothers us is that they are not included in the bill. They may be respected or not, as the minister sees fit.

The public as well as parliamentarians must put a great deal of trust in the minister right now, because he tells us is completely sincere. However if a new minister comes along, because ministers do change, whose philosophy is different from that of the current minister who wants us to trust him, how could we be sure that what we ask this new minister with a different philosophy will be respected? It is very important that this be included in the bill.

This process has to become more transparent and it should not cause us any more problem. Right now, there is something of a sword of Damocles over the National Bank because everything is up to the minister and nothing is set out in the bill. If it were, we could always refer to the legislation to show what the intent was, but it is not the case.

As I said earlier, we support the bill. We have worked very hard. My colleague from St-Hyacinthe—Bagot has even tabled a brief with the committee. He has put forward points that were included in the bill. However, we feel that we have been elected to protect the interests of Quebec consumers in our ridings. We are somewhat concerned right now, and when I say somewhat, I really mean to say that we are very concerned about the situation in which this bill puts the National Bank and the small banks with less than $5 billion in capital.

I raise the issue, but this is a concern not only for members of the Bloc Quebecois, but also for the directors of the National Bank. In view of this, the National Bank decided a few weeks ago to adopt a series of rules in order to prevent a hostile takeover at its expense. Looking for strategic partners, the president of the National Bank said that maintaining the head office in Montreal was simply not negotiable.

The shareholders passed two resolutions to protect the National Bank against a hostile bid. They agreed to drag things out so the directors would have more time to examine other bids. They also agreed to drop the limit on the number of common shares that could be issued by the bank. These measures clearly illustrated the concerns generated by the new environment.

With this bill, the Minister of Finance is giving himself the power to determine at his discretion, the future of Quebec's major banks. As I mentioned before, we find it unacceptable that this discretionary power has such sway, more even than the law itself.

In concluding, I would like to say once again that we will support this bill, but we would like the Minister of Finance to take into account the concerns of Quebecers and of the members of the Bloc Quebecois.

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

Madam Speaker, before I deal with my three amendments I want to say publicly in the House that I support the position of the credit unions in terms of amending the legislation to make it easier for them to establish a national financial institution.

I moved a similar amendment in committee and it was turned down. We had the support of all four opposition parties: the Alliance, the Conservatives, the Bloc and me for the New Democrats. We had a recorded vote in the committee. Interestingly enough all the Liberals voted against the particular amendment asked for by Bill Knight, the CEO of Credit Union Central of Canada. The credit union made its position very well known to the government, to the members of the committee and to the House of Commons. It wants an equal and level playing field with the banks.

The reason it needs this kind of amendment is that there is a different culture in the credit union. It is one of a co-operative where one entity does not own another entity, which is the case with other financial institutions. In the credit union there is one member, one vote. It is truly a democratic structure.

Without an amendment to that effect it will make it very difficult for the credit unions to establish a national credit union system where people can go with their bank cards from one province to another and still do their financial transactions with the Credit Union Central of Canada. I indicate our support for the amendment in that regard, which is part of this group as well.

I have three specific amendments before the House today in this grouping. One of them I referred to earlier in general in the last round of debate: the changing of the penalties for the Financial Consumer Agency of Canada. Under the agency there will be all kinds of power, regulations and activities it can do, but when it comes to penalties, the maximum penalty for an individual who is in violation of the act is $50,000 and for a financial institution it is $100,000.

Financial institutions are very large. Some of them have revenues in excess of $10 billion a year. Some of our banks are extremely large. I am suggesting in our amendment that we move the penalty for financial institutions from $100,000 to $500,000. The reason is that it makes the penalty more real, more meaningful for very large financial institutions than just a penalty of $100,000. It is more in accordance with the size of their assets and the kinds of business they do.

