Mr. Speaker, I am happy to speak to Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters.
Last June, the Department of Finance released a policy paper on which much of the bill is based. The policy paper was commissioned by the previous Liberal government in preparation for the statutory five year review of the Bank Act.
The title of that white paper was “2006 Financial Institutions Legislation Review: Proposals for an Effective and Efficient Financial Services Framework”.
Given that it was inspired in large part by the white paper, the government's bill mirrors Liberal policy. The white paper stated that competition and disclosure are the best ways to protect the interests of consumers.
Consequently, we are seeing some positive measures in this area.
Bill C-37 would ensure that financial institutions provide greater and more timely disclosure to consumers in areas such as deposit type investment products and complaint handling procedures.
What these measures would ensure is that when a customer opens something like a savings or chequing account they are provided with all the information they require to make an informed decision. I think that little could be more important for consumers than ensuring that they have the appropriate information specific to the type of product they are purchasing.
The bill also makes some routine changes that need to be addressed every few years. The prime example of this is readjusting the equity thresholds that determine the size of financial institutions. When the Bank Act was last reviewed in 2001, it was determined that large institutions would be considered those that hold over $5 billion in equity.
Times do change, however, and as a result this bill proposes to increase that threshold to $8 billion to reflect growth in the sector and the general cost of living and inflation factors, small as they are.
Additionally, it would set a new threshold for what is considered to be medium sized institutions. These will be those institutions that hold between $2 billion and $8 billion in equity. As I said, these are some routine updates, but they are important nonetheless.
The bill also has a section devoted to electronic cheque imaging, something that we had asked to be addressed in the white paper. It would require banks and financial institutions to exchange electronic images of cheques, rather than physically exchanging them among themselves. Let us try to picture some five million cheques being transported from one financial institution to another every day, some of which must travel clear across the country.
Advances in recent technology means that this drawn out process is no longer required. Electronic images of the cheques can now be scanned, captured and transmitted in a safe and secure manner between banks. This saves time and it reduces the administrative burden. It is already used by several financial institutions and we have seen great results.
This measure will be very advantageous for both consumers and businesses because cheques will clear quickly. Once electronic cheque imaging becomes widespread, cheques will no longer have to be held for more than four days.
Our previous Liberal government was constantly searching for new technologies to make business and government more efficient. For instance, last year the Canada Revenue Agency began a move toward 2D bar coding for corporate tax returns which would allow tax software to generate a bar code that could be affixed to a company's tax return. When it arrives at the Canada Revenue Agency processing facility, all that is required of the CRA is to scan in the bar code and all of the data contained in the return is transferred electronically into the CRA's computers. This not only would allow for faster processing time but would significantly reduce the occurrences of human error that often goes hand in hand with manual data entry.
This was just a small aside, but I think it illustrates the point that we need to be cognizant of new technology and seize the opportunities that they present us with. I am glad that the Conservatives are following our lead on this particular issue.
I am also in favour of the section in the bill that would make it easier for credit unions to establish cooperative credit associations as a means of expanding their business opportunities. Currently, the Cooperative Credit Associations Act requires a minimum of 10 credit union members in order to form a cooperative credit association. This is a fairly high threshold that precludes many credit unions from forming cooperatives. I am happy to see that the minimum number will be reduced.
When our government reviewed the financial sector in 2001, there were key initiatives that we pursued when bank mergers were on the radar. We wanted to ensure that if bank mergers were ever proposed and were deemed in the public interest that there would be the opportunity for more competition and more products, services and choices available to Canadians through credit unions and foreign banks.
In questioning the minister earlier, I alluded to the fact that foreign banks, while they have an interest in doing business in Canada as the minister indicated, are doing well in certain areas. Most of their efforts are in the wholesale banking side because of the dominance in terms of retail branches across Canada that are maintained by Canada's chartered banks. However, I would encourage any measures in Bill C-37 that would create more opportunities for foreign banks to more aggressively enter the Canadian marketplace. This would give Canadian consumers more choice and more opportunities to shop around for different options and that is good for consumers and the Canadian economy.
I am glad to see that the minister is trying to deal with the credit unions as well. This is a great opportunity again for giving consumers more choice. I know the minister has indicated that there is no big appetite right now for bank mergers or cross-pillar mergers and I think that is a wise decision at this point in time. It is certainly providing clarity to the financial institutions with something that they were looking for.
However, at some point in time if the banks do come back, it would be important, for example, because certain branches of the credit unions would have to be divested and then perhaps foreign banks and others would be in a position to acquire those branches. In fact, the end result could be that consumers would have more choice, so I think it is important to try to build those institutions up in Canada so that Canadians do have more choice and more access to different products and services.
The minister talked about how the bill proposes to reduce the cost of mortgages for some borrowers by raising to 80% the loan to value threshold above which mortgage insurance is required by statute. The current threshold at which one requires mortgage insurance is 75%. Given changes in risk management practices and regulatory requirements, the white paper, which we commissioned under our government, made this exact recommendation. I am happy to see it included in the bill.
One area I am concerned about that did not receive enough attention in this bill is extending customer protection. Beyond the requirement I mentioned earlier that financial institutions provide greater and more timely disclosure to consumers in areas such as deposit type investment products, there is very little mention of helping other types of customers. The bill does not seem to offer similar types of protection for Canadians who take out a mortgage, for example.
