Debates of Oct. 6th, 2005

Bank Act

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Madam Speaker, I did exactly that yesterday. I outlined the importance of the bill.

The member brought forward a couple of points that I would like to address in talking about the building that was not moved into for a year after it was built, although the lease was paid. That is not the fault of the builder. That is the fault of the government.

The other thing Canadians expect from good government is good business planning. If a government, with all the resources and all the expertise it says it has, cannot plan something as simple as a date to move into a building when it is ready, if there is a year delay because of bad business planning, that is really letting down Canadians. I think Canadians would expect more than that.

In talking about the efficient operation of banks and financial institutions, that is the very thing Canadians expect from a government as well, efficient operation. That has not happened with the Liberal government.

The sole sourcing issue is something we could probably debate all day. There could be example after example where it was probably close to rightly perceived that some of the sole sourcing examples may have been created so that they could happen. We will just leave it at that. I think the member knows what I am talking about.

In closing, Bill C-57 is a good bill. We have had a lot of input into the bill and we will certainly take credit for that. It gives the financial institutions some real guidelines to operate under. It lets them do some long term efficient business planning now, something the government apparently is incapable of.

What still remains in the minds of Canadians is if financial institutions are expected to operate under very strict governance guidelines, at the very least the government should practise what it preaches.

[Keith Martin, Liberal, Parliamentary Secretary to the Minister of National Defence]

Madam Speaker, I could not agree with the member more in that a government should behave in a manner,and implement solutions that would ensure that the people's money, the taxpayers' money, is used in the most efficient and effective way possible and in the most transparent fashion. That is why, to set the record straight, this government has instituted a number of very important initiatives to do just that. I am quite proud of what has been done.

First, there is the expenditure review system that was put in place. Everybody who is watching today should please pay attention to this because it is a very exciting way in which we use the taxpayers' money, all of our money because we are all taxpayers. It ensures that every single minister looks at the expenditures and initiatives under his or her purview, takes those that are under-performing, the lowest 10%, and drives that money into the highest 10%, the most important initiatives that Canadians want.

Second, the Prime Minister and the ministers involved, the Minister of National Revenue and the Minister of Finance, instituted a comptroller system that ensures improved analysis and improved responsibility to the taxpayer and transparency in the way in which we spend the people's money.

Third, crown corporations were formerly at arm's-length from the gaze of the Auditor General and this House. This has been changed significantly by the President of the Treasury Board who has implemented 31 changes into law. This enables crown corporations to be subject to access to information and subject to the watchful gaze and the expertise of the Office of the Auditor General.

My colleague across the way should be talking about the facts, the exciting things that have been done. Certainly if he has solutions that would improve what already has been done, he should offer those solutions and challenge us all to do better.

Does the member not accept and applaud the initiatives that I have mentioned that this Liberal government has put forward? If he has other solutions that he could proffer that would make the way in which we spend taxpayers' money more useful, more effective and more transparent, we would like to know what they are.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Madam Speaker, I am well aware of what the member is talking about concerning the guidelines and the safety nets that the government has set out for itself in the operation of how it handles the taxpayers' money. On the surface that looks pretty good.

The difference between the government and the institutions that are going to be affected by Bill C-57 is that under this bill, when banks and financial institutions and insurance companies fail to abide by the rules of the game in their operation, they are subject to very heavy penalities because of the regulation. They are subject to being charged with criminal activity.

The government has made, and may continue to make, all the rules of operation of how it spends taxpayers' money that it wants and it all sounds good. The difference is when the Liberals do not live by the rules, when they break their own guidelines, when they break their own regulations, they set themselves up while they are in office as the judge and jury of their own misdeeds. We know what the outcome of that is, just about zero penality.

That is the difference between what the Liberal government does within the guidelines it sets and what happens when it breaks its own guidelines as opposed to the regulations laid out in Bill C-57. The member knows that very well.

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

Madam Speaker, I thank my Liberal colleague for his applause. But I would rather he held off until l am done with my presentation, in case he did not feel like applauding at all by then.

I also thank my colleague from Cariboo—Prince George for his excellent presentation. I will not repeat all the points he made about the government's mismanagement. He has covered the issue extensively. A government can hardly have the necessary credibility to impose new, stricter control rules on directors of public corporations when it is faced with all these scandals.

On the face of it, my colleagues and myself think that Bill C-57 is a good bill. It responds to a need. In 2001, if memory serves, this House passed Bill S-11, which dealt precisely with clarity and new rules for proper management and accountability by both shareholders and directors of public corporations.

At the time, we omitted to include certain financial institutions, such as banks, cooperative credit associations and insurance companies, as part of the federally chartered institutions. Now, Bill C-57 is completing the process by reforming the governance of federally chartered institutions. But it is not making any changes to monitoring rules.

I was listening to my hon. colleague from the Conservative Party who, together with other Conservative and Bloc members, has worked very hard on the Standing Committee on Finance to develop these new rules. I heard him suggest that this bill would shield us against Enron and WorldCom-type scandals. I do not think so, because the new rules govern the accountability of directors. No new rules were imposed to monitor the statements and corporations concerned. If there is one improvement that should be made following the work done at the finance committee, it is in that respect that it should be made. As far as we are concerned, we are not shielded in any way against Enron or WorldCom-type scandals.

The bill has its good points. It also relaxes the regulations on the exchange of information and on proxies, which is a very onerous procedure for banks, particularly cooperative credit associations and insurance companies. Furthermore, companies and shareholders are now allowed to do something they could not do before, which is communicate electronically and exchange information on the Internet. We must adapt to the new era of communication and this bill does just that.

The process by which information is disclosed to policyholders is also strengthened. I think this is a good thing. By doing so, we are making the underwriting of public companies more transparent.

The bill also attempts to increase director liability. We have questions about this. We will ask them during consideration in the Standing Committee on Finance and before the expert witnesses we intend to call. Since such bills are extremely technical, we need to call upon people in the field who worked under the old provisions and who may have an opinion about the new ones.

With regard to director liability, when such directors are taken to court, for example, there is a new defence. Previously, there was the defence of acting in good faith. A director was able to say, “Given what we were told, I made my decisions according to the information I had available”. Now, we want to adopt a new type of defence for directors, which is called due diligence.

We do not know just how far this new defence for directors can go. I think that it would be worthwhile to examine this issue in greater depth, particularly since there are strong hints of scandals every week. We saw it in Quebec, among other places, with the Norbourg affair. In order to protect shareholders, we need much more than a potentially meaningless concept, such as due diligence. We need directors who are liable and audit methods that prevent scandals similar to those we have seen in recent years and now.

These involve insider transactions, on which we can never be too vigilant or severe. This is a provision that could improve our control over such offences.

Then there is the matter of public holder requirement, which requires institutions with equity holdings between $1 billion and $5 billion to make at least 35% of their voting shares available for trading on the public stock exchange. We have a number of questions on exemptions from this provision as it relates to public financial institutions. Among other things, we are going to clarify the situation with the cooperatives, but it does seem a positive change.

