Madam Speaker, I welcome you back for another continuation of this session of parliament.
We are starting this leg of this session of parliament with a very interesting bill before the House, Bill C-38. It is a bill to make a number of changes to the financial institutions in our country. It is a rather historic bill with some 900 pages. I understand it is the most voluminous bill we have ever dealt with in the history of this country, some 900 pages and the consequential changes which affect about 4,000 pages of existing legislation. In addition, there are many things in the bill that are left as orders in council and guidelines.
I do not think there is anyone in the House who can pretend that we have a good grasp of the overall impact of the bill. The minister, if he says he does, is very unique because the bureaucrats tell me that there is no one who has a total grasp of all aspects of the bill, including all the experts.
There are many experts of course who have expertise in various parts of the bill but no one can really tie it together in terms of all the consequences.
It is a very comprehensive bill. Where did it come from? In 1996 the government established a task force headed by Mr. Baillie, replaced later on by Mr. MacKay of Regina, to look at financial institutions and make recommendations to parliament and to the Minister of Finance to reform and change our financial institutions.
That task force went on from 1996 to 1998 at a cost of $3.5 million. It made a comprehensive and sweeping set of recommendations to the Parliament of Canada. The finance committee undertook hearings on the MacKay task force recommendations in October, November and December 1998, if I recall correctly. We also made our recommendations to parliament and to the Minister of Finance.
The Department of Finance issued a paper in June 1999 in which it made some comments and 57 recommendations arising out of the report. In the year 2000 we finally have before the House this very voluminous bill that makes all kinds of changes.
In a bill of this sort there are many positives and negatives. Our party will be voting against it on second reading and will continue to take that position unless a number of fairly sweeping changes are made to the bill.
Before I get into some of the negatives, I want to say that there are also a number of positives. The bill expands access to the payment system in the country. The payment system is there for the chartered banks. Bill C-38 will expand access to that system, in particular to the insurance companies, some of the brokerage houses and other financial institutions. We see this as a positive step in terms of competition in the financial industry. It is something that is supported by the insurance industry and others as well.
Another positive aspect of the bill is the expanded powers for our credit union movement. The credit union movement comes under provincial jurisdiction today. The legislation would allow them to have a national service entity where we could have easier transactions made from province to province. A member of parliament for example from Nova Scotia could go out to B.C. and do his banking in a credit union more easily than now because credit unions are currently regulated on a provincial basis and not on a federal basis.
There is also some talk about the possible creation of a credit union bank. This was a recommendation of the MacKay task force. It is not in this legislation, primarily because there is no consensus, as I understand it, in the credit union or co-operative movement on whether or not it is the right way to go. I think there is an openness in the House and in the government to the idea of a national credit union bank if indeed there is consensus evolving in the credit union movement and if the minister nods his approval to that. That would come some time in the weeks, months or years ahead. That is certainly a good possibility.
Under the current legislation a credit union could own a bank. For example, the Van City Credit Union could buy or operate a bank but the bank would have to be a subsidiary of the credit union and not owned directly by individual members of the credit union. This gets us into some of the detailed debating we will be having in the committee if the bill goes there in the next few days.
We support the idea of a financial services ombudsman. When it comes to the ombudsman it is a step in the right direction. We now have an ombudsman funded by individual banks and therefore there is a built-in conflict of interest in a real sense and in a perceived sense. The new financial ombudsman would not be a creation of the banks. It would have an independent board that is not drawn from the federal government or the banks. It would operate independently.
A concern I have about the ombudsman—and we will get to it in committee as well—is that I do not think it has enough power to enforce some of the findings that occur in terms of a levelling of fines and sanctions on banking institutions that may violate the rules and regulations pertaining to those institutions. We will be looking at more details from the minister at committee stage, but at least we have the establishment of a financial service institution which is a positive step in the right direction.
Let me reminisce. In 1989 an old friend of mine, the then member for Nickel Belt, John Rodriguez, introduced in the House a private member's bill to establish an office of the financial ombudsman or banking ombudsman that had sweeping powers to look out for consumers and to impose fines and sanctions on financial institutions that violated the rules and regulations. Some progress has been made, but hopefully we can strengthen it at committee stage.
Part of the bill that is going in a positive direction is some of the consumer protection agencies. They are very timid in my opinion. We now have the possibility of a lifeline account where some four to twelve transactions in a bank account are free of charge. If I understand correctly, it also says that no one can be denied a bank account as long as he or she has two pieces of identification and as long as there is no fraud. One cannot be denied a bank account whether the person is poor, unemployed or whatever. A lot of people now have difficulty establishing a bank account.
This is very vague in terms of what is actually in the legislation and of the details for individual banks. My understanding is that there will be negotiations between the new consumer agency and individual banks. There will be a memorandum of standing, an MOU, signed with each individual bank which might differ from bank to bank or financial institution to financial institution in terms of their obligations. The minister confirmed that as well. We want to scrutinize that carefully to make sure we can maybe strengthen it on behalf of consumers.
Another positive aspect in the legislation is something for which we have lobbied for a long time. It does not expand the power of banks to get into auto leasing or the sale of insurance. Members will recall a lobby a couple of years ago when this idea was floated, particularly by the MacKay report when it recommended that banks be allowed to sell insurance and get into the auto leasing business. There was quite a lobby in the country and we were all contacted. The influence of that lobby has paid off and that provision is not in the legislation today. That is a very positive step.
Those are some of the positive aspects of the bill. Some are not as strong as we had hoped, but at least they are steps in the right direction.
I come to some of the concerns. My major concern is the changing of the wide ownership rule. I am afraid this opens the door to more concentration of who owns the banking institutions and to foreign control and influence in our banking institutions. This has been a debate in cabinet. I would like to make sure that Canadians know this fairly radical change is being suggested.
Under the current legislation nobody can own more than 10% of the banking shares in any bank. All a wealthy individual can buy is 10% of the Royal Bank or 10% of the Bank of Montreal. This rule was brought in to parliament in the mid-1960s by the Pearson government when the Chase Manhattan Bank was in the process of trying to buy the Toronto-Dominion Bank. There was great concern about losing our financial institutions so the House of Commons brought in the 10% and 25% rule. No individual could have more than 10% of the shares in any bank and foreigners, put together, could not have more than 25% of the shares of a bank. The 25% rule went by the way with the signing of the free trade agreement with the United States. That has been gone now for a few years.
Today the 10% rule still applies. The government will raise the 10% to 20% for voting shares and the 10% to 30% for non-voting shares, opening the door for more concentration in the banking industry and for more billionaires or wealthy banks in the United States to buy huge chunks of Canadian banks and therefore have control over the Canadian banking industry. I do not think that is the way the Canadian people want to go.
Canadians are already concerned that we have given away too much of our national sovereignty. We have sold out too much of our country. We have erased too much of the border. I think Canadians are saying that we should not get rid of the 10% rule and should make sure Canadian banking institutions remain in the hands of Canadians and regulated by the Parliament of Canada on behalf of the Canadian people. I think that is the way we ought to go.
People are saying maybe we need this kind of change to compete in the world. Our banks are actually pretty large on the world scale. We have some of the largest banks in the world today, ranking 15th, 16th or 20th in terms of size. If our banks need to be bigger to compete in the world, for economy of scale, they could form a consortium. They would still have the same effect and efficiencies as if we were to change the rule in terms of amalgamating with other banks and ownership changes. We could do the same by consortium.
Another point I am concerned about is the ownership rule. The government has decided to categorize banks into three different categories: large, medium and small.