Mr. Speaker, I am very pleased to speak today to Bill C-37. This bill is the mandatory review that is provided for regarding the operation of the banking system. Every five years, we have to review that piece of legislation to try to make it as functional as possible and to adjust it to changing technology. The Bloc Québécois will therefore be voting for the bill, because even though it is not perfect, it does contain significant improvements.
First, Bill C-37 institutes mechanisms for disclosing information to consumers, so that they will be able to make informed choices regarding the banking services they use. We all know that, historically, banking services have not always been models when it came to providing information to consumers. People did not find it easy to understand and it was very difficult to compare one bank to another. There are improvements in the bill that will allow people to get this kind of information, and this is a benefit for consumers.
Second, the bill will establish the regulatory framework to allow for digital data to be used in cheque processing, which will reduce the time that cheques are held by banking institutions. A new technology has been adopted, and this means that a cheque will be frozen in a banking institution for less time. This provides a benefit for the consumer and an important benefit for small and medium-sized businesses, which often have to wait until a cheque is released before it becomes available and can be cashed. It will facilitate both business operations and everyday management of family and individual budgets. In this respect, it is a practical application of a technology.
Third, the bill will reduce the regulatory burden for foreign banks, credit unions and insurance companies, to make the regulatory compliance mechanisms more efficient. For example, credit unions that have fewer people and that apply to do this will be recognized. As for foreign banks, the aim is for there to be more competition because a lack of competition is a problem in the Canadian system. In regions like the one I represent, bank branches have disappeared, one after the other, in recent decades.
At present, I can tell you that the Desjardins movement is represented, as is the National Bank of Canada and a few other banks, but those institutions cover huge geographic areas. The way that the rules about loans to businesses or individuals are applied, for example, increasingly fails to take the local situation into account and is increasingly often no more than a mathematical financial calculation. From that perspective, even the disappearance of the banks has an effect on how credit unions operate, because the banks' focus on profitability at any cost has prompted the Desjardins movement, for example, to review its structures with a view to that fact.
We have to find solutions to the lack of competition, solutions that may lie in providing foreign banks with market entry conditions that enable them to offer services so that ultimately the consumer wins. This should be done, on condition that appropriate operating rules are obeyed and also that we ensure that in terms of employment spinoffs, jobs are not simply being exported abroad. On that point, the amendments in the bill are acceptable, and are even attractive.
Fourth, the bill aims to amend the rules governing mortgage loans, thereby enabling more people to take advantage of that financial tool. A previous amendment has already increased the percentage that could be obtained without an insurance guarantee. This bill aims to increase it to 80%.
Lastly, the government is increasing the equity threshold from $1 billion to $2 billion, thereby making it possible for a single shareholder to wholly own a bank, and thus encouraging new competitors on the market. I mentioned that earlier. We need to ensure greater competition. This measure aims to move forward in this area.
The Bloc Québécois wants to ensure, however, that the amendments to the regulations do not allow the kind of uncontrolled mergers and acquisitions we have seen before in the banking sector. I have been a member of this House for about 12 years and we have seen all kinds of situations in terms of bank mergers. Under the former Liberal government, during my first few years as a member here, there was greater willingness to allow this. Systematic opposition from the Bloc Québécois, other parties of this House and civil society made it possible to ensure that there were no uncontrolled mergers and, that, at the end of the day, there were no fewer intervenors.
Canada currently has five major banks. If that number had decreased to only two, clearly, there would have been less competition. If we do not open the market up externally at the same time, we would be creating a duopoly, and we certainly do not want that to happen.
While the committee was studying the bill, we wanted to make sure that we continued to look at this issue to avoid unrestrained mergers.
Speaking of mergers, we demand that any amendment to the moratorium on bank mergers be made in the best interest of citizens, not just to make the financial markets happy. There is an unfortunate tendency in this sector to see this activity as being the sole province of economic players, but clients, consumers, citizens, have the right to know how these things work. We must ensure that the mechanism gives everyone a fair chance and that we have a stable, structured system that fosters real competition. In that respect, the Bloc Québécois will ensure that the committees hear all relevant witnesses so they can make good recommendations.
That, in a nutshell, is the Bloc Québécois' analysis of this bill.
I would also like to talk about promoting consumers' interests by improving the information disclosure regime. A lot of progress was needed on this issue. For example, institutions will be required to clearly disclose their information on the Internet, in all branches and in writing to anyone who asks. This is a major change to the way banks do things, a change that we applaud. We hope that this will come to pass and that the banking system will become more democratic.
We also want to change the regulatory framework to enable the implementation of digital imaging. The legislative framework must therefore allow digital imaging in order to facilitate the cheque cashing process and to reduce the length of time banking institutions can hold cheques, as I mentioned earlier.
We must also reduce the length of time banking institutions can hold cheques directly, because following the publication of the 2006 Financial Institutions Legislation Review, the government promised to reduce the cheque holding time to make life easier for SMEs and other citizens. Bill C-37 gives the superintendent the authority to limit the length of time for which cheques can be held. We will see how that works out in practice.
The white paper proposed an immediate reduction of the maximum hold time to seven days, and to five days once the digital cheque imaging system is in place. We will see how this works.
Cheque holds affect not only consumers who need to have access to those funds to pay their bills, but also small and medium businesses that must pay their employees and keep the business operating out of the funds they deposit.