If we have to work on this bill—as we will do with all possible seriousness in the Standing Committee on Finance—there are some questions we will assign importance to, including the need for clarifications on the amendments relating to insider trading. Will this really help to catch the guilty parties?

As well, we have some questions on the consequences of broadening the possible defences for directors, as I have said, under this new concept of due diligence rather than the former good faith. Not that the latter is being done away with, but due diligence is being added as a defence when directors come before the courts.

We also have some questions on the consequences of opening up the criteria for application for exemption from the requirement to float 35% of voting shares on a stock exchange. That was our objection four years ago in connection with Bill S-11 and it still is today: the bill gives no consideration whatsoever to small shareholders. We will try to improve this bill so that small shareholders have a say in decisions made by the directors and will be better treated than they are at present. It is, for instance, my intention to personally invite Mr. Michaud, dubbed “the Robin Hood of banking”, who is engaged in a pitched battle for those rights.

We are in favour of the bill in principle at second reading. We will be making some improvements and some clarifications during its examination in the Standing Committee on Finance.

Like my colleague from Cariboo—Prince George, when he said that, as a public administrator, the government should set itself strict guidelines on liability, I remembered a debate that we have been having since 1994 and that may well reach its apex in the coming weeks, during an extraordinary session of the Standing Committee on Finance. Furthermore, we will have a debate this evening on a motion by my colleague from Portneuf—Jacques-Cartier to abolish various corporate income tax regulations as they relate to the tax treaty with Barbados.

The state must be viewed as a big democratic company. This big democratic company has millions of shareholders: the taxpayers and citizens of Quebec and Canada. They are all shareholders in the state. If we draw a parallel between the public and democratic company called Canada and the regulations before us today, we see that some directors are not subject to the same rules that we want to impose upon the directors of crown corporations under Bill C-57. I am thinking, for example, of individuals who are in good position to apply double standards when it comes to calls for strict guidelines, liability, accountability, the elimination of conflicts of interest, and so forth. Some people who have worked for the Canadian state for a long time have used their status to get the governor in council and cabinet to amend tax laws and regulations so they can fill their pockets, as we say in Quebec. This was the case with the former finance minister and current Prime Minister.

I am often told, “Your approach is overly aggressive. You are always on the Prime Minister's back because of his shipping company, but it no longer belongs to him. It belongs to his children”. It is still a family business. And this is not aggression, but rather merely concern that all taxpayers be treated fairly.

What shareholders and company directors are being asked to do in this bill, the Prime Minister has not required of himself since 1994, not since he was named Minister of Finance and not since he became Prime Minister. He changed the rules of the game for international shipping corporations operating in international waters. The headquarters of Canada Steamship Lines International has been in Barbados since 1994, in other words since the tax regulations and related legislation were changed. At that time, an exception was made in the tax treaty with Barbados so that Canada Steamship Lines International would not have to pay taxes to Canada. The current Prime Minister changed the rules, taking advantage of his position as finance minister.

I would like to return to my example of Quebec, which is a large democratic corporation in which everyone is a shareholder. The Prime Minister has managed to save more than $100 million in taxes since 1998, thanks to provisions that he himself had passed. It was he who introduced Bill C-28 in 1998. And in 1994 there was the change to the tax regulations.

So he built a gilded cage for himself in order to fleece the shareholders in the democratic country of Canada. As a result, he has not paid more than $100 million in taxes since 1998. That hurts all the other shareholders, to draw a connection with Bill C-57. When they do not pay their taxes—he and other corporations that are structured similarly, that is to say, a consortium of shipping companies or other corporations headquartered in countries considered tax havens, especially Barbados—it is all the other shareholders who pay for the poorer returns of the democratic corporation known as Canada.

This evening we will have an opportunity to remind ourselves of this with the motion of my colleague from Portneuf. We are going to have a special session in November when we will fully expose the machinations of the current Prime Minister at the time he was Minister of Finance and built a gilded cage for himself. He made sure that Canada Steamship Lines and other similar companies, his friends, could take advantage of these tax loopholes. As a result, we are still paying taxes to Canada while he fleeced the Government of Canada out of about $100 million.

We are speaking about the responsibility of all citizens of this country. All the citizens are shareholders or company directors and should feel a certain amount of responsibility. For starters, when a person is Prime Minister and was finance minister for years, he or she should set an example. I think he set the wrong example. And we are going to prove it over the next few weeks.

I repeat that the Bloc Québécois will support this bill in principle. However, we are going to make some improvements to it. In regard to the other matter of the large democratic corporation in which we are all shareholders, we will be keeping an eye out and will shed light on the allegations that I have made.

[Alexa McDonough, NDP, Halifax, NS]

Madam Speaker, I welcome the opportunity to ask the hon. member from the Bloc Québécois a couple of questions, although my colleague, the finance critic in the New Democratic Party caucus will be speaking more broadly in the debate on Bill C-57, an act to amend certain acts in relation to financial institutions.

The couple of questions I want to put to the member arise out of some of the concerns I have about the gap between the rhetoric we have heard from Liberal members, the parliamentary secretary and the member for Esquimalt—Juan de Fuca, and the actions. The rhetoric that has accompanied the introduction of the bill is along the lines that this is about greater efficiency, more responsible use of taxpayer dollars, greater dollars and transparency and ensuring that every taxpayer dollar is protected. Yet when one looks at what we are dealing with, and this is the government's explanation and not some partisan twist on what we see before us, the act is about is making changes to the corporate government's framework of banks, insurance companies, et cetera to bring them into line with the changes to the Canada Business Corporations Act for business corporations. These changes were adopted in 2001.

When it comes to efficiency, if we are to believe that the bill before us is so incredibly important and great results will flow to taxpayers of Canada from it, one has to ask about the inefficiency of waiting four years before the bill was brought forward. No wonder we have some strains on the public purse, and that is even before we get to the Dingwalls and all the other things that are the subject of the Gomery inquiry, et cetera.

First, does the member share that concern? Does he not think there probably were other priorities for tax dollars, which apparently have not been protected during these four years while the government delayed?

Second, in the same sort of context of efficiency, of the government moving quickly to address these matters, one has to be concerned. The New Democratic Party very much shares a concern, and it is not just about our colleague from Ottawa Centre who was a major architect of the important work done.

The Canadian Democracy and Corporate Accountability Commission addressed many of the same kinds of issues, and it has been sitting gathering dust for a long time. The former New Democratic Party leader, who now sits in the House and provides very distinguished leadership, was the co-chair of that commission. Again, many of these recommendations have yet to be introduced which certainly raises in our mind concerns about how efficient and effective the government is in moving on these important issues. Could the member indicate if he shares some of those concerns?

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

Madam Speaker, I thank my colleague for her comments and questions.

She has put her finger on one fact about this government. If it is so urgent to enact certain of these provisions, why the four-year delay in proposing them? I agree with her totally. What is more, when we did enact some new provisions back in 2001, thanks to Bill S-11, we were already years behind the times as far as business corporations are concerned. This was also the case when the Bank Act was reviewed. Normally, this is done every five years. Financial realities, the market, configurations and the industrial structure of this sector change, but this government let seven and one-half years go by before reviewing the Bank Act.