Our banks are doing very well. If we look at their balance sheets and their retained earnings and profits in the last few years, we see that they have gone up in many ways in an astronomical sense. I am thinking of Royal Bank, TD Bank, Scotiabank and Bank of Montreal, which is having a few more problems but is still doing very well. All the big six banks are doing very well as we speak. I think a penalty that is more a reflection of their size would be $500,000 rather than $100,000.

The second amendment I am proposing is found in Motion No. 10. It is to set up a no frill bank account and to have a charge for that of $3 a month. I am very interested in hearing what the parliamentary secretary has to say about this point. I am ashamed to say that I have moved what is almost a Liberal amendment today.

If we look at the government white paper in June 1999 it said that there should be a no frills account established for 12 transactions for a fee of $3 to $4 a month. In the bill itself the government dropped the idea of having a no frill account for $3 a month. What I am doing is moving a Liberal amendment, saying that there should be a no frill account and that the maximum charge should be $3 a month.

Why are we doing this? We are doing this because many low income people have difficulty with the cost of bank transactions today. In my riding of Regina—Qu'Appelle I represent most of the inner city in Regina. The poverty rate is extremely high. Many people are on welfare. Many are earning minimum wage. Many are struggling to make ends meet and have difficulty with bank service charges.

Some banks have on a voluntary basis been introducing special accounts with lower charges, but many people still find these charges to be very steep and very excessive. We should have legislation which says that there should be a minimum number of charges for each and every Canadian, rich or poor, and that the maximum charge for such an account should be $3 a month.

What is wrong with that? Our banks are making a lot of money. Our banks are also making a lot of money on the poor people. We do not have, as has the United States, a community reinvestment act that forces banks to invest a certain amount of money in the communities they take their money from. We do not have many of those kinds of regulations. It is not onerous for a bank to be asked to establish a no frills account for low income people.

I know my good friend from Souris—Moose Mountain, who represents the neighbouring riding to mine in southern Saskatchewan, certainly supports the idea as well. He also has a number of low income people in his riding, a number of aboriginal people in his riding who would certainly be in support of establishing this kind of an account.

It speaks to equality, to a more egalitarian society and to the common good. It speaks to opening up financial institutions to every Canadian, regardless of the size of his or her pocketbook. It speaks to what parliament should speak to: improving the common good.

I am very anxious to hear what the parliamentary secretary will say on behalf of the government about this issue. I remind him once again that it is really a Liberal amendment. It was taken out of the government's white paper of June 1999 when it suggested a no frills account to the tune of some $3 per month.

The third amendment in my name is in Motion No. 11 which provides for an amendment to the Bank Act to ensure that branches could only be closed for reasons of non-profitability.

Today banks will often close branches even though they are profitable, which leaves many communities without banking services. What I am saying in this motion is that if a bank branch is profitable it should not be closed down. If it is not profitable, then it should have the right to pull out of a particular community.

We have had some interesting things happening on the prairies. In the last year the Bank of Montreal sold a number of its branches to credit unions in Saskatchewan, Manitoba and Alberta. I have a couple of examples in my own riding of Regina—Qu'Appelle where the credit union has taken over some branches from the Bank of Montreal. The Bank of Montreal in this case has made an accommodation with the credit union movement to provide a very important service to a particular community. I have seen in a couple of communities in my riding where people appreciate that the service is there. They do not have to drive an extra 20 or 30 miles to another town to be provided with banking services.

This again speaks to fairness and equality. Coming from rural Canada, it probably speaks to the fact that rural Canadians should not be discriminated against in terms of banking services. If the banking service is profitable, if the branch has made money over the years by providing loans to farmers, to the small business community and to consumers in a small town, it should not be able to close down that branch. We think that should be part of the legislation before the House today.

It is not only rural Canada. In parts of urban Canada, the parts of inner cities where there is a lot of poverty, often a branch will pull out even though it might be profitable but not as profitable as it might be in a wealthier suburb.

