Mr. Speaker, I am pleased to be here in this crowded House to take part in the third reading debate on Bill C-8, an act to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions.
I think we can all agree that the financial services sector plays a critical role in the Canadian economy. It underpins all other sectors in the economy by providing the means to channel savings into investment, resulting in economic growth and wealth creation.
The role the financial institutions play in the life of Canadians is equally important. In fact, these institutions protect Canadians' assets well and meet the needs of consumers and businesses as far as major financing, purchases and investments are concerned.
Let us not forget that half of Canadians are shareholders of our financial institutions, either directly or indirectly, so this represents an important source of revenue for Canadians now and in the future.
As legislators, we have an important responsibility to encourage the health of this sector. According to 1999 Statistics Canada data, 863,000 Canadians were employed in the financial services sector, including finance, insurance, real estate and leasing.
Canada's federal financial institutions operate within a legislative and regulatory framework defined by parliament. These legislative acts require the government to periodically review this framework and to bring before parliament any amendments needed to ensure that it remains current and relevant.
I would like to call the attention of the House to the four fundamental principles that underpin the legislation and which guided the government's decision making on the specific measures in the policy paper “Reforming Canada's Financial Services Sector”. It was released to the public on June 25, 1999, as the government's response to the MacKay task force report.
The first principle is that banks, trust companies, credit unions, insurance companies and other financial institutions must have the flexibility to adapt to the changing marketplace and to compete and thrive, both at home and abroad. Upholding this principle is necessary if the financial sector is to maintain its contribution to economic growth and job creation in the face of increasing globalization and rapidly changing technology.
To this end the bill provides additional flexibility for banks and insurance companies to organize themselves under a new holding company option that would be available to them, thus permitting them to explore opportunities to improve efficiency and grow their businesses by reducing the regulatory burden, among other things.
Similarly, we are raising the limits on widely held ownership of financial institutions in order to permit the exchange of considerable shares which is required for the conclusion of strategic alliances and joint ventures. This important business strategy is becoming increasingly common in other industries and ought also to be available to Canada's financial institutions.
The bill substantially expands permitted investments for financial institutions and makes these available to both the holding company and the parent subsidiary structures.
The second principle guiding the bill stresses the importance of competition. Specifically, we believe that vibrant competition in the financial services sector is necessary to allow consumers and businesses alike to benefit from a wide range of choice at the best possible price. With this objective in mind, the government is acting to remove unnecessary barriers for a bank start-up. We want to encourage new entrants. To that end, we are lowering the minimum amount of capital required to start a bank to $5 million from $10 million.
We are also proposing a new three tier, size based ownership regime that allows for the single ownership of small banks.
Banks with equity of $1 billion to $5 billion are also allowed to be widely held, provided at least 35% of shares are widely distributed among the public. There will, however, be no restrictions on the ownership structure of small banks with equity of less than $1 billion. These measures will make it possible to increase competitivity in the banking sector and to encourage new players.
Large banks with more than $5 billion in equity would continue to be widely held. Furthermore, commercial enterprises would also be allowed to establish new banks. This may be potentially attractive to retail companies that already have a network of stores or outlets.
The bill also includes measures to strengthen credit unions and caisses populaires. It contains measures that could accommodate their plans to restructure themselves in a way that reduces structural fragmentation and increases efficiency. It also provides the government with the regulatory flexibility to respond to new initiatives that may be forthcoming from the movement. The end result could be a stronger and more competitive credit union movement in Canada, better placed to challenge other financial service providers across the land.
We also propose to open up the Canadian payments system to life insurance companies, securities dealers and money market mutual funds. We believe that a broader range of participants in the payments system would foster competition because these firms would be able to offer services akin to chequing accounts.
Moreover, we will implement measures to align access rules for foreign banks in Canada with those governing domestic banks, so as to provide greater flexibility to foreign banks that wish to settle in Canada.
All in all, these measures will promote competition in the financial services sector, thus contributing to ensuring that Canadians get the best possible deal from suppliers of financial services.
I know the House is interested in the third guiding principle underpinning this legislation and that is to empower and protect consumers of financial services.
To that end, this bill would provide better access to basic services. It would allow us to specify in regulation what are reasonable identification requirements for an individual to open a bank account. The legislation also would provide regulation making authority regarding the provision of a low cost account and would oblige banks to follow a fair and reasonable process if they decide to close a branch.
As for low fee retail deposit accounts, memoranda of understanding have already been signed by the eight largest banks. While such accounts may vary from bank to bank, they must all comply with standards that will allow us to ensure that all Canadians have access to an account at an affordable price.
The bill would also establish two new organizations to promote and safeguard consumer interests in the financial sector. The Financial Consumer Agency of Canada, or FCAC, would consolidate related functions currently housed in Finance Canada, Industry Canada and OSFI. This agency would uphold the consumer protection provisions of our financial institution statutes, monitor institutions' compliance with their pledges to self-regulate, and provide consumer information and promote consumer education about financial services.
The government would also work with financial institutions to launch the new Canadian financial services ombudsman. This office would provide an independent, objective and impartial third party who would review complaints from individual consumers and small business owners who believe that their financial institution has treated them unfairly and have not been able to resolve these matters with the management of the financial institution.
However, we are also mindful that regulations are not without cause, which brings me to the fourth and final guiding principle underlying this bill.
We believe that our government should initiate improvements to the safety and soundness of the sector, but we should also take every opportunity to lighten the regulatory burden when we can. Bill C-8 would do just that.
The bill before us today seeks to implement a streamlined approval system for numerous operations that must be approved by the superintendent.
We are also proposing to improve the payments system, to ensure that the public participates more fully in the decision making process, and to ensure that the standards, regulations and rules of the CPA reflect the public interest.
The bill would also enhance the powers of the Superintendent of Financial Institutions to deal with firms that do not meet the regulatory requirements. It would also bolster the superintendent's power to intervene in the affairs of a financial institution that is heading for trouble. This would ensure that the prudential safeguards for the financial system are consistent with the new reality of stronger competition which we are trying to bring about.
In conclusion, the measures embodied in the bill we are debating today uphold and advance all four of the guiding principles I have just enumerated.
Canada's financial sector has an excellent reputation. Our financial institutions are extremely successful, both at home and abroad. To retain this excellent reputation and to keep our financial institutions strong, we need this new policy framework, a framework for the future. We need it because it recognizes the change around us, it permits our financial institutions to seize new opportunities and it manages change for the benefit of all Canadians.
I would like to thank the members of the finance committee and the hon. members of the House for being very supportive of this bill. I firmly believe that the measures proposed in this legislation provide an important framework whereby we can move forward together.