The main cause of the urgent need to enhance efficiency to which the government's speakers have referred lies in the numerous scandals the government has been confronted with, particularly the lack of responsibility and transparency in handling public funds. Now the government is trying to clean up its reputation. Under the pretext of wanting to avoid financial scandals, by tabling a bill on responsibility and accountability, it is trying to pass itself off as the defender of these virtues, while it is up to its elbows in corruption, up to its neck, even.

This is a positive bill, but the actions of this government make it obvious that it is trying to clean up its tarnished reputation. Unfortunately for the government, however, people have pretty long memories. They have not been able to clean up public finances, so they are trying to show that they are capable of cleaning up elsewhere. The only impression that leaves is that they lack credibility.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, the member highlighted some important aspects of the bill and then used the parallel to accountability and transparency of government itself.

The Canadian Comprehensive Auditing Foundation held a round table this past Tuesday. It said that there was a clear matrix of responsibilities in the accountability relationship, first, the government reports to parliament, and second, Parliament in turn holds government accountable. It also went on to mention that one of the pivotal roles played in that accountability was the public accounts committee, which in the Westminster system is typically chaired by the opposition, and that is the case for us. Would the member to comment on that?

Also would he comment specifically on the broader question about whether the resources are available to discharge the responsibilities that are put on Parliament in terms of holding government accountable?

Members of the Canadian Institute of Chartered Accountants have been on the Hill this week. They have been talking about governance issues and accountability and transparency issues. One of the important aspects that I talked to some of the representatives about last evening had to do with directors' liability.

The member is aware of Worldcom and the Enron situation. As a result of the severe consequences with respect to directors' liability, the corporate sector, and I can only presume the banking sector as well, is having difficulty attracting good quality people to be directors of corporations to discharge those responsibilities because of the onerous responsibilities and exposure they have under liability. This is very troubling. There are cases where marquee directors have been appointed, people who have held many directorships, and they cannot discharge all their responsibilities. They are there simply to attract other directors.

We have to keep our eye on the issue of directors' liability. I hope the member will share some comments on that as well.

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

Madam Speaker, I want to thank my colleague for whom I have a great deal of respect. I also want to commend him on his work in Parliament. He is on top of every debate and topic discussed in Parliament. I share his opinion on all the financial scandals in the United States and here. It is becoming increasingly rare for an experienced director to want to run a public company, and with good reason. There are millions of shareholders who have lost exorbitant amounts of money in these numerous scandals. Just recently in the Norbourg affair in Quebec, let us say the news is not good.

Nonetheless, as I was saying earlier, the bill is an improvement in terms of transparency and diligence. However, there are no specific provisions in terms of auditing and that is what we want to work on at the Standing Committee on Finance. There are no specific provisions on auditing or the authenticity of information on the activities of a publicly traded company. As for the directors' responsibility, there is some grey area in the definition of the new concept called “due diligence”, which supposedly could, according to discussions held with senior officials, improve the level of security of directors in terms of legal proceedings, while ensuring that rules are clearer on their responsibilities. This is being called “due diligence”.

This is what we heard:

With a due diligence defence, the directors may act reasonably prudently by relying on financial statements represented to them by an officer of the corporation or by relying on their own assessment of the financial health of the corporation. However, the due diligence defence also recognizes that the nature and extent of the expected precautions will vary under each circumstance.

Admittedly, this is quite vague. This is supposed to improve the situation and directors and shareholders will feel more secure. However, we do not yet know how. These are issues we are going to delve into at the Standing Committee on Finance.

[Roy Cullen, Liberal, Parliamentary Secretary to the Minister of Public Safety and Emergency Preparedness]

Madam Speaker, I thank my colleague from Mississauga South. I welcome this opportunity to rise in this House to speak on Bill C-57.

We are well aware of just how important the financial services sector is to the Canadian economy, and that of Toronto in particular, where my riding is located. The steps taken by our government in recent years attest to that fact. We have passed legislation ensuring that financial institutions have the modern regulatory framework they need in order to be competitive in today's global economy. Bill C-57 builds on these initiatives.

This bill builds on the financial services restructuring package that was introduced and passed by Parliament in 2000. I think it was the largest piece of legislation that was introduced and passed by Parliament dealing with the financial sector in Canada and how it was going to be structured or allowed to structure itself. Of course, a major piece of that legislation dealt with bank merger guidelines.

At the time there were governance issues affecting the major banks and financial institutions that were not dealt with, so this bill addresses some of those governance issues. For example, it brings the legislation up to date to recognize the fact that the major insurance companies were demutualized. It also deals with the issues around deposit insurance and aligns this act with some of the features of the Canada Business Corporations Act, for example, the question of the defence of due diligence by directors.

In fact, my first private member's bill in 1997 dealt with giving directors the defence of due diligence for corporations incorporated under the Canada Business Corporations Act. It was necessary I felt, and in fact it was incorporated later into the Canada Business Corporations Act, that directors would be given the defence of due diligence.

What that means is that if directors of companies asked all the right questions, demanded certain information in certain ways and did everything that was reasonable for directors to do, then they would not be held liable if something occurred subsequently which created problems for the corporation. I think it is fair for directors to have that defence because directors come together for board meetings maybe once a month. It is management that is primarily responsible for running the company.

For example, if a company was building a big plant and the director asked about the impact on the environment by the plant, and wanted an independent study conducted by environmental engineers, once the study was conducted and the environmental engineers said the plant would create no environmental difficulties, then at that point in time I think the director has discharged his or her responsibility. Subsequently, if the plant creates some environmental problems, then I do not think the director should be held liable. That is what the change to the Canada Business Corporations Act did and that is what the changes to Bill C-57 contemplate as one of the pieces with respect to the financial institutions legislation.

Corporate governance is one of those items that has received more attention in the last few years around the world, particularly with the advent of the Enron scandal in the United States and WorldCom. We have not been immune in Canada either. We have had some difficulties with corporate governance at Nortel. I cannot remember the company name, but there was the Drabinsky theatre group that got into some problems.

Corporate governance is a very topical matter and concerns, of course, a lot of citizens who own shares in companies, pension plans and mutual funds. In fact, many Canadians hold shares in companies in Canada through either mutual funds or pension plans or hold those shares directly. It is important to them that corporate governance is sound.

That is why, following the Enron and WorldCom situations in the United States, members on this side reacted. I do not know about members on the other side as I do not think they spend much time worrying about things like this. They are more interested in a $1.50 pack of gum that Mr. Dingwall bought. Nonetheless, corporate governance is a very important matter because it affects the investments that many Canadians have made. Following Enron and WorldCom, the United States, through its Congress, brought in legislation referred to as Sarbanes-Oxley that basically brought in tough corporate governance rules for companies.

The reality is that the Sarbanes-Oxley legislation, while well intentioned, has had some mixed reviews, but it did raise the question, certainly on this side of the House, of what we should be doing in Canada, so we struck a caucus committee, which I was honoured to chair, and we looked at corporate governance in Canada.