One could go on at length in terms of what should be said here. However I refer interested members to a presentation that was made to our committee by the Public Interest Advocacy Centre when it spoke about the accountability of banks, branch closings, and the services that should be provided to Canadians and the community at large.

Once again I commend these amendments to the House. They are straightforward. In particular, I look forward to the response from the parliamentary secretary when he talks about the $3 a month bank account for consumers. I am also interested in seeing what his reactions are to the suggestion of making amendments for the credit union movement.

I have not seen his briefing notes, but he will say that the government will try to accommodate credit unions through regulation. In other words, he is asking us to trust him, trust the government, trust the minister and trust the bureaucrats. Even the minister responsible for sport will be cynical about some of that. The parliamentary secretary will say that they will bring in the proper regulations so that the credit unions will be on a level playing field with the banks.

The credit union movement is saying that is not good enough. The Credit Union Central of Canada has said that. Various centrals across the country, such as the Van City Credit Union in British Columbia, have also said that. They want an amendment to the legislation.

If we do not do that in this House, I predict they will go to the other house and lobby senators to make the change. It will be sent back to the House of Commons and we will be debating this piece of legislation and amendment in a few weeks' time.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I would like to go back to the comments made by the hon. member for Drummond on the importance of the whole issue of the classification of banks and the degree of ownership.

For the benefit of those who are listening, I should point out that the new bill on financial institutions establishes three categories of banks: major banks, that is those with equity of $5 billion or more; medium size banks, that is those with equity of $1 billion to $5 billion; and small banks, that is those with equity of less than $1 billion.

For each of these categories, the degree of ownership is different. For example, in the case of major Canadian banks, such as the Royal Bank, an individual cannot hold more than 20% of the voting shares, while 80% of the shares must be widely distributed among the public.

The bill has a major impact on medium size banks, such as the National Bank in Quebec. For these banks, including the National Bank, the new degree of ownership is 65:35. In other words, a single individual can own up to 65% of the voting shares and thus have full control over the National Bank, while the other 35% must be widely distributed among the public.

This new provision leads us to fear the worst in Quebec. This bill discriminates somewhat against the National Bank, the largest in Quebec, because the treatment of the Royal Bank, the largest in Canada, where one individual is allowed to own a maximum of 20% of voting shares, and the National Bank, where one individual may own up to 65% of voting shares, creates discrimination which is unjustified under the circumstances.

We are told that the purpose was to improve the National Bank's funding flexibility. I have often asked the Minister of Finance why one individual holding 65% of National Bank shares confers more flexibility than 65 individuals with 1% each. I have never had an answer. These new provisions are cause for alarm.

Recently I read comments by economists to the effect that this is no big deal, because the National Bank's equity is increasing by leaps and bounds anyway, and soon will be in excess of $5 billion. Such an analysis is wrong.

It is certain that the bill states that the banks can be reclassified. This means that, should the National Bank one day have over $5 billion in equity, it could be classified as a major bank and therefore the voting share split would be 20%:80%. In other words, with this bill a single individual could own 20% of voting shares and the other 80% of voting shares would be public, rather than the present 65%-35% split.

The point on which I disagree with the economic experts is that, under this bill, which must be read carefully, the Minister of Finance has three years to change the bank's classification. That time limit can be extended as he sees fit. In other words, even if the National Bank attains the $5 billion equity ceiling, the Minister of Finance could decide to wait three years before reclassifying it as a major bank subject to the 20%:80% split of individual and public voting shares.

Not only may he wait three years before recategorizing it, but he has the authority to extend this period. In other words, even with equity of $5 billion and more, the National Bank would not automatically be recategorized as a major bank and would therefore still be in the 65:35 category, that is 65% of shares held by one person.

There is a danger in this. Not only is the National Bank the biggest bank in Quebec, but it is also the bank that finances SMBs. As well, Quebec is proud to have such a large bank, which, through the contribution of people like Mr. Bérard, has grown at record speed to become the flagship it is today.

