Jim Peterson

[Taxation, May 10th, 1999]

Mr. Speaker, in every one of our budgets we have had tax cuts, starting with targeted ones. In the last two budgets we have cut taxes by $16.5 billion, which means 600,000 Canadians are off the tax rolls.

We will continue to cut taxes in the future, but we will not do it in a way that rips the fabric out of Canada's social programs. We will do it in a responsible and balanced way, respecting the priorities of Canadians.

[Taxation, April 28th, 1999]

Mr. Speaker, the government has and is committed in the future to bringing down personal income taxes but in a way that does not rip apart the fabric of this country. If personal income taxes were the sole determinant of where a business sets up, the Cayman Islands would be the industrial mecca of the world.

[Taxation, April 28th, 1999]

Mr. Speaker, in every one of our six budgets we have recognized the need to bring down taxes. We have done so. We started, even when we were in deficit, bringing down taxes for the voluntary sector, for working families and for Canadians with disabilities.

In the last two budgets we have introduced $16.5 billion in tax cuts over the next three years. This is our commitment to tax cuts.

[Public Sector Pension Investment Board Act, April 26th, 1999]

That was a great government.

[Ways And Means, April 15th, 1999]

Mr. Speaker, pursuant to Standing Order 83(1), I wish to table a notice of a ways and means motion to amend the Excise Tax Act.

I am also tabling legislative proposals, explanatory notes, draft regulations and a backgrounder on the new framework for the taxation of wines, spirits and tobacco products.

I ask that an order of the day be designated for consideration of this motion.

[Bank Act, March 19th, 1999]

Mr. Speaker, we have seen how foreign competition such as the Wells Fargo operations directed at small business have actually sparked some lending in Canada to small businesses which is not based on balance sheets.

We have seen how foreign operations through electronic banking here in Canada have encouraged Canadian banks to get into all of these areas. We have received indications from a number of these foreign banks that the areas they will concentrate on are certainly commercial; big companies of course, but also hopefully the smaller businesses that may not have options under existing regimes.

Let me talk about the conditions for entry. I emphasize that the government will maintain control over which banks will be allowed to enter our market. Let me highlight some of the standards they will be required to meet.

A foreign bank must obtain the approval of both the Minister of Finance and the Superintendent of Financial Institutions. As a condition of establishing a branch in Canada, the foreign bank must be regulated in its home country in a manner satisfactory to the superintendent. Furthermore, we will be looking to see whether it has sufficient size, experience and financial health to support its branch operations in Canada because, above all else, we do not want to see banks in Canada going under, even if they are not taking retail deposits.

More specifically, a foreign bank wishing to branch into Canada must generally have a proven track record in international banking, must have demonstrated a favourable financial performance over the last five years and must be widely held. These are the guidelines which are in place. In addition, foreign banks wishing to set up a full service branch must have a minimum of $5 billion in worldwide assets.

Safety and soundness in the financial sector is our top priority. Let me explain how these banks would be regulated. First, they would be required to maintain a minimum deposit with an approved financial institution in Canada. For full service branches the deposit would be the greater of 5% of the bank's liabilities or $10 million. Since lending branches would have no depositors but would only be permitted to borrow from other financial institutions, they would be required to maintain a lower minimum deposit of only $100,000.

The only way to establish a foreign bank in Canada is by establishing a subsidiary, not a branch, and presently the minimum deposit is $10 million. The bank's parent is naturally incorporated in another jurisdiction and its primary supervisor would be the authorities in its home jurisdiction. However, its business in Canada would be supervised by the superintendent. OSFI would be given adequate regulatory powers to carry out this role, including the ability to order that a branch maintain specific additional access with an approved Canadian financial institution if this were deemed necessary to protect depositors and creditors of the branch.

In the case of insolvency, OSFI could take control of the assets of the foreign bank which are in Canada. If the proceeds from any liquidation that might occur were not sufficient, the depositors and creditors could seek recourse from the liquidator of the foreign bank in its home jurisdiction. While foreign bank branches would be exempted from many regulations, I emphasize that they would be subject to all of the rules that we have in place for the protection of consumers, such as regulations on disclosing the cost of borrowing, interest and other charges.

I will touch briefly on four technical changes contained in the bill. First, if the foreign bank is a member of the World Trade Organization, then it would no longer have to seek our approval to establish individual branches in various different locations in Canada. In other words, we would remove one regulatory impediment to their further expansion.