Canada has a complicated quilt of different jurisdictions and different organizations that get involved in corporate governance. We have the Ontario Securities Commission. We have organizations like the Canadian Public Accountability Board, which was set up just two years ago to give oversight over auditing firms, so that auditing firms are held accountable to the audit reports that they issue. Many investors rely on these audit reports because if they give companies a clean bill of health, then someone investing in those companies has a right to expect that they have a clean bill of health. The Canadian Public Accountability Board was set up to monitor the performance of auditing firms.

We also have the Canada Business Corporations Act. I forget the exact statistic but something like 30% to 40% of the public companies in Canada are incorporated under the Canada Business Corporations Act. It is a large number of companies. It does not represent all companies, but it is quite comprehensive.

Therefore, our view, coming out of that review, was that the Canada Business Corporations Act could be used and should be used as a benchmark, as a worldclass standard that should be implemented. This is an area that the Government of Canada can control very directly. Through Parliament, we can pass legislation that sets the corporate governance rules for corporations incorporated under the Canada Business Corporations Act.

What does corporate governance consider? It deals with a whole host of things. It deals with things such as the composition of a board of directors and whether there should be independent boards of directors. We saw problems, for example with Nabisco, which was a big fiasco years ago where the CEO hand-picked all the members of the board of directors and paid them $40,000 U.S. a year. They would go to fancy meetings and so on. When the executive made presentations to the board of directors, they were all hand-picked buddies of the CEO and chairman, and nothing really came under close scrutiny. There are issues around the independence of the members of the board.

There is the question, which particularly comes up in the context of financial institutions in Canada, of what the requirements or limitations are in terms of the participation of foreign directors on boards of directors. Should a bank such as the Bank of Montreal or an insurance company such as Sun Life be allowed to have unfettered access to members of their boards who are U.S. citizens, for example, as opposed to Canadian citizens?

There are issues whether the role of the chief executive officer should be split from the role of chairman of the corporation, so that the chair could be independent and provide more oversight over the CEO and his or her executive team.

There are issues around executive compensation, stock option plans and the transparency of those. One of the problems or challenges we had was public companies' quarterly profits being reported and those profits really determining the share price of a company to a large extent. The management of companies is under huge pressure to keep earnings per share on the rise. That sometimes puts officers of a company in a position where they might compromise their ethical standards, frankly.

We saw that in a big company in the United States, Xerox or one of those, that simply capitalized a whole range of expenses that should have been expensed. Of course, if those costs had been expensed, it would have had an impact on earnings per share. Its share price would have been affected, so they treated them as assets rather than expenses. Even the most cursory examination by an accountant would have or should have revealed that those were not assets, those were expenses.

With the pressures on management to perform in terms of earnings per share, we need to have complete transparency with respect to stock options, so that shareholders know that the executive of a company has certain incentives to see the share price increase. In this way shareholders know precisely what is going on.

There are issues about the handling of proxies for meetings, so that the executive and the management of a company do not dominate what happens at these meetings. There are a whole range of developments under corporate governance, but I am pleased to note that the Minister of Industry is conducting a review of the corporate governance under the Canada Business Corporations Act and I hope that he picks the best practices.

We have had some time now to learn from the experiences of other jurisdictions, looking at what the United States did and others, and consulting with the industry and other stakeholders to pick the best practices in terms of corporate governance and enshrine them in the Canada Business Corporations Act.

That would not impact every single company in Canada, but it will be the new benchmark. It will set the standard and the Government of Canada can take pride in that because it will protect investors, whether they are direct investors, big monied investors, or small investors through mutual funds, pension plans or the like.

There has been a great deal of press recently about the bank merger guidelines, whether the Minister of Finance will come out with the new bank merger guidelines. The financial sector legislation was enacted by this Parliament around 2000 set up a process for large bank mergers. It set up a role for the Standing Committee on Finance of the House of Commons and the Senate banking committee, so that those committees would be charged by Parliament to assess the public interest questions around major bank mergers. It was enshrined in Bill C-7.

The banks of course are looking for certain clarity around what a large bank merger would entail, what would be the appetite of the government to allow another bank merger. This is a vexing question because in Canada we know there is a large concentration of banks and further consolidation would raise some questions.

The bottom line is that if we were to allow another merger of two major banks, what would the benefit be to Canadian consumers and Canadian business? We know the benefit to the shareholders of major banks, to the boards of directors and all those with stock options. They would receive a benefit and that is fine. Profit is not a dirty word. However, we need to understand what the benefit would be to consumers in terms of choice, access to services, and would it enhance the ability of Canadians to do their banking? That is the question on the table.

Another issue that has been presented has to do with cross-pillar mergers. When the finance standing committee of the House of Commons dealt with large bank mergers and the public interest aspects of that, the committee did not really deal with the question of cross-pillar mergers. Cross-pillar mergers would entail the merger of a large bank with a major insurance company, for example, Sun Life merging with the Royal Bank of Canada.

There has been some discussion, pro and con, as to whether that would be a good thing or a bad thing. The empirical evidence would suggest that there is not a lot of synergy or appetite within those two different sectors. They have a different business culture, a different business model, but nonetheless, it is an important question because it allows a concentration of capital. It allows a company to have stronger capitalization.

This is one of the things that is important for banks because they are dealing in an international world. If their client is a Canadian company that is a multinational and wants to expand globally, the banks have to have the capital, the care and the capacity to do that kind of work. So, there is some interest there. That is a debate I am sure we will have maybe in the next Parliament, but it is an important question.

When the Minister of Finance comes out with his bank merger guidelines I hope he will ask the Standing Committee on Finance to examine the public interest aspects of cross-pillar mergers because that was not really dealt with in any detail by the finance committee. We focused mostly on large bank mergers.

As I said, this huge piece of the legislation did a number of things. It described the process under which large banks could come to government seeking a merger but it did much more than that. What it attempted to do was create more competition within the banking sector so it created greater opportunities for the credit union movement to grow and enlarge. It gave more opportunities for foreign banks to participate in the economy in Canada. It gave a lower threshold for start-ups of banks in Canada. It set up the consumer protection agency. It did a number of things, which is why it was such a large bill when it was presented to the House.

Not only does the House of Commons committee and the Senate banking committee look at the public interest aspects, but the Competition Bureau weighs in and makes a determination of whether a bank merger would create any anti-competitive types of situations. The Office of the Superintendent of Financial Institutions also makes a determination of whether a merger would create any issues around prudence and stability of the financial sector in Canada. Therefore it is quite a rigorous process.

One of the ironies is that if two major banks were to merge, the Competition Bureau would very likely say that there would have to be a divestiture of certain branches. Let us say, in the case of the Toronto-Dominion Bank and the Bank of Montreal, if they ended up with too many of their banks in a small town in Ontario and not enough of the other banks, the Royal Bank and CIBC for example and others, the Competition Bureau might say that now with this merger there is too much of a dominant position by that bank in that city or that region and it has to divest of certain branches.

This creates an interesting aspect. In the past this has always been seen as a negative in the sense that if they have to divest that means the people in that local community have less choice and they do not have the range of options that they might have had if the banks just stayed the way they were. There is clearly some truth to that.