Concern about this is so great that even Mr. Landry, former finance minister and deputy premier, and now premier, of Quebec, wrote to the federal Minister of Finance last June 2 to suggest a number of public interest criteria for evaluating any banking operation involving a mid-sized bank.

To my great surprise, just before the election, the Secretary of State for International Financial Institutions had even agreed to these criteria being part of the banking bill. He had even signed beside the four criteria suggested by Mr. Landry, saying “Yes, provided that it is not only for Quebec, we can Canadianize—as it were—these criteria, and make them part of the bill”.

A few days later, the secretary of state changed his mind. I do not know why, but after putting his signature on this document, he changed his mind and subsequently refused to include these evaluation criteria in the bill.

There is no substantive difference between Bill C-38 as it was before the election and Bill C-8 today. When the Minister of Finance and the secretary of state released the new Bill C-8, they also issued press releases and attachments, one of which concerned the evaluation criteria for operations involving mid-sized banks, such as the National Bank.

On reading these criteria, we realized that the government had understood the message on additional criteria. We were satisfied with that, but only half satisfied. What we called for, and this is the heart of the amendment, it is the essence of the amendment we are proposing this morning, is that these criteria, which parallel the bill and are to be used as guidelines by the Minister of Finance in making a decision regarding the shares in a medium size bank, such as the National Bank, must not be left to one side and left out of the decision making process, but incorporated in the heart of the Bank Act, to ensure reference is made.

In other words, we are not telling the government to reject all transactions involving the National Bank. That is not the intent. We want to ensure additional security, additional criteria leading to the best possible decisions benefiting Quebec's economy and finances and the financial sectors of Quebec and Canada too.

We are not asking the government to be obtuse or to reject every proposal. We would be the first to criticize this sort of attitude, because we want our financial and banking institutions to move ahead and to take their place in the world, the National Bank and others too.

So, it is with an open mind that we are proposing these amendments and we hope that the government will accept them. I would say, and this is evidenced by all the representations that we have made, that since the beginning of the process, the McKay study, the white paper and the bill before us, the Bloc Quebecois has always looked positively at the reform of the financial institutions act, particularly since it is three or four years late. The delay is getting longer by the week, considering how quickly the financial sector is changing in Quebec, in Canada and in the rest of the world.

We hope this bill will be quickly passed. However, would it be possible for the government to show some openness for once? We are not asking much; we are not asking for a complete overhaul of the bill. We are simply asking the government to reassure Quebecers who are concerned about the new provisions that specifically apply to the National Bank. They hope that this new reform of financial institutions will have a positive impact on the financial sector and will not raise concerns about takeovers that would be detrimental, particularly to the interests of small and medium sized businesses in Quebec.

I urge the government which, through its secretary of state, has already agreed to the four conditions, the four criteria proposed by Mr. Landry in June, to include these criteria in the core of Bill. It recently tabled a document, along with Bill C-8, that includes these criteria, albeit in a different format, but it includes them nevertheless.

So, I am asking the government to simply show some openness by taking that document and including it directly in the core of the bill. If it does that, the Bloc Quebecois will support the bill.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, it is with pleasure that I rise to speak on these specific amendments in Group No. 2.

First, with regard to Motion No. 2 and the stiffer penalties for violations of the rules relative to consumer protection, while I understand the hon. member's notion of making the punishment even more onerous, the fact is that the legislation would give a greater amount of intrusion and regulation of the financial services sector than any other sector or industry in Canada. I understand the hon. member's philosophical foundation for the amendment but I disagree fundamentally with his intention.

On Motion No. 9, I generally agree with the notion that we need to improve and increase levels of flexibility for the Canadian financial services sector players which include the banks, credit unions et cetera. The greater level of flexibility in ownership rules for small banks makes a great deal of sense if we are serious about increased levels of competition. I would not agree with Motion No. 9 in general because I think it is contrary to the principles of the MacKay report and to the general direction that I believe is sound in terms of moving toward greater levels of flexibility in the financial services sector to increase the level of competition and ultimately services to consumers.

