Mr. Speaker, I rise on behalf of the people of Surrey Central to support Bill C-67, the government's proposal to allow foreign banks to branch directly in Canada. We can support this change because it is long overdue. The Liberals have dragged their feet on this issue which of course is not unusual for that party.
At the World Trade Organization in 1997 the Liberals agreed to the letting into Canada of subsidiaries of foreign banks by June 1999. Bill C-67 will permit foreign banks to accept deposits of over $150,000. This means that foreign banks will not be constructing branches all across Canada and their competition with domestic financial institutions will be limited.
Let us look into the current banking environment in Canada. The presence of foreign banks in Canada has been steadily declining. It has been declining from a 12% share of total banking sector assets in 1990 to just 10% today. There was a peak of 59 foreign banks in Canada in 1987 and it was down to 45 in 1998.
Foreign banks cannot currently operate branches directly in Canada. They must operate as subsidiaries largely unconnected to the parent bank in terms of capital, governance and accounting. Bill C-67 proposes a new regime for foreign banks in Canada as well as some miscellaneous changes to financial sector regulations.
This proposed legislation would allow foreign banks to operate as branches of their parent banks with the ability to draw on parent capital, to make loans and to conduct other banking business. New full service foreign bank branches will primarily serve the corporate market. Foreign banks that want to take retail deposits, that is deposits below $150,000, will still have the option of establishing a separate subsidiary in Canada. New lending branches will not be permitted to accept deposits or borrow except from other financial institutions.
It is hoped these foreign banks will serve as sources of funds for both small businesses and credit card users. Both full service and lending branches will be allowed access to Canada's clearing and settlement system with the approval of the Bank of Canada.
As I understand it, changes to the Income Tax Act to place these new foreign banks in a comparable tax position to Canadian resident banks will be introduced as future legislation.
I would like to briefly explain why we support Bill C-67. The Reform Party supports allowing foreign banks to set up branches in Canada to provide more choice in banking for consumers and businesses as well as to allow for the offsetting of reduced domestic competition created by any future Canadian bank mergers.
As the hon. member said, direct foreign bank branching is the norm in most other countries. The Liberals have been promising the same for Canada since February 1997. The Liberals' introduction of Bill C-67 is two years overdue. The government has been sitting on its hands for two years.
Foreign bank regulations have not been substantially upgraded since 1980, 20 years ago, when foreign banks were granted the authority to establish Canadian subsidiaries. We will take what we can get from the government and take the opportunity to urge the government to work harder to keep up with other economies in the world and reform our financial services sector.
The changes proposed in Bill C-67 represent the least that Canadians want in terms of updates to the regulations governing foreign banks operating in Canada.
The government is taking a piecemeal approach to financial services sector reform when broad reform is needed to increase competition. We regret that but it does not take away from our support for Bill C-67. Large foreign banks generally would rather compete electronically but the government has done nothing about that.
The MacKay task force in September 1998 recommended that foreign banks should be able to carry on any banking business in Canada other than, of course, the taking of retail deposits below $150,000 through branches of the foreign bank as well as through their subsidiaries.
After reading through Bill C-67, I am convinced that there are some safeguards for Canadians which I will briefly touch on. The bill proposes that foreign banks obtain the approval of the Minister of Finance and the Superintendent of Financial Institutions before setting up a shop in Canada. That is pretty good.
The minister must be satisfied that the foreign bank will be in a position to contribute to Canada's financial system and its entrance would be in the best interests of the Canadian financial system. The foreign bank must be a bank in its home country of sufficient size, experience and financial health and be satisfactorily regulated in that country.
Authorized foreign banks must establish a customer complaint procedure with staff located in Canada. The foreign bank must also disclose to its customers all service charges, fees, the cost of borrowing, the penalties if there are any, et cetera, to customers before agreements are entered into.
The Office of the Superintendent of Financial Institutions, OSFI, will be authorized to seize all assets of a liquidated foreign bank to satisfy claims of depositors and creditors of the foreign bank branch in Canada, including going to the parent bank for such seizures if there need be.
Let us look at the reasons that the Liberals should have brought this legislation to the House at least two years ago. The Canadian economy has not had access to as much credit as would otherwise have been made available by foreign banks, so that opportunity is lost.
Canadian companies have not had access to the range of products and services available from foreign banks that would have assisted them in better managing their business risks and facilitating growth internationally. Foreign bank competition will push domestic banks to be more innovative concerning the kinds and amounts of services they currently provide to Canadians.
The Canadian financial services industry has not benefited from learning from the technological developments that foreign banks provide the industry all over the world. The presence of foreign banks in our economy would increase the responsiveness and accountability of domestic banks, which is badly needed.