In the last few years some of the smaller banks, Laurentian Bank, the National Bank and the credit union movement, have indicated very clearly that if the Competition Bureau indicates that a bank merger would require divestitures that they would be very interested in buying up those branches. The ironic twist is that we could end up with more competition in a regional market if we ended up with some of these smaller banks in those locations.

Therefore it is an important question and it is a vexing question and I am sure the next Parliament will deal with that.

However I am very happy to support this bill because it would bring the financial institutions legislation more in line with the Canada Business Corporations Act. It would provide the corporate governance requirements that we need. I hope down the road that there will be further enhancements to governance for banks that will be further aligned with the changes to the Canada Business Corporations Act that I certainly expect will be coming.

[Louise Thibault, Bloc, Rimouski—Témiscouata, QC]

Madam Speaker, I have a related question for the hon. member who just spoke.

At the beginning of his speech, he indicated that Bill C-57 was part of a modern regulatory framework. That is understandable. We have to keep up with the times.

On the whole issue of access to information and the use of electronic communications to transmit any type of information, I was wondering if this was satisfactory? Is the hon. member satisfied? He did point out that this was a large piece of legislation. I am not as knowledgeable as our hon. colleague, but I am concerned because of the major challenges we are facing. I will not run down the list, but there have been scandals and, in one instance, privileged and confidential information held by a financial institution was made public.

Given the large number of amendments contained in Bill C-57 and the large number of acts in relation to financial institutions affected by these changes, I was wondering whether it had been necessary to improve security once again around the whole access to information issue, particularly where the privacy of individual citizens is concerned.

[Roy Cullen, Liberal, Parliamentary Secretary to the Minister of Public Safety and Emergency Preparedness]

Madam Speaker, I thank the member for Rimouski-Neigette—Témiscouata—Les Basques for her question. She is asking an extremely important question about the rights of citizens and consumers with regard to confidential information.

I am not sure the bill deals specifically with the question of privacy provisions but I do know that the protections under the Privacy Act are quite demanding.

The member might recall problems that occurred when one of the banks was processing data in the United States and it could have come under the purview of the Patriot Act. I have been told on pretty good authority that the problem has been rectified. However it is a constant challenge. We do know there is a lot of identity fraud, people purporting to be someone they are not. This is why when we go to banking machines we are told to protect our code, but even with all of that people will try to break that system such as computer hackers.

We should be quite proud of the strength and the progressiveness of the banking sector in Canada. When it comes to building firewalls and protecting data, generally they do a very good job, but it is a work in progress for which, I suspect, they need to be constantly vigilant.

Protecting the privacy of Canadians is paramount and I am not sure this legislation deals with that specifically. The member is right, it is a very important point and something the government is seized with as well.

[Lynne Yelich, Conservative, Blackstrap, SK]

Madam Speaker, I enjoyed listening to the member speak to the bill. I would like him to give me an idea of how this would affect small banks in small towns because he said that the interests of the consumer were very important.

It appears that the more these banks do merge, the services are not there any more. We, in Saskatchewan, for example, who deal with the Royal Bank, we phone our bank 10 miles down the road and our calls go to Winnipeg, which is in another province.

Is that something that might be under the purview of the bill or is it something that is under the purview of each of the banks? I sort of wonder about that. Could the hon. member tell me in simple language how the people would be affected? If he heard from the common people, perhaps witnesses at committee who had concerns about the bill, could he relate to us what some of those concerns were so I could grasp how this affects our small communities and smaller populations in provinces like Saskatchewan?

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, even though what the member has raised is not dealt with specifically in the bill, I dealt with it in my remarks and I think it is an important question.

Of course the issue around bank mergers still has to be debated and decided but we are not there yet. However there will come a day, I am sure, where banks will come forward and look to merge. I think this is where we as parliamentarians, in looking at the public interest aspects, have to deal with the question of the access and service that consumers will have, especially in small rural communities. In a city like Toronto, if the local branch of the CIBC closes, one can go to the TD Bank or the Royal Bank. There are a lot of options in large urban centres but in parts of rural Canada this could be a very big problem

For example, if a merger occurred between, let us say, the Toronto-Dominion Bank and the Bank of Montreal, in one small town in Saskatchewan that merged entity would be seen as having too dominant a position and the Competition Bureau would say that has to be divested. So now we are down to maybe one bank in that town. We know that if consumers and small business operators do not have choices they are sort of hung out to dry.

The question I think the House of Commons and Senate banking committee will be wrestling with when a merger proposal does come forward is: What does this do and how does it enhance consumer access to quality products and services?

As I indicated in my remarks, there is one interesting twist to this. Before, when we dealt with bank mergers back in 1998 I guess it was, the banks were not prepared to deal with the question of, if there was a divestiture in a certain town, what would happen. However today the banks realize that if there is going to be a divestiture in a small town in Saskatchewan, or in Ontario, or in New Brunswick, they need to have a plan and they need to be able to put those assets up for sale. Smaller banks, regional banks, credit unions, the Laurentian Bank, the National Bank, the Hong Kong and Shanghai Bank, banks like that, have come forward and said that they would be interested in picking up those assets.

In terms of the process of bank mergers, I think the challenge will be to align all that up simultaneously so that we have comfort as parliamentarians that in fact some other bank will pick up that branch that might be divested. I think that will be a very serious question.

In my riding, as it is, I am sure, in the riding of the member for Blackstrap, even though the banks have responded to some extent in a greater capacity in terms of small business lending, there is still a lot of angst out there that the banks are not being as helpful as they could be to small business. I think that will be a question on the table as well. By consolidating and by bulking up the bank what is that going to do in terms of capital that might be available for small business? I think that will be an important question as well.

We are not there yet but it is an important question. I am sure it will be in front of this Parliament sometime in the next year or so. I think the member has raised an important question that we will have to deal with and deal with very carefully.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Madam Speaker, I am glad to have the opportunity to speak to Bill C-57 at second reading. It is very importance legislation.

Some would think, based on the low key nature of this debate, that this is a rather mundane, routine kind of legislation, that it is housekeeping to simply bring things into line. The NDP views the bill as far more significant than simply a matter of housekeeping and tidying up on the part of the government, and I want to point out some concerns right at the outset.

I begin by referencing those Liberals who this morning had the audacity to stand up and suggest that this was a good example of Liberal efficiency, that the legislation was about making our programs and our institutions more efficient and in line with modern day standards.

Let us look at the history. We are talking about a government that in the year 2005 has brought in legislation to bring in line legislation that was passed in the House in 2001. The last time I checked four years have gone by. Four years is a heck of a long time for the government to move on efficiency. I guess one could say, by the very nature of what we are dealing with, the government belies the very definition of efficiency. Only Liberals could say that waiting four years to bring something into line with a 2001 bill is efficient.

My goodness, this goes to the nub of the issue we face on so many fronts when we deal with finance. We have a government that dithers. We have a finance minister who cannot make up his mind about bank mergers. I also want to reference the speech by the Parliamentary Secretary to the Minister of Public Safety and Emergency Preparedness who focused so much of his remarks on bank mergers, suggesting that this was a matter that would be advanced if the banks supported the idea of mergers and wanted it to come forward.