Second, there are proposals to eliminate the reciprocity provisions in the financial institutions statutes to reflect the most favoured nation principle of the WTO. Under this principle, parties to the agreement must not discriminate among financial institutions from different countries and must grant most favoured nation treatment. This means that Canadian firms can expect to receive the same treatment in other jurisdictions as those host countries offer to any other foreign institution coming to them.

A third amendment will be that OSFI can accept delegated legislation or regulatory responsibility from the provinces in Canada. We are trying to harmonize a lot of the regulatory laws and rules governing financial institutions in Canada and this is a major thrust in that direction.

There are federal rules and there are provincial rules. This causes unnecessary red tape. We will continue to try to eliminate this overlap and duplication, this totally unnecessary burden, by offering to take over the regulatory functions of provincial regulators so that we have one regime.

We are working to encourage the provinces, where they do not want to give up regulatory control by delegating it to the federal government, to at least harmonize provincial laws among the 10 provinces and territories and with the federal government so that at least people can understand that there is only one regime they need comply with.

Last, an amendment to the law would provide authority to OSFI to make regulations restricting the disclosure of supervisory information by financial institutions.

We are attempting to enhance the competition in our financial services sector. This is in accord with what the MacKay task force recommended, with what the Senate committee recommended, with what the House committee recommended and with what the committee chaired by the hon. member for Trinity—Spadina recommended. We are proceeding with this and we look forward to this law being passed.

Let me conclude by saying something about the entire banking structure in Canada. Our domestic banks are in favour of this legislation. It will subject them in certain areas of business to even greater competition from abroad. That is a sign of the confidence which they have in their own future.

I want to put on record very clearly that I could not be prouder than to be the secretary of state dealing with Canada's financial institutions. By all objective criteria, Canada's financial institutions are among the finest in the world in terms of the service they offer their customers and in terms of what they have contributed as an industry to our country.

Our banks, for example, employ directly over 200,000 Canadians. That does not include the thousands upon thousands of other jobs which they generate, such as those found in marketing, accounting and in other areas. They are the most highly taxed industry in Canada. Forty per cent of the their income comes from abroad. They have penetrated foreign markets throughout this world.

In spite of the fact that 40% of their income comes from abroad, fully 85% of the global taxes they pay are paid right here in their home jurisdiction, Canada. Ninety per cent of their global jobs are in Canada.

I would defy members of this House, if they wanted to set up a new industrial strategy for Canada, to find an industry which is contributing more in terms of exports, taxes and jobs than our banking sector.

Maybe it is in fashion to criticize our institutions. I am not saying that they are perfect any more than I am perfect. However, this does not mean that we will renounce our obligation to continue to work with all groups in Canada to make sure that our banks provide not only world class service, but that they are world class players.

Let us look objectively at what the banks have achieved in Canada and around the world. Let us give them the credit that is their due.

I look forward to the comments of members, to the bill going to committee and to its eventual passage into law.

[Bank Act, March 19th, 1999]

Mr. Speaker, I am very pleased to rise in the House today to speak to Bill C-67 at second reading stage, I hope with the support of this House that this bill will go to committee.

We are moving forward on second reading today to allow foreign banks to establish certain types of commercially focused branches in Canada. Establishing this branching regime will undoubtedly enhance competition for banking services within the Canadian market. This will help to provide a wider and better range of financial services for all Canadians.

The essence of Bill C-67 is that it will remove unnecessary regulatory barriers by allowing foreign branches to offer specified services in Canada through branches rather than requiring them, as at present, to set up a separate subsidiary in Canada with all of the regulatory implications and capital implications that that involves.

The major benefit that we will be giving to the foreign banks coming to Canada is that they will be able to draw on the capital base of their parent. They will be able to draw on their global capital in order to back up their Canadian lending operations.

They will be spared as well the expense of having here in Canada a separate board of directors and the different committees that are required by our regulators to ensure that they are compliant.

This will give to foreign banks greater flexibility in how they structure their Canadian operations. We believe this to be a useful step to help stem what has been over the years a withdrawal of foreign banks from Canada.

Yes, there has been a reduction in the number of foreign banks in Canada since we allowed them to come in here in a subsidiary form in 1980.

The cost-effectiveness of foreign banks operating in Canada is noticeably lower than that of the Canadian banks. The reason given most often for this difference is the cost structure relating to the activities of foreign subsidiaries.

But it must also be acknowledged that our Canadian banks are truly competitive worldwide, and this may well be the real reason.

