Madam Speaker, I am pleased for the opportunity to speak at second reading of Bill S-5, the financial systems review act.
I want to begin by noting that this legislation is vital to the stability of Canada's financial sector, and explain how it came before the House today. Every five years the government reviews the policy framework that governs federally regulated financial institutions. The last review was completed in 2007.
Launched on September 20, 2010, the current five year review began with the Minister of Finance inviting Canadians to share their views on how to improve our financial system through an open consultation process. This process has helped to ensure that Canada remains a global leader in financial services. Making sure that Canadians continue to have a strong and secure financial system, one that has been a model for countries around the world during the recent global turmoil, is a key priority for our Conservative government.
This bill would help ensure that our system continues to be recognized.
For the fourth year in a row, Canada was ranked as having the soundest banks in the world by the World Economic Forum. This strength has been widely recognized by independent observers, both here and abroad. An Ottawa Citizen editorial acknowledged that, and I quote:
Our banking and financial system is the envy of the world. While the great money edifices of countries such as the U.S., Britain and Switzerland cracked at the beginning of the recession, Canada's banks stood firm.
In the Toronto Sun columnist Peter Worthington has said:
Canada's banking system is now widely recognized as arguably the world's best. No Canadians fear for their deposits as many Americans do.
We have also been recognized beyond our borders. Indeed, we have heard from voices around the world.
When it recently renewed Canada's top-tier, AAA credit rating, Fitch, the world renowned credit rating agency, pointed out:
Canada's banks proved more resilient than many peers thanks to a conservative regulation and supervision environment.
The influential Economist magazine recently stated that:
Canada has had an easier time than most during the recent global recession, in part because of a conservative and well-regulated banking system.
The Irish Times commented recently that:
Canada's policy of fiscal discipline and strict banking supervision was a reason why it was one of the world's strongest performers during the recession.
U.K. Prime Minister David Cameron praised our system:
In the last few years, Canada has got every major decision right. Look at the facts. Not a single Canadian bank fell or faltered during the global banking crisis...Your economic leadership has helped the Canadian economy to weather the global storms far better than many of your international competitors.
I echo that high praise.
Moreover, I would like to add that the financial services sector is a constant presence in the daily lives of Canadians. The industry employs over 750,000 people in good, well-paying jobs. It represents about 7% of Canada's GDP. The sector is a key pillar of our economy through its role in fostering financial stability, safeguarding savings and fuelling the growth that is essential to Canada's economic success.
Canada is set apart from almost every country in the world through the implementation and practice of the mandatory five year review that produced the bill we are discussing today. This practice ensures that the laws governing our financial institutions are updated and responsive to a constantly changing global marketplace.
I would also add that the recent financial crisis helped us recognize the importance of a stable and well-functioning housing market to the economy and the financial system. While our banks and financial institutions remained sound, well capitalized and less leveraged than their international counterparts during the crisis, in order to ensure stability in our housing market our government proactively moved three times to adjust our mortgage insurance guarantee framework.
These adjustments included reducing the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%. We also reduced borrowing limits in refinancing and withdrew government insurance from home equity lines of credit.
These adjustments have been applauded by observers and economists alike. TD Economics praised the changes highly, stating that “these policy changes were prudent and act to help limit risk in Canadian real estate”.
Our government is committed to renewing the key elements of our financial system and bolstering it with new tools. We are committed to fine-tuning, clarifying, harmonizing and modernizing the existing framework. We are doing just that through the financial systems review act.
Canadians recognize that the current framework functions well. Canada's financial system continues to be recognized as one of the soundest in the world. From that solid foundation, the proposed legislative package includes measures that would modernize financial institutions' legislation to encourage financial stability and ensure Canada's financial institutions continue to operate in a competitive, efficient and stable environment. Measures would fine-tune the consumer protection framework, including enhancing the supervisory powers of the Financial Consumer Agency of Canada and improve efficiency by reducing the administrative burden on financial institutions and adding regulatory flexibility.
Other measures contained in this bill include: improving the ability of regulators to share information efficiently with international counterparts while respecting privacy laws; guaranteeing that all Canadians have the right to cash government cheques under $1,500 free of charge at any bank in Canada; and promoting competition and innovation by enabling cooperative credit associations to provide technology services to a broader market. The bill would reduce the administrative burden for federally regulated insurance companies offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements.
I am happy to report that many public interest groups have shown strong support for today's bill. For example, the Canadian Life and Health Insurance Association proclaimed:
It is important that legislation be periodically reviewed so that it keeps up with the changing environment... The industry welcomes a number of measures outlined in [the financial system review act].
In summary, today's act would reinforce financial sector stability, fine-tune consumer protection provisions and adjust the regulatory framework so it can better adapt to new developments. It would provide for a framework that would benefit stakeholders in the financial services sector, financial institutions, as well as all Canadians who rely on our banking system daily. Our Conservative government recognizes that in order to remain an international leader in the area of financial sector stability, we must continually consider what regulatory changes are needed to foster competitiveness and to ensure the safety and soundness of our system.
Today's bill would maintain the long-standing practice of frequently reviewing the regulatory framework for financial institutions, ensuring that Canada remains the leader in this regard. I therefore urge all members to support the financial system review act, along with the sensible regulation of our banking system that has served us so well.