The parliamentary secretary is being a little disingenuous. We know the banks have been demanding that the government bring forward merger legislation for years. We have a finance minister who promised it would be on the table this summer and this fall. Now we understand that the finance minister got cold feet because he was not sure the had the support of everyone in the House for bank mergers. He dared to suggest that he had to pull it back because of political game in this area and that it had become a political issue.

The government of the day sets the agenda. The government of the day determines what needs to be acted on. The government of the day is supposed to deal with the public interest. Surely, if the finance minister thought it was important, he would have brought it forward.

However, we recognize the fact that the Minister of Finance was cautious in his approach and needed some more support and backing. Therefore, we presented a very reasonable proposal to the Minister of Finance. We suggested to him that there would be support perhaps for the idea of bank mergers if the government would finally deal with a long list of outstanding issues that were of concern to Canadians and consumers in all our communities.

We pointed out to the Minister of Finance that he was not in a very strong position to move on bank mergers if he had not dealt with banks that shut down branches without any regard for the communities they were abandoning. The parliamentary secretary who just spoke tried to suggest that in small towns banks no longer do that, that they do not close branches and leave a community high and dry.

Perhaps that is true in small towns, but it is certainly not true for communities within large cities. It is certainly not true for inner city neighbourhoods. It is certainly not true for older north end communities. It is certainly not true for Winnipeg North, where the banks shut down every branch in the entire north end of Winnipeg without regard for citizens to be served or for the needs of people to have access to financial institutions.

We suggest to the Minister of Finance that if he wants to move on bank mergers and wants us to even look at the idea, then perhaps he should deal with that very issue. Perhaps he should have some teeth in legislation that prevents banks from unilaterally shutting down branches and abandoning entire communities. Perhaps he should deal with the credit card interest rates that banks set. Perhaps he should deal with the huge rise in numbers of payday lenders without regard for regulation. Perhaps he should deal with a form of reinvestment in our communities, which is present in the United States, and ensure that banks that benefit from communities and that reap their profits from loyal customers over the years put something back into those communities before they up and leave and abandon entire neighbourhoods.

We gave the minister all kinds of ideas and help to bring forward this issue. I want the record to show that it is absolutely irresponsible on the part of the Minister of Finance to suggest that he could not go forward because of political games that were played by members in the opposition.

On the part of the New Democratic Party, we are not playing political games. We are trying to do what is in the best interest of Canadians. We are trying to ensure there is some measure of accountability, efficiency and transparency in the area of financial institutions. That gets us right to the heart of the bill.

The bill attempts to modernize the corporate governance framework for Canada's federally regulated institutions. That is clearly an issue of great importance in this day and age of corruption and scandals in the corporate sector. We would expect the legislation to help us deal with accountability and transparency in all federally regulated institutions.

As I already said, we had a lot of chances to deal with this before, and finally we see something happening. I wish it had not taken so long. We have to see Bill C-57 as a process that has been underway in the country for a long time, certainly in a formal way since 1994. It is one that has seen other phases and has taken other legislative forms. Bill S-19, Bill S-11 and Bill C-8 are all legislative examples that leap to mind. Let us not forget the MacKay task force and the several parliamentary committees that have studied this issue over the years.

There is another aspect to this whole debate. It is the need for reform that comes not just from corporations or the financial sector as a whole, but one that is part of an ongoing broadly based shareholder and consumer movement, a movement that is trying desperately to establish greater public access to the instruments that control our economy and the impact on our livelihoods and finances in major ways.

That is part of the debate we have to address today. At least members of the New Democratic Party have been diligent about raising such issues in the past. I want to refer members to the January 2004 announcement of my party for a pocketbook protector, which outlines a comprehensive set of proposals to protect Canadian consumers including, may I emphasize, the establishment of citizen utility boards to give stakeholders an organized voice and some real clout and increased openness in Canadian financial and other corporations that would be modelled on the American experience with the Sarbanes Oxley act and other measures.

I mentioned that we gave the minister all kinds of suggestions around the whole bank merger issue for bringing more accountability to our banking sector. This summer I responded to the Minister of Finance's letter on his demand that the NDP and other opposition parties come clean with their position on bank mergers. I said to him that legislators and consumers currently lacked basic information to determine whether banks acted in the public benefit in accordance with their public charters. There is a huge potential for improving transparency in banking without compromising legitimate privacy concerns or good business practices. Legislative changes are clearly needed to enable the public to track bank activity in our communities

I want to mention another indirect initiative from the NDP. That is the Canadian Democracy and Corporate Accountability Commission, chaired by the member for Ottawa Centre. This commission examined ways to increase corporate responsibility. The member for Ottawa Centre attempted to raise many important issues and to lead efforts to reform Parliament to better embody our democratic impulses. However, those political reforms would be incomplete if our financial institutions and their decisions remained isolated from the vast number of Canadians that they serve.

What took the government so long? Why does it go in starts and fits? Why does it get something going and then pull back? In the case of banker mergers, why has it dithered about its response? On the question of income trusts, why does the government suddenly decide to study the issue and the next minute decide to crack down on the expansion of any income trusts, knowing full well the millions of dollars that are lost to our public coffers because of corporations taking advantage of this loophole?

Finally we have a chance for action, and that is what we are about to do.

There are some positives in the bill and some negatives. There are measures in it that would improve financial sector governance, and I do not want to dispute that. It recognizes changes in our communications technology and reflects those changes by accommodating electronic communications.

Bill C-57 would relax the overly restrictive limitations on shareholder communications. For example, it would allow shareholder communications without necessarily triggering proxy rules. The bill also would harmonize the legislation covering the various types of financial institutions. It introduces some long overdue measures to upgrade governance of the crucial financial institutions regulated under the direct authority of the federal government closer to a standard appropriate for the 21st century.

In particular, I want to emphasize a change that has been long overdue and one that all of us have fought for in this place. That is the alignment of the Cooperative Credit Associations Act and the Bank Act. This is very important because it will provide cooperatively structured companies with equal treatment on their share requirements as that afforded other more traditionally structured groups. This previously has been denied to them on account of the outdated limitations imposed by current legislation. Cooperatively structured corporations should be encouraged in Canada, not penalized. The measure in the bill at least puts them on an equal footing in one important area.

I will now get on to some of the negatives in Bill C-57.

I want to emphasize the fact that this legislation ignores the Broadbent commission. It has failed to incorporate modern, progressive, corporate-social responsibility initiatives recommended by the Canadian Democracy and Corporate Accountability Commission, also known as the Bennett-Broadbent commission of 2002.

Despite assurances at the time of the passage of Bill S-11 that the government would as a matter of course incorporate the positive suggestions of the commission into its corporate reform vision, the thrust of the commission's work and its specific recommendations remain largely ignored in Bill C-57.

That independently funded commission was composed of five members, three from the business community, one from organized labour and one with a political background, that being the member for Ottawa Centre.

Between February and September of 2001 the commission travelled across Canada. It held public hearings, meetings and received briefs and presentations from a wide cross-section of Canadians interested in corporate governance issues. It further conducted a public poll on the issues and concluded its activities with a report in 2002 containing 24 recommendations.