The domestic financial services industry bears a disproportionate share of the credit risk associated with the Canadian economy. Consequently, when major credit events occur, such as declines in the energy and real estate sectors, the stress to the domestic financial services industry is significant. The opportunity is also lost.
While the Canadian government is expending significant resources to boost the export of Canadian products, the ability of foreign banks to make the advantages of their global networks available to all Canadian companies is severely hampered.
In addition, foreign banks are keen to finance Canadian exporters who target emerging markets around the world, the sort of risky ventures that Canadian banks often avoid.
Canada has forgone tax revenues at both the federal and provincial levels due to marginal profitability and constraints on growth on foreign banks. Such tax revenue could be funding our beleaguered social programs such as health care and education.
The average retail banking consumer may not see a direct benefit from foreign bank branching. However, trickle down benefits are expected to come to them by way of increased financing to small and medium size businesses for starting up and/or expanding and thereby creating more competition in the consumer goods marketplace.
As foreign bank branches establish in Canada there will be increased investment in the Canadian economy by way of foreign banks purchasing goods to run their businesses in Canada, capital cost expenditures for infrastructure and real estate leasing and purchasing, among others. This increased investment will translate into more employment for Canadians.
In conclusion, while we on this side of the House are supporting Bill C-67 with no resistance at this time because we believe that the bill is offering advantages to Canadians, we should take the opportunity to scold the government for its foot dragging on implementing further changes to the financial services industry that need to occur.
This includes reforming the ombudsman system in the banking industry, reducing federal-provincial regulatory overlap and duplication, and reviewing the taxation regime encountered by banks with an aim to improving competitiveness in Canada.
As I said earlier, the Liberals agreed to allow foreign banks into Canada in 1997 as part of a commitment they made at the World Trade Organization. However, they dragged their feet and did not introduce legislation until this month, May 1999, which is the last possible moment that they could have done that.
They did the same with changes to the equalization program. As we know, the federal government updates the equalization program every five years.
The Liberals had five years to allow members of the House to debate the changes. Instead, the Liberals introduced that legislation into the House at the last possible moment, like this one, and had to invoke time allocation on that bill in order to get it passed before the deadline. This is a government that lacks vision. This is the way organizations proceed when they have no real long term vision or long term plan.
The Liberals are dragging their feet on changes to our youth criminal justice system. They have frozen the progress of the changes to the divorce laws that would give each parent an equal amount of responsibility for children. I can count a number of instances like this. They are also way behind in many other areas where Canadians want changes, including our immigration and refugee system. Today we heard the minister agreeing to allowing a criminal, who has been convicted of drug trafficking in this country, to become a refugee. This will allow him to continue his drug trade and continue to feed drugs to our children.
Help from the government for our law enforcement agencies, such as the RCMP in B.C., is very slow, and in returning integrity to the accounting practices of the Minister of Finance who has been cooking the books in the country.
The government is lagging behind in many areas of innovation in the way we govern ourselves. It will not do anything about leaked House of Commons committee reports. It just wants to study them. We still do not have televised House of Commons committees even though it was agreed to by all parties. It is still dragging its feet and not allowing Canadians to monitor and educate themselves on what we do in the House.
Bill C-67 should have been passed a few years ago, before our dollar dropped so severely and before our taxes got higher and they get higher during every session of parliament under this government. Those were the days, two years ago, before the Asian economic melt down, when if we had allowed foreign banks into Canada then perhaps we might not have suffered in that meltdown.
The government is using incremental policy when it comes to our financial sector. That means it is doing very little or nothing, or certainly only what it absolutely must do. This is a shame.
Along with the passage of legislation like Bill C-67 that would update the laws concerning our financial sector, we would see improvements in our economy. Our economy could grow. Jobs could have been created in the country. The Liberals leave the House with a thin soup legislative agenda and they do as little as possible.
The government goes as slow as possible and only does something when it absolutely has to. It has no intention of allowing a full debate on the legislation introduced in the House. We have seen 52 motions for closure or time allocation in the House. The government may also want to apply closure or time allocation on this bill to ensure it gets passed without exposing too many secrets that Liberal backbenchers know nothing about. They only need to know how to vote and the Liberal hierarchy tells them how to vote.
Yesterday we saw some Liberal backbenchers voting against the government on Bill C-78 and one member simply sitting on his hands. That bill will allow the government to take away the $30 billion surplus from the pension plans of our public servants, our RCMP and our Canadian forces personnel.
The list continues to grow and it goes on and on. This is the government that looks through the lens of political stripes and not through the lens of the issues. It should be ashamed.