Motion No. 10 is very well placed. While I may disagree with it, it is important that the hon. member presented it. It points out the hypocrisy on the part of the Liberals. It was Liberal policy to have a $3 basic account. Now the Liberals are lining up opposed to it.

Are we prepared to have these kinds of rules for every industry? For instance there is the food distribution business. Clearly food is a necessity since we cannot live without food and we also cannot live without shelter, unless we were to pass laws that would require grocery stores and distribution companies or real estate developers to provide a basic level of service to people at very low levels of cost or perhaps even free. It is incorrect and not logical for us to impose these same levels of onerous restrictions and over regulation on the financial services sector.

If I disagree with some elements of the legislation, they are the parts that would lead to a greater level of intrusion and over regulation of the financial services sector than any other industry in Canada. The motion in some ways would make it even worse, more onerous and unfair.

Probably it is good politics to present motions that are anti-bank but it may also be very bad public policy if in fact our interests are consistent with the long term interests of Canadians. In general, greater levels of regulation can also lead to greater levels of cost of compliance and ultimately higher levels of services charges for consumers and/or lower returns for bank shareholders. The bank shareholders include about seven million Canadians indirectly or directly who are counting on their long term returns from their investments, particularly for retirement income.

Motion No. 11 deals with prohibition of bank closures for any reasons but non-profitability. It is very intrusive and difficult to determine. Frankly this gets into issues of bookkeeping and cost allocation. It would be almost impossible to implement the principle of the motion.

Again, there is a greater level of transparency and there is a process put in place for branch closures in the legislation which goes quite a long way further than we have seen in the past.

I do agree with the hon. member in terms of the notion that the credit unions should be engaged more actively when there are going to be branch closures in order to ensure that every possible avenue has been identified and pursued to ensure continued services to communities, particularly smaller communities. I think the Bank of Montreal and the credit union movement have created a very positive example of how that level of co-operation can benefit consumers and citizens in smaller communities.

I think it was about a year ago when a number of Bank of Montreal branches closed in the western provinces, but instead of waiting for public backlash the Bank of Montreal pre-emptively negotiated with and announced a deal with the credit unions, which resulted in only a minimal disruption of services to consumers in those communities. I support that kind of initiative.

In terms of Motion No. 14, again I am supportive. It is consistent with the underpinnings of the co-operative movement, the credit union movement and the distinct democratic culture of the credit union and co-operative movements. If we are serious about enabling the credit unions to compete more effectively with banks, the amendment in fact makes a great deal of sense, because it enables them to compete and at the same time remain consistent with the democratic underpinnings of their movement.

As a result, I think this is a positive amendment and it is regrettable that the government does not support it. On the one hand the government is saying it wants to create greater levels of competition from the credit union movement, and on the other hand it is not providing the legislative vehicle through which to ensure that the credit union movement can also take advantage of this greater level of competition. I support Motion No. 14.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Madam Speaker, I thank you for recognizing me at this time, which actually accomplishes a couple of goals. First, since I have had to stand five or six times to be recognized, I have been afforded needed exercise. Second, I appreciate being able to speak before the parliamentary secretary on this particular grouping because I can hopefully change his mind since I think he may have considerable influence on the way the votes are conducted on the other side. At least I would hope he has, although I sometimes even wonder about that.

Let me address the issues that are before us in this group of amendments. I will begin, of course, with the matter of the penalty that is proposed to be amended by the member from the Bloc.

He proposes that the maximum penalty be changed. In order to see how the clause reads now, I need to haul out this book, the bill we are amending, Bill C-8. It says the maximum penalty for a violation is $50,000 in the case of a violation that is committed by a natural person and $100,000 in the case of a violation that is committed by a financial institution. That is for breaches of the act and of the regulations made by the minister.

