Mr. Speaker, I am pleased to speak to Bill S-5.
Today we have discussed many of the important features of Bill S-5, which will strengthen Canada's financial sector advantage. As many speakers before me have noted, this is a mandatory, routine bill. Moreover, it includes many technical or administrative amendments that can be somewhat classified as housekeeping. However, there are a few more substantive measures that address current, global and domestic trends that I would like to highlight today.
The financial crisis highlighted the importance of evaluating the overall size of financial institutions, their global linkages and the impact these factors had on financial stability and the best interests of Canada's financial system.
In response to lessons learned, today's legislation proposes to reinstate an existing ministerial approval for select foreign acquisitions of financial institutions.
While Canada's sound financial system is a model for countries around the world, and we want to ensure that it remains secure, the global banking crisis nevertheless highlighted additional risk factors that supported more oversight of large foreign acquisitions.
To provide historical background, prior to 1992, banks were prohibited from owning a foreign subsidiary. In 1992 the government of the day amended the legislation to allow federally-regulated financial institutions to own a foreign subsidiary or hold a substantial investment in a foreign institution with the approval of the minister.
In 2001 that requirement for ministerial approval and review by the Department of Finance was repealed and oversight was limited to the Office of the Superintendent of Financial Institutions.
However, since 2001, the global banking crisis has highlighted additional risk factors that support the need for greater oversight to keep our financial system secure. As such, we are reinstating in today's bill some of those historical oversight provisions that were repealed in early 2001.
This bill would simply add ministerial approval if a federally-regulated financial institution acquired a major foreign entity which increased its assets by more than 10%. The criteria that the minister could consider are hard-wired in the legislation, those being the stability and best interests of the financial sector. The timeline for approval is also hard-wired. The legislation would require the minister's consideration in 30 days or it would be deemed approved. This would likely only apply rarely. In fact, since 2004, there have only been a small number of cases where this proposed legislation would have applied.
The reactions from academics, bankers and the Superintendent of Financial Institutions have been quite supportive of the provision. I would like to share some of their reactions with the House.
Michael King, finance professor of the Ivy School of Business stated:
This kind of a rule is actually one of the reasons why Canadian banks weathered the crisis so well over the years...Canadian banks have done well. And it’s helped the Canadian economy to have such stable banks.
Terry Campbell, president of the Canadian Bankers Association stated:
That power was given to OSFI, and now it is back with the Finance Minister to, in our view, give him a full suite of tools as part of his oversight of the financial system in Canada.
Julie Dickson, the Superintendent of Financial Institutions, stated:
—we fully support that decision. It makes sense for the Minister of Finance to ultimately have the ability to approve. It’s just going back to the way it used to be.
Today's bill would help ensure that Canadians would continue to have a strong and secure financial system on which they could rely. Canadians are proud that, unlike Europe or the U.S., we did not have to nationalize or bailout banks with taxpayer money. Canada has shown the value of ensuring a well-regulated financial system. That is something that has been recognized around the world.
Canada was ranked as having the soundest banks in the world by the World Economic Forum.
The influential magazine The Economist has also proclaimed:
Canada has had an easier time than most during the recent global recession, in part because of a conservative and well-regulated banking system.
Canadians use financial services every day, be it by using their credit card, cashing a cheque, going to the bank, or signing a mortgage. I think members would agree that Canadians deserve to be treated fairly when using these products and to be provided with clear information before agreeing to use them.
Indeed, since being elected in 2006, our government has taken important steps to address consumer concerns and make financial services products more consumer friendly. Those measures have included: protecting consumers with new credit card rules, such as requiring consent for credit limit increases, a minimum 21-day grace period on new purchases, full disclosure for consumers, and limiting other anti-consumer business practices; bringing in a code of conduct for the credit and debit card industry to help small businesses dealing with unfair practices, as the code would help ensure fairness, encourage real choice and competition, and protect businesses from rising costs; and banning negative option billing for financial products. There is much more.
Our government agrees that making financial services products more consumer friendly is an important goal.
In this legislation, we are making a few important changes to federal financial institution statutes, including confirming that Canadians, including bank customers, are able to cash government cheques in amounts of less than $1,500 free of charge at any bank in Canada, and improving consumer protection by increasing the maximum administrative penalty that the Financial Consumer Agency of Canada, FCAC, could levy from $200,000 to $500,000. This would also bring FCAC penalties in line with other financial regulatory authorities, like the Office of the Superintendent of Financial Institutions and the Financial Transactions and Reports Analysis Centre of Canada.
This is in addition to consumer-friendly measures we announced in budget 2011, such as banning unsolicited credit card cheques, moving to protect consumers of prepaid cards, beginning to implement the task force on financial literacy's recommendations, starting with the creation of a financial literacy leader in the government. In fact, it was only last month that we introduced the financial literacy leader act to move forward on the financial literacy front.
I could go on to outline other very important components of the bill, but I will close by encouraging all members of the House to support this very important mandatory and routine legislation so as to ensure it is passed without delay so that we can continue to enjoy a strong, stable financial sector.