Regrettably, the work of the commission was superseded back in 2002 with the government's Bill S-11. We tried at that time to get the whole process to address the commission's findings but unfortunately were not able to do so.

Among the recommendations contained in the Broadbent commission's final report, entitled “The New Balance Sheet: Corporate Profits and Responsibility in the 21st Century”, was this recommendation:

Companies should have governance structures facilitating the development of a corporate culture supportive of corporate social responsibility. In particular, a committee of the board of directors should be assigned responsibility for corporate social responsibility matters. A senior executive should be appointed corporate social-responsibility ombudsperson and have direct access to the chair of that committee.

Many other recommendations put forward by the commission are important and have not yet been accommodated in this legislation.

I want to mention another very important issue and that has to do with a watchdog agency, because I think that perhaps the key element in any progress in realigning stakeholder authority and increasing accountability lies in the development of an independent watchdog capacity. This element has been missing in the governance of federal financial institutions generally and it is still not there. This has left stakeholder voices without a vehicle of expression when concerns about corporate behaviour arise.

Provision for the formal recognition and integration of independent watchdog groups must be incorporated, in our view, as an essential part of any corporate governance landscape. The NDP, together with many consumer advocates, has proposed an effective, inexpensive way of starting and maintaining such groups. This involves utilizing the already existing corporate communications network, mail-outs or other communications to shareholders, policyholders, et cetera, and using that network to disseminate information about forming a consumer watchdog group, along with contact numbers for those who wish to follow up.

This type of communications tool should become, in our view, a regular element of corporate mailings at specified intervals. The distribution of notices of annual meetings or annual reports is commonly suggested as a very minimum.

Having a consumers' agency with responsibilities to others besides stakeholders may be appropriate for other purposes, but it is not an adequate response to the need for an independent and exclusively consumer-oriented mechanism.

There has been a lot of support for such an oversight group. It has been endorsed by 31 citizen groups, including 18 national organizations, but it is not limited to citizens' groups alone. It has also received support from the House of Commons and Senate finance committees. Also, it was supported by the 1998 MacKay task force on the future of the Canadian financial services sector.

There has been a heck of a lot of discussion on this issue over the years and a lot of support from all sectors. The question is, how can we make it a reality? We have an opportunity in this bill to do just that. We have an opportunity to modernize the fiduciary framework for financial institutions.

There has been a battle raging for some time now over the parameters of legitimate director activity. In Bill C-57 it is apparent that those favouring a narrow, conservative and, some would say, dated interpretation must be questioned. To turn a profit for shareholders irrespective of the consequences is an approach better suited to the 19th century than the 21st century.

I could go on with many other recommendations, but let me conclude by saying that this bill is long overdue. There are some major parts to it that are important. We particularly value the acknowledgement of the cooperative sector and we want to see this bill approved with that component in it, but we would also like to see some changes. We will be working very hard in committee to address the outstanding issues and to ensure that consumers have access to financial institutions on a basis of accountability, efficiency and transparency.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I want to thank the member for her contribution. As a member of the finance committee in this debate at second reading on Bill C-57, she went through some excellent history, particularly that of the Bennett-Broadbent commission report and the MacKay task force report. There is a number of underpinning or foundational documents and studies which I think will be very helpful to the committee as it deals with a bill that is almost 300 pages long in both official languages.

It is going to take some careful work to ensure that we do get it right. That is one of the reasons why at second reading it is important for members who have interests in certain aspects of the bill to ensure that their input, either through debate or through their critics, is brought to the finance committee to help it do the job.

As the member laid out, the bill itself has some themes. There are four broad categories which the committee will be working on. The first is with regard to clarifying the role of directors. The second is about enhancing the rights of shareholders. The third concerns modernizing practices within the financial institution group. The fourth is about strengthening governance elements of the regulatory framework, an extremely important aspect and the member did comment on it. Finally, with regard to the Insurance Companies Act, certainly there is the clarifying of the policyholder governance in view of the fact that we have had this demutualization within the insurance industry.

I want to urge the member to consider one aspect for the committee's consideration, and it is with regard to the role of directors. We know the issues with regard to Enron, WorldCom, et cetera. There were officers and directors who were knowledgeable of the business practices and the decisions taken that gave rise to serious business failures, which led to significant losses to the citizens. However, we should celebrate our financial services industries as well. The failures in Canada have not seen the same kinds of problems that have been experienced in the United States.

The member is also aware that the financial industry, although it takes a pretty good beating in the public with regard to making $1 billion or something like that, does not often get credit for the fact that it employs about 600,000 people and contributes about 6% to Canada's GDP. I would also add that there is the industry's philanthropic work and the matter the member raised about the social aspect of the banks. That has been well established and well appreciated by Canadians for many years.

With regard to the directors and the specific question, there is the issue of directors' liability. Last evening I was at a function sponsored by the Canadian Institute of Chartered Accountants, at which I became aware that there is a serious concern about the low number of people putting their names forward to be directors of corporations because of the high risks and the liabilities associated with directors' responsibilities. It is a very important issue.

At the same time, and the member may have an opportunity at committee to get this kind of information, we have a broad range of financial institutions as well as corporations which have a tendency to seek marquee directors who are paid significant bonuses to join the board, along with stock options, et cetera, simply to be there to attract others. Would the member indicate whether she shares that concern and whether this kind of thing may also help to improve the governance scenario as it relates to financial institutions?

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, that is a very good question. As I touched on in my speech, there is clearly a raging debate going on about the parameters of legitimate director activity.

There are those who subscribe to a rather dated Conservative view, as I mentioned, accepting the notion that turning a profit for shareholders irrespective of consequences is okay. However, there are those who demand far more accountability.

I think we have to stress that failing to demand of corporate directors that they consider other stakeholder interests beyond narrow stakeholder profit is leaving Canada's corporate governance lagging behind other jurisdictions.

The member may know that the Canadian Institute of Chartered Accountants and others have recognized that there are legitimate considerations to be taken into account, but if we do not have a legal requirement, even enlightened boards of directors have their hands tied. It is also worth noting that Britain has adjusted its fiduciary requirements, as have the majority of U.S. states, which now have non-shareholder constituency laws.

Finally, let me point out that the Corporate Responsibility Coalition has suggested wording that we should look at to be included in all Canadian legislation related to corporate governance. It states something like this: corporations established under this law shall advance the interests of shareholders only in ways that fully take into account, fully and publicly document and fully adhere to the highest global standards for the protection of human rights, the environment, public health and safety, consumers' rights and shareholder rights. That is an important suggestion.

I will conclude by saying that we must remember that the proportion of bank resources from depositors, for example, far outweighs the investment by shareholders. We have to take all of this into account at the committee. I appreciate the member's suggestions.

[Michael John Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Speaker, I appreciate the opportunity to speak to Bill C-57 which introduces a new governance framework for the financial services sector. Other colleagues have spoken quite eloquently about how important this bill is to bring governance standards for the financial institutions up to date. This proposed legislation would give financial institutions and their stakeholders the governance tools that they need to allow them to continue to play a key and leading role in Canada's economy. It addresses concerns that many Canadians have about corporate governance.