There are currently cash flows because of how quickly businesses are operating and because of the introduction of just-in-time systems. Financial flows need to be just as quick. In that sense, the improvement to the bill should help businesses.
The government wants all users of the payments system—including consumers—to benefit from the increased efficiency resulting from the Canadian Payments Association initiative that involved changing the payments system to facilitate electronic imaging of cheques. These changes must do more than just improve profits. We must ensure that the services are adequate and that the savings are passed on to the consumer.
The second objective is to increase legislative efficiency by lightening the regulatory burden on foreign banks so as to facilitate their access to the Canadian market and stimulate competition.
Competition exists. However, certain problems were raised concerning the regulations governing foreign banks. This bill aims to clarify the measures applying to foreign banks operating in Canadian territory by refocusing the regulatory framework on the chartered banks and simultaneously excluding the near banks.
The near banks are companies that offer banking-type financial services. Unlike chartered banks, near banks cannot change their basic money supply, that is, they cannot borrow money from or lend money to the Bank of Canada to make new deposits or new loans.
Still in the same section, a second measure aims to improve legislative efficiency and streamline the regulatory approval regime. We want to ensure that decisions that do not impact public policy, as provided for in the legislation, are in the hands of the superintendent.
In the opinion of the Bloc Québécois, the minister must not be permitted to depoliticize operations that will have an impact on public policy. We have to make sure that the minister continues to assume his responsibilities. Given the current practice of the Conservative government of not wanting to intervene in the economy, such a caution is quite justified.
The bill also relaxes the federal framework governing credit unions. For example, in order to facilitate the opening of new credit unions, the government would lower to two the number of institutions required to constitute a credit union. At present, a minimum of 10 credit unions is needed to establish an association under the Cooperative Credit Associations Act.
Still, in light of the new commercial possibilities offered by retail associations and ongoing consultation in the cooperative credit system, the current entry threshold is too high. This is why the amendment corresponds to the market reality, which seems to be an advantage. This would increase this sector’s ability to adapt to new developments and better serve consumers and SMEs.
The third objective of this bill would increase from 75% to 80% the loan-to-value ratio for which insurance is mandatory on residential mortgage loans. This ratio was set over 30 years ago. It is a cautionary measure designed to protect lenders from fluctuations in property values and payment defaults by borrowers.
The last time this ratio was changed was in 1965, when it was raised from 66% to 75%. But the marketplace has changed since then. Lenders’ risk management practices have improved, risk-based regulatory requirements concerning capital have been implemented and the financial markets have changed and stabilized.
Finally the supervisory framework for federally-regulated financial institutions has been strengthened. So it seems that the restriction no longer plays the same role with respect to caution. A cautionary provision requiring borrowers to take out mortgage insurance at a loan-to-value ratio set at 75% might mean that some consumers are paying more than necessary for their mortgage.
The second part has to do with readjusting the equity thresholds, which would allow sole ownership or to force wide ownership. They also want to increase, from one third, the minority limit on the number of foreign directors on the boards of Canadian banks. There is an array of measures, therefore, intended to make the banking system work better.
As I said at the outset, my fellow citizens and the electors in my riding are very concerned about the availability of bank services. The banks have undertaken some major offensives over the last few years and have invaded the insurance market, for example. The insurance brokers came up with a strong response to show us what a negative effect this would have had on regional development.
The Bloc Québécois believes that this bill, generally and overall, improves the way the bank system works.
Obviously, there are still some basic questions. However, in view of the fact that the act will have to be reviewed within five years and the government has already offered an additional six-month period ending April 24, we should definitely pass this bill and hope that ultimately the government will listen to what the Bloc has to say. We will continue to monitor these matters.
I want to conclude with the question of bank mergers. This is an area where the federal government's actions have lacked transparency over the last few years. They have gone back and forth and even hidden a document for a few months on the pretext that since we have a minority government, it might have been damaging to make it public. In the meantime, life goes on.
I think that it is good to have an open public debate in a sector like this. We should take a global view now of the measures we are taking and the corrective steps we want to take, to ensure there is genuine competition and we do not just end up creating duopolies.
Foreign banks can come and compete, just as the Canadian banks can make foreign purchases. Globalization in itself is not a bad thing, but we need to ensure that it is done in a way that leaves us winners.
The federal government has often neglected to use all the tools at its disposal, including the safeguards enabling industrial sectors such as the apparel and textile industries to protect themselves, to have a transition period. This was not done in these industries.
With regard to Canada's banking system, which has grown along with Canada, it is solid but it must adjust to new global realities. It must be given the requisite opportunity to serve consumers adequately. In this regard, there are still improvements to be made in terms of the transparency of information available.
I am anxious to see whether or not the clauses of this bill that pertain to disclosure of information to consumers, will be applied correctly and if the banks will provide the maximum amount of information. In the end, the Bloc Québécois will be able to see whether or not results are achieved.
In any event, this is an on-going process. We will have to re-examine this legislation to ensure that it always reflects the market reality. However, at present, the Bloc Québécois thinks it is a good thing to vote in favour of this bill, which makes certain improvements to our banking system. We hope that the banking system will be of benefit to our entire economy and that, in particular, it will address the lack of service in areas outside of major centres, in the rural areas of Quebec and Canada. In this regard, the banking system needs to pay more attention to our citizens.