Mr. Speaker, I appreciate the opportunity to introduce at third reading C-37. The bill would amend the legislation concerning the framework for financial institutions operating in Canada and it comes out of the five year review of the Bank Act undertaken by Parliament.
The financial services sector is key to the success of a modern industrial economy. That goes without saying. The sector plays a unique role in fuelling the growth that is essential to the success of the Canadian economy, but the significance of this proposed legislation goes beyond our borders. Canada is recognized internationally for our safe and secure financial sector and the bill would help ensure that Canada remains a world leader.
The goal of Canada's new government is to improve our quality of life and make Canada a world leader for today and future generations. How will we do that? Along with November's economic and fiscal update, the Minister of Finance introduced “Advantage Canada”. This long term plan will achieve a higher standard of living and better quality of life for Canadians as the world economy continues to transform.
I will talk a bit about the plan and illustrate just how Bill C-37 fits in.
“Advantage Canada” is rooted in the realities of global competition and Canada's existing strengths and economic challenges. As a long term vision, it will serve as the framework for government decision making for years to come. Competition drives firms to become more efficient, invest in new technologies and introduce new products and services that benefit consumers. A highly competitive and open national economy also helps our companies and organizations to be more successful when competing in global markets, which means more and better jobs in Canada.
Government has a role to play in creating the ground rules for competition in Canada. Consistent with the overall purpose and principles of the “Advantage Canada” plan, Canada's framework of competition will create competitive marketplaces that serve both individual and business consumers with low prices, choice, quality and service. The investment will also drive and foster innovation investment and efficiency that grow productivity and competitiveness and it will promote a more resilient adaptable economy.
“Advantage Canada” is about making Canada a world leader and a safe and efficient financial system is crucial to achieving that goal.
Canada has a strong and sound financial system that serves Canadians well. It is an asset unto itself, providing high end, knowledge based and well-paying jobs for Canadians. Of course a strong financial system needs to be able to adapt to the evolving needs of households and businesses.
Keeping Canada's financial institutions and markets innovative and competitive with a flexible regulatory framework founded on sound principles will ensure that they continue to meet not only the needs of our growing economy but also the needs of Canadians. That is where Bill C-37 comes in.
Just as “Advantage Canada” is about making Canada a leader in the world, the bill is about ensuring that Canada's financial system remains a leader in the world. To attain that goal, Canada must have a regulatory framework that allows financial sector participants to operate as efficiently and effectively as possible.
The Government of Canada is responsible for maintaining the safety and soundness of the financial institution sector. It is also responsible for ensuring that consumers and businesses are properly served and protected. The regular five year review of the financial sector framework is an important tool in meeting these responsibilities, and a consultation process was an integral part of that review.
A large and representative group of stakeholders provided comments to shape the review of the financial sector statutes. Over 50 submissions were received from various stakeholders, including industry associations, financial institutions, consumer groups and individual Canadians. Those submissions culminated in a white paper issued by the Minister of Finance this past June. The drafting of Bill C-37 followed to legislate the proposals set out in the white paper.
While stakeholders agreed that no major overhaul was needed, there was acknowledgement that some steps could be taken to enhance the interest of consumers, increase legislative and regulatory efficiency and adapt the framework to new developments. These three objectives are the framework on which the bill is built.
I will now illustrate how Bill C-37 meets these objectives.
First, Canada's new government wants to ensure that the interests of consumers are well served. As members can imagine, competition in the industry in technological innovation can sometimes make for a confusing array of products and services confronting consumers. It is therefore important that consumers have the information available to them to help make informed decisions.
That is why Bill C-37 proposes to improve disclosure to consumers. Perhaps one of the best examples of improved disclosure to consumers relates to the growth of online services. Currently, federally regulated financial institutions must disclose in their branches information on the amounts charged for services normally provided to their customers and the public.