The financial services sector not only plays a vital role in the economy but also in the financial lives of Canadians, whether it is banking, insurance, financing, investing or financial planning. Every day across the country consumers, businesses and governments depend on the products and services provided by financial institutions. Community groups, arts and culture groups, amateur sports groups across the country also depend on these institutions. We need look no further than the CIBC run for the cure this past weekend to see how important our financial institutions are. In my own province of Nova Scotia we are proud to be the home of Scotiabank which is a leader in corporate responsibility.

I would like to focus my remarks today on the federal legislation and the initiatives the government has introduced that are designed to make the financial services sector more competitive and to enhance consumer protection. The process of implementing the new policy framework began in 1996 with the establishment of the MacKay task force on the future of the Canadian financial services sector. In September 1998 the task force presented the government with its report which was then reviewed by two parliamentary committees.

The committees in turn conducted extensive public consultations and presented the government with their recommendations. This consultation process eventually led to Bill C-8, which in 2001 introduced legislation to reform the policy framework for Canada's financial services sector. That contained a number of measures that focused on four main areas, one of which was to empower and to protect consumers.

Perhaps the most important initiative for consumers that sprung from this legislation was the establishment of the Financial Consumer Agency of Canada in 2001. This agency was established to consolidate and strengthen oversight of consumer protection measures in the federally regulated financial sector as well as to educate consumers. While some consumer protection activities existed before that, they were dispersed among a large number of federal entities making the complaint process more arduous and less responsive to the needs of Canadians. The FCAC consolidated those services.

Hon. members may also be aware of the ombudsman for banking services and investments, OBSI, which was established in 2002. The OBSI is an independent organization that investigates consumer complaints against financial service providers including banks and other deposit taking organizations, investment dealers, mutual fund dealers, and mutual fund companies. It provides prompt and impartial resolution of complaints that customers have been unable to resolve satisfactorily with their own financial services provider. For the first time in Canada customers of banking and investment services now access comprehensive and effective complaint resolution through a single ombudsman.

The OBSI is independent of the financial services industry. To ensure its independence, the ombudsman reports to a board of directors of which a majority of the directors are independent of the financial services industry. The bottom line is that consumers have benefited from the changes in the financial services sector. With new competitors in the marketplace, increased competition among existing institutions and more innovative products and services, consumers now have more choices in deciding who fulfills their financial needs.

Small and medium sized businesses too in some cases have benefited from increased choice among financial service providers. To ensure that there is better information on the financing needs of small and medium sized enterprises and the availability of financing to meet those needs, the government undertook a comprehensive program.

That program was to assist in the development of effective public policy; to promote greater awareness among small businesses of the sources and types of financing available; and to foster a more complete understanding among financing providers of the financing needs of small and medium sized businesses.

I would not suggest that I am entirely delighted with the way that all financial service institutions have responded. I think, particularly in regions of Canada like Atlantic Canada, that we could do a lot better in terms of decision making as well as presence in those regions, but we have come a long way in a lot of areas.

Although the government has introduced consumer safeguards, we have also been mindful not to place too high a regulatory burden on financial institutions. The government is equally committed to providing a policy environment that is fair and balanced.

It is important to mention that the framework for the Canadian financial services sector enacted by the government is not a static process. Rather, it is dynamic, reacting quickly in this world with the rapid pace of globalization and technological innovation that has become a daily reality for businesses in Canada.

Indeed, the policy framework for the financial services sector should be dynamic, flexible and fair. The framework provides that flexibility in three ways. It maintains, first, the long standing practice of ensuring regular updating of the regulatory framework by including an automatic five year review in the legislation, one being scheduled in 2006. This is a practice that sets Canada apart from virtually every other country in the world.

Second, as has been frequently done in the past, the government is prepared to revisit this legislation prior to the five year review if it proves necessary in order to ensure that the framework keeps pace with the rapidly changing marketplace. Finally, the legislation allows for matters of implementation to be dealt with through regulation.

What we have is a balanced framework, a regulatory approach that is well thought out and efficient, with important consumer protection measures. Both aspects are conducive to the growth and success of Canada's financial institution.

One would ask, how does Bill C-57 fit into the big picture? I believe that government policies will continue to evolve over time, so that we can keep pace with the new economy, new innovations and new technology. Bill C-57 is part of that evolution.

The proposals contained in the bill will update and modernize the framework for the financial services sector. It has broad support among stakeholder groups in the country and I believe among Canadians. I urge and expect all members will support Bill C-57.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member has laid out the broad strokes of Bill C-57. It is an important bill. It will update our legislation with regard to financial institutions to bring into line changes that were made to the Canada Business Corporations Act.

I am pleased that all parties seem to have agreed that support will be given at second reading, so that the committee can hear the witnesses as well as to bring to the table some of the important ancillary issues, and the member raised a very important one. I was a member of the finance committee when we went through the last flurry of bank merger discussions. One of the significant debates and concerns that came from Canadians and parliamentarians was the impact on regional banking services and financial services.

I would like to ask the member, does he have any recommendations to give to the committee as it looks at this to ensure that there is a balance across the country and that it takes into account the regional differences throughout Canada?

[Michael John Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Speaker, some people have referred to this bill as housekeeping, but I can see some members actually get choked up about it. I think that demonstrates the importance of what we are doing here.

I do not know if I have specific recommendations about how to deal with the regions. What I do have are concerns.

I must say that I feel well served as a citizen of Canada by our banking institutions and I feel very well served, individually, by the relationship that I have with my own banker, Dave MacIntosh, and the Scotiabank in Dartmouth and by the banking institutions in Nova Scotia.

However, I do believe that the centralization, particularly of decision making, of the banks has taken away the traditional banker and small businessperson relationship, where the small businessperson could come in, the banker would know that person, would know what he or she did in the community, would know his or her reputation, and would understand his or her involvement in important community activities. The banker would know the business, and know the ups and downs and the cycles of the business.

I believe we have lost that to some extent with the centralization of decision making. The loan limits that bank managers are allowed to approve at the local level has changed dramatically and I think that is a concern.

Now, fortunately, under the wisdom of the government and agencies such as the Atlantic Canada Opportunities Agency, we have been able to support small and medium sized enterprises and build the economy of Atlantic Canada and, in some cases, have gone where the banks have not gone. As well, we have had the credit unions, which are strong across the country but not quite as mature in Nova Scotia as in some of the western provinces, step in and do a very good job as well.

My recommendation to the banks would simply be to not forget that the regions of Canada provide an awful lot of support, a lot of those 600,000 employees that the hon. member mentioned before. I would also say that, for example, Scotiabank, in whatever changes it has made in Nova Scotia, has never laid off or told a person that he or she no longer had a job. So I think there is a corporate responsibility there as well.

My concern is with the centralization of decision making which should reside in the regions where people know the businesses and the individuals involved.

[The Acting Speaker (Mr. Marcel Proulx)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Mr. Marcel Proulx)]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[An hon. member]

On division.

[The Acting Speaker (Mr. Marcel Proulx)]

I declare the motion carried. Accordingly, the bill stands referred to the Standing Committee on Finance.

(Motion agreed to, bill read the second time and referred to a committee)