I want to draw attention to the fact that this states the maximum penalty, so I think arguments could be made in favour of this particular amendment. The maximum penalty right now is $100,000 and the amendment says it should be a maximum of $500,000. This does not mean it is going to be applied.

As a matter of fact, if we read the next section, which is not referenced in this amendment, it states that in assessing the penalty these are some of the issues which are to be taken into account: the degree of intention or negligence on the part of the person committing the violation; the harm done; the history with respect to previous convictions or violations; and any other criteria that may be prescribed.

In assessing a penalty for a violation, I am sure that a large bank, a huge financial institution, would, under that prescription, be given a larger penalty than a small credit union somewhere, depending on the severity of the violation. Yet at the same time, I am somewhat inclined to have a substantial penalty when a large business just will not comply. That could happen. I cannot imagine under what circumstances, but it could happen.

I think, for example, of a large but unnamed mall in Edmonton. When it first started in business we had the Lord's Day Act in place in Alberta, which meant that some days were available to families to spend together because basically all of the stores were closed and just essential services were provided. It was a wonderful time, actually, when I look back at it, when we could get together with our families. We had freedom. People were not obliged to go to work. It was the same day for everyone.

Then that particular mall said that if it were to be fined $10,000 a day every time it was open on Sunday that was a fair and reasonable cost of doing business. It just paid the fine and broke the law with impunity. There was no provision under the law to escalate the penalty; it was just a straight $10,000 a day. The mall gladly paid the fine and made a lot of money.

By the way, I believe that is where the erosion started. Then it went right across the country, so that working people now no longer have a day off each week that applies to all family members. Very seldom do we see a family being able to get together. Either mom has to work or dad has to work or one of the kids who has a job at the store has to work. They cannot be together.

That is an example of a penalty so small that the business was not compelled at all to obey the law. In that sense, I have a bit of a tendency to be in favour of just increasing the maximum. It would not necessarily be applied, but this amendment would put some teeth into this for those who were in blatant violation and who continued to be so.

I must hurry because I have spent too much time on that particular provision. The next motion is Motion No. 9. That has to do with the application of a problem specific to Quebec at this time but which could happen in other provinces as well. In order to preserve my time, let me simply say that I have an inclination to agree with it.

Motion No. 10 has to do with the provision that the banks should provide for a low cost account. I do not really believe that we should have this in legislation or in law, although I agree with the principle of it. I would much rather see the banks provide these necessary low cost accounts and advertise that fact.

If a bank were to have an ad in the paper that said there were a number of people in our society from whom they just did not make a great deal of money but for whom they felt obliged to provide a banking service at a low cost, I think the bank would get a lot of public relations benefit simply by advertising that and providing a service. The bank could ask small businessmen in towns and cities or wherever to support its business with their business. I think it would benefit the bank.

I agree with the principle that a person of limited financial means should have the ability to go into a bank and cash a cheque and to have a low cost bank account. That is definitely a principle I agree with. As I said, the only reason I would vote against this is that I think would be overkill. I also do not agree with putting in a fixed amount, because maybe the bank could do it for less. Maybe of necessity it has to be $4 and a bank would be in violation if we ensconced $3 in the legislation.

I am opposed to this particular motion on the basis that it is too specific, and I think the same goals, which I agree with, can be achieved by other means.

I turn now to Motion No. 11, also put forward by the NDP member, which proposes that the closing of the branches of a bank “can only take place for reasons of financial non-profitability.” I hate to say it, but this is a dreadful amendment.

I think it is a huge imposition on business operations. It is like telling farmers they could plant only a certain kind of crop and the only reason they could ever quit planting would be if they were not making money on it; otherwise, they would have to plant that crop. I disagree with that.