However, with consumers increasingly managing their finances using Internet banking, these disclosure requirements currently do not extend to the online world. To ensure that consumers have sufficient information, Bill C-37 proposes to harmonize online disclosure requirements with those of the in-branch requirements. This proposed legislation will allow consumers to compare banking products and services more easily online.
Another important measure to address consumer interests in the bill is the proposal relating to complaint handling procedures. Federally regulated financial institutions are required to have procedures and staff in place to deal with complaints from consumers. These procedures must be filed with the Commissioner of the Financial Consumer Agency of Canada and must be provided to consumers when they open a deposit account.
However, there are currently no requirements to ensure that consumers have access to information on these procedures on an ongoing basis. In addition, consumers who do not open an account, but rather obtain other products and services such as a mortgage, do not receive any information on complaint handling procedures.
Consumer groups have raised concerns that consumers may be unable to readily obtain the necessary information on the proper complaint handling procedures when a complaint with their financial institution arises. Bill C-37 addresses that issue by proposing amendments to the financial institutions statutes that will require financial institutions to make their complaint handling procedures publicly available for all consumers to access whenever they choose.
One of the biggest advantages of a regular review of the financial sector, such as we have in Canada, is the ability to modify just the framework as the sector changes and evolves. For example, there is now increased competition in Canada from foreign banks. The framework encourages competition through the entry of foreign banks into the Canadian market. However, while foreign banks have considerable flexibility to do business in Canada, some aspects of the current regulatory mechanisms have been criticized as being complex and burdensome.
An area of significant concern has been the regulatory burden placed on the so-called near banks. These foreign entities are not regulated as banks in their home jurisdictions, but provide banking type services such as consumer loans. Of particular concern is the ministerial entry approval that near banks must obtain to undertake unregulated activities. This requirement is regarded as unnecessary and costly. Moreover, it results in delayed transactions and provides little benefit.
To simplify the foreign bank entry framework and reduce the administrative burden, Bill C-37 proposes to narrow the framework to focus on real foreign banks and remove near banks from the foreign bank entry framework by eliminating the entry approval for near banks undertaking unregulated financial services.
The financial services sector has changed dramatically in recent years. Globalization has certainly played a major part in this change but so too has convergence and consolidation in the industry and, of course, advances in technology have changed the way we do banking today. One just needs to look at the way cheques have been processed for years.
Traditionally, the cheque clearing process involved the physical delivery of cheques to the issuing financial institution before a decision could be made whether or not to make the payment. Now, with the use of computer scanning technology, cheques can be sent electronically to the originating financial institution.
The faster processing enables financial institutions to clear cheques more quickly, thus allowing consumers and businesses to have more timely access to funds. To reflect the faster cheque processing time, Bill C-37 proposes to facilitate the introduction of regulations limiting hold times imposed on cheques.
Instead of using this regulatory power, however, the government is in the process of finalizing an agreement with the banking industry to reduce the maximum hold period voluntarily for cheques to seven days from ten days. Once cheque imaging technology is fully implemented across Canada, the cheque hold time will further be reduced from seven days down to four days. This, of course, represents a significant benefit for consumers and businesses alike.
Once more, these changes illustrate the importance of having an up to date framework to allow financial institutions to evolve and prosper while benefiting consumers.
Bill C-37 also contains a proposal that would attract additional expertise to the industry. Specifically, the bill proposes to reduce the board of directors residency requirement for Canadian financial institutions from two-thirds to a majority. This would l allow Canadian financial institutions to add more foreign experts to their board. It would also enhance flexibility and give financial institutions new scope to pursue global business opportunities while maintaining a strong Canadian presence on their boards.
All told, the proposals in Bill C-37 will help modernize the regulations for our financial institutions, which makes this bill important for a number of reasons. First and foremost, the bill is important because it would cut red tape and advance the interests of consumers. It is also important because it would amend the legislative framework so that Canadian financial institutions can better compete in the international marketplace. The bill is important for Canada because it would ensure that Canada continues to be a world leader in the financial services industry.
I therefore would ask all hon. members to give this bill careful consideration and allow it to pass without delay.