A considerable number of foreign banks have cut back on Canadian activities, or pulled out of Canada altogether. Between 1990 and 1998, the number of foreign banks with subsidiaries in Canada dropped from 57 to 45.

I do not believe that this is something we should ignore. Any unwarranted damper on the ability of foreign banks to maintain a presence in Canada runs counter to our efforts as a government to encourage competition in the market for financial services. We want and need this competition in order to ensure maximum choice and value for consumers of financial services in Canada.

We believe that maintaining the status quo would likely rule out the prospect of more new foreign banks establishing operations in Canada. Simply put, they have plenty of opportunities throughout the world to expand their efforts and their operations. Their investment choices and decisions will be made on the basis of where they can get the best return on their capital. Removing some of these impediments will enhance the capacity of these foreign banks to develop higher returns because of the lighter regulatory burdens.

I would also point out that not only throughout the G-7 but throughout the entire banking world, there are only two countries today, and unfortunately Canada is one of them, that do not permit this type of foreign bank branching in the host country.

In order to remedy this, in February 1997 the government announced its intention to allow foreign banks to open branches in Canada. The following September, it published a consultation paper on the foreign bank access policy, followed by extensive consultations with all interested parties, as well as an examination of the regimes other countries had put in place in connection with foreign banks.

The regime set out in Bill C-67 is the outcome of these consultations. The key parameters of the proposed framework are similar to those of our main trading partners. The proposed regime will enable foreign banks to set up subsidiaries in Canada which would focus mainly on commercial banking activities and lending operations of a more general nature.

The regime would offer two options to foreign banks wishing to establish branches in Canada. They could establish either a full service branch or a lending branch.

Let me begin by explaining that neither type of branch would be permitted to take retail deposits. That would mean they would be limited to deposits of $150,000 or more. There is very good reason for this. If foreign bank branches were allowed to take retail deposits, then we could not offer them as attractive a regulatory regime. We would have to impose the full measure of regulations in order to protect those depositors.

In any event, foreign banks already have the option in Canada to take retail deposits by setting up a fully regulated subsidiary. This option remains open to them. Let us recognize right from the start that most foreign banks will not set up retail operations. They have indicated that their interest is in expansion in the commercial wholesale banking market.

Accordingly, these foreign banks would not be permitted to take retail deposits and since there would be no Canadian retail depositors' funds at risk they would naturally face this lighter regime of regulations.

Looking at the two types of branches that we are allowing, lending branches and full service branches, it is only the full service branches that will be permitted to take deposits of greater than $150,000. The lending branches will not be permitted to take deposits, large or small.

As well, the lending branches would be restricted to borrowing only from other financial institutions. As the name implies, the lending branches, the most lightly regulated of these branches, would be in the business of providing loans to Canadians.

The availability of two options for branches will make the regulatory framework more flexible. Regulatory requirements may be adapted to the nature of the activities of foreign banks in Canada.

Since lending branches will not be able to accept any deposits, they will be subject to fewer regulatory requirements than the full service branches.

Foreign banks choosing to operate lending branches will not be able to operate either a deposit branch or a full service branch. However, they will be able to operate other types of financial institutions that do not take deposits, such as insurance companies or other financial services. Foreign banks choosing to operate full service branches will also be able to operate deposit taking branches.

These options should be attractive to foreign banks already operating in Canada and those perhaps contemplating setting up here. I have had indications from a number of foreign banks that, with the new Canadian system, they will consider setting up business here.

The manoeuvring room associated with these options and the more flexible regulatory requirements adapted to each category of activity should reduce the costs to foreign banks of operating in Canada.

What does this mean for Canadian consumers of financial services? Since the foreign bank branches would be prohibited from taking retail deposits they would not be competing with fully regulated foreign bank branches or domestic banks in the retail deposit market.

However, we believe that they can make a positive contribution to the Canadian market in terms of lending to small and medium size businesses, corporations and some areas of consumer lending such as, for example, credit cards.

We believe in addition that the domestic banks stand to gain from liberalization. More often access to the Canadian market helps to promote fair and open treatment of our Canadian banks abroad and from 1980 when we allowed foreign banks to come into Canada this of course was always the main—

[Ways And Means, March 15th, 1999]

moved that a ways and means motion relating to the National Parks Act be concurred in.

[Supply, March 15th, 1999]

Say don't come to Canada.

[Supply, March 15th, 1999]

Mr. Speaker, our exchange rate is floating. It is not fixed, it is not set. It fluctuates depending on the U.S. dollar and the currencies of all the countries in the world.