I believe the banks should have a certain degree of flexibility to open and to close branches based on an efficient way of providing services in the community. For example, let us say that there is a branch over here and there is a branch over there. With modern transportation it is now much easier for people to get around, so if the banks decided to have one branch operating in the middle instead of having two branches operating, it would mean the closure of two branches. Neither of them might be losing money, but the bank could be more efficient and provide a better service for less cost, including services for low income people. I do not think we should stand in the way of this. In this particular instance, I would simply say that I would be really hard pressed to support Motion No. 11.

The last motion is the one on the credit unions, proposed by the member for Prince George—Bulkley Valley. I propose that we heartily support it. This is where I want to get the ear of the parliamentary secretary over there and have him influence all of his Liberal colleagues to vote in favour of this very fine amendment.

I happen to believe in the credit union movement. My dad was a leader in the credit union in Saskatchewan for many years. He was on the board, on the finance committee and on the loans committee. He did all sorts of things. As a result of having grown up in that kind of an atmosphere, I guess, I am sort of inclined toward credit unions.

Over the years I have given some business to the banks for different reasons, but I have found that in a competitive market my dealings with the credit unions have been most satisfactory. I do not hesitate at all to give a little bit of free advertising to them here today. They can use this clip if they want to. I give them permission. I do not know whether the rules of the House of Commons permit that, but I certainly support the credit union movement and this amendment strengthens it. The reason we should favour this amendment is that one of the best things for the Canadian financial services industry is to have good competition, where we can say to our financial institutions “Treat me like that and I am out of here”.

I am going to run out of time here, but I remember when I had a bank loan for purchasing a car. I asked the bank whether I could pay the loan off more quickly. The bank said that I could but I would have to pay a penalty. Members would not believe it, but the total payment the bank wanted in order to have me pay off that loan early was greater than the sum of the remaining payments. I said to the bank that either it was nuts or it thought I was. I was not willing to comply with that. I just finished off my payments and said that if that was how the bank did business I would look elsewhere. Sure enough, soon I found another financial institution that pleased me more and I just moved my business to it.

That is the very best thing we can do: provide competition. Credit unions are one of the primary ways of holding the banks responsible and giving them some real competition.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, what I propose to do is deal with the motions in the following order: Motion No. 14 from the member for Prince George—Bulkley Valley; then those from the member for Saint-Hyacinthe—Bagot, the Bloc amendments; and then finally the amendments from the NDP member for Regina—Qu'Appelle.

Dealing first with Motion No. 14, of course the members on this side of the House do not need convincing about the importance of the credit union movement and the kind of expanded and enhanced role we would like to see them play in the Canadian economy by providing consumers with more choice and by providing more competition. That is a given. The Secretary of State for International Financial Institutions, when he spoke at committee, gave the undertaking that the government would work with the credit union movement to try to enhance its role in the Canadian economy.

With respect to this particular motion, which was actually put forward by the NDP at committee, I would just like to mention that the member for Regina—Qu'Appelle seems to argue that the legislation does not provide equal treatment to credit unions.

The credit union movement, when it came to the committee, was looking for preferential treatment. We cannot accept having treatment for the credit union movement that would be preferential to the treatment we have for other financial institutions.

Members on this side are not the only ones to work actively with the credit union movement. The Department of Finance has worked closely with it in developing Bill C-8. The resulting legislation responds to the need of credit unions for greater structural flexibility as they move to restructure their operations and become more integrated.

However with this new flexibility come prudential concerns resulting from a whole new set of ownership possibilities, most of them unknown at this point. Because the landscape is changing so quickly we must be concerned about the potential for prudential risks. The control requirement is necessary to safeguard against such risks and is designed to ensure the parent company has the power to intervene in situations where a subsidiary might get into financial trouble. These same provisions apply to other financial institutions such as large banks and insurance companies that are also widely held.

Given the broader risks associated with this new flexibility it is more prudent, in the government's view, to establish a general safety net or prohibition and to provide the regulatory flexibility to make exceptions as necessary. This is a common use of existing regulatory authorities. If unforeseen circumstances arise, a general prohibition allows us to err on the side of caution.

The change made to proposed subclause 396(a) at committee would broaden the scope of the regulation making authority and provide further comfort to the Credit Union Central Canada, CUCC, that the government had all the flexibility it needed to provide exceptions from the control requirements as necessary.

The Department of Finance is already engaged in an extensive drafting exercise to prepare the regulations stemming from Bill C-8. It has had early discussions with the CUCC on the possibility of drafting a regulation that would provide the required flexibility. Once approved, the regulations would have the same effect as legislation.

I now want to speak to Motion No. 9 by the hon. member for Saint-Hyacinthe—Bagot. This motion deals with the matters the minister might take into account in determining whether or not to approve acquisition of a significant interest in a bank.

The matters to be taken into account under proposed paragraph ( i ) of the motion are contemplated in paragraph ( f ) on the conduct of businesses and operations of applicants. Consequently, the minister shall have the legislative authority to take into account the matters outlined under paragraph ( i ).

Since there is no need to amend the legislation to allow the minister to take these matters into account, it was determined for reasons of clarity and transparency to have these matters set out in the guidelines.

The guidelines indicate the government's commitment to take these matters into account in category changes.

I will clarify a point made by the member for Saint-Hyacinthe—Bagot. In his speech he seemed to imply that a bank with assets of over $5 billion may not be subject to the widely held rule. Bill C-8 states that banks with assets over $5 billion would automatically be subject to the widely held rule.

We have other motions before us from the member for Regina—Qu'Appelle, the NDP finance critic, and I will now refer to them.

I will move to Motion No. 10, which deals with low cost accounts. The member for Regina—Qu'Appelle and others spoke about how the government and the Liberal Party have talked about the need for low cost accounts. The amendment from the NDP would amend the definition of low fee retail deposit accounts in clause 439(1) to specify that such accounts shall cost $3. The members opposite seem to be implying that we do not have a commitment to low cost accounts.

Bill C-8 in fact establishes the low cost account and that is exactly what the Liberal government has advocated for some time. Rather than reneging on our promise, the bill delivers on that promise. As members are aware, the Department of Finance has successfully negotiated low cost account memoranda of understanding with each of the major banks.

The views of consumer groups on the desired features of the low cost account were sought prior to negotiating the arrangements. Taking those views into account, the accounts adhere to certain standards, including a maximum monthly fee of $4 and the availability of some in branch transactions. Providing banks some flexibility in pricing and designing the accounts ensures consumers greater choice in obtaining low cost accounts that best meet their needs.

Motion No. 11 from the member for Regina—Qu'Appelle deals with branch closures. I will comment on that briefly. Our proposed reforms are intended to encourage financial institutions to be more responsive to the public without unduly interfering in the day to day business decisions of banks. Some members opposite have clearly pointed out that the motion presented by the member for Regina—Qu'Appelle is intrusive into the day to day decision making of banks.

Issues such as branch operating hours and closures are a matter for individual banks and the marketplace to decide. That being said, we believe consumers should receive adequate notice of branch closures to facilitate adjustment to the closures. Under our new policy framework, should a financial institution choose to close a branch it would be required to provide at least four months' notice. If the branch is the last one in a rural community, six months' notice would be required. The notice period would give the community an opportunity to discuss alternatives with the institution or to approach other financial institutions that could perhaps fill the gap. That deals with the motions in Group No. 2.

[The Acting Speaker (Ms. Bakopanos)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Ms. Bakopanos)]

The question is on Motion No. 2. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Ms. Bakopanos)]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Ms. Bakopanos)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Ms. Bakopanos)]

In my opinion the nays have it.

And more than five members having risen:

[The Acting Speaker (Ms. Bakopanos)]

The recorded division on Motion No. 2 stands deferred.

The next question is on Motion No. 9. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Ms. Bakopanos)]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.