June's white paper recommended that the government amend laws governing financial institutions to require them to give all consumers full access to their complaints process, either in their branches or online.
One of the central pillars of consumer protection is providing them with the information required to make the right initial choice of product and the information required to properly lodge a complaint and seek compensation if that product is defective. Yet, the bill has largely ignored this recommendation from the white paper.
I do not think the majority of Canadians are very familiar with what the complaints process is at their local banks and legislating information in that respect to be readily available would have been a great idea and is still a great idea. My riding and I am sure many of my colleagues' ridings receive calls and complaints about banks, service charges and a range of other things. There is a bank ombudsman and there is actually an ombudsman of all ombudspeople. That is a very useful mechanism.
I would be willing to bet that there are a good number of Canadians who do not even know that there is an ombudsman for banking services should they exhaust all the avenues available to them. The banking services ombudsman and his office do fine work. I have worked with them before on a number of issues. I would have liked to have seen a requirement for information about the services of the ombudsman be made readily available.
The white paper called for the streamlining of the ministerial approval process. Currently, there are numerous ministerial approvals required for a broad range of important financial sector transactions related to market entry, structure and competition, as well as financial institution ownership. There are also many routine transactions that require multiple ministerial signatures. This could be dealt with in a more efficient manner and this bill would ensure that happens.
The bill also contains a few items that go beyond the white paper. For instance, the bill proposes to reduce the number of resident Canadians who are required to sit on the board of directors at a Canadian owned financial institution. Currently, two-thirds of such directors must be residents of Canada. The bill proposes to reduce this requirement to more than half of the directors being Canadian.
I know this issue comes up when financial institutions in Canada look to merge or acquire assets in the United States by way of example. When they try to merge, very often the U.S. enterprise will say it will merge but it would like a stronger representation on the board of directors. Frankly, I would encourage our financial institutions to grow north-south. This would give them options beyond just looking to cross-pillar mergers in Canada. This is a positive step.
The two-thirds requirement worked well in the past, but these days, our financial institutions have added a major international component to their activities. Relaxing these requirements would promote the growth and enhance the competitiveness of Canadian institutions on the world economic stage.
I brought up with the Minister of Finance the question of data processing outside of Canada. The proposal in Bill C-37 says the approval of the Superintendent of Financial Institutions would be eliminated for the processing of information of data outside of Canada. While I appreciated the minister's remarks, I think that is in the domain of the Privacy Commissioner.
If a financial institution in Canada was proposing to outsource some of its data processing outside of Canada, keeping superintendent approval is probably still a wise thing to do because before the superintendent would give his or her approval, he or she would presumably ask whether the Privacy Commissioner had been consulted and whether the transactions would protect the privacy interests of Canadians. I am sure the superintendent and the Minister of Finance do not mean to pass this off to someone else to get out of a sticky situation. I am sure that is not the motivation.
Whatever the motivation, the government and perhaps a committee should look at whether this is a wise thing to do given the recent events where certain data processing activities in the United States came under the purview of the patriot act. The confidential information of Canadians was perhaps compromised.
As I said earlier, our government made changes to the financial sector framework in 2001 to set up the process where any bank merger would be required to pass a parliamentary committee test as to whether or not it was in the public interest. That was a good move.
However, in that period, the finance committee of the House of Commons did not review cross-pillar mergers. A cross-pillar merger would be, for example, when a Canadian bank wishes to merge with a Canadian insurance company. The minister has signalled that he is not interested right now in any sort of cross-pillar merger proposals, but if that day ever comes, the public interest criteria and framework that was set up for potential bank mergers needs to be looked at by the House of Commons Standing Committee on Finance because that work was not done for cross-pillar mergers.
Unfortunately, I am not at the stage where I could have proposed amendments to the Bank Act, but that may come one day. I just have to do more work on this particular issue.
An area of interest to me has to do with Internet betting. The Woodbine Racetrack is in my riding of Etobicoke North, and it is expanding at an incredible rate. It is developing its property to include the concept of Woodbine Live, which will have entertainment, hotels, shopping, et cetera. One of the issues that is of great importance to Woodbine is the growth in Internet betting which is actually taking some of its market share away. The irony is that Internet betting is illegal, but no one seems to want to prosecute. As a racetrack, Woodbine is regulated very carefully by the provincial and federal governments. It would be happy to get into the game of Internet betting if everybody else was doing it, but it is reluctant to do so because of the regulatory regime that oversees its operations. It could lose its licence.
I have looked at this from a number of different angles. I have tried to engage the RCMP and the Ontario Provincial Police. No one seems to really be interested in seeking prosecutions in this area. One way to come at it is to do what has been done in the United States where it is illegal for banks to accept cheques, debit or credit cards for Internet betting activity.
Yesterday we debated a bill sponsored by my colleague from Bourassa with respect to video terminals in bars and restaurants. Young people could become addicted, and not just young people, but many people do become addicted. The reality is there are some people who sit in their homes, go online and play poker on their computers at poker.com, et cetera. I have never done it myself but I am told that in order to do that, people have to use a credit card or a debit card to create some credit authority.
If there were changes made to the Bank Act that the banks would not accept debit cards or credit cards associated with online Internet betting, this might be a way of trying to limit some of these activities. It would make sure that the playing field was level for organizations in my riding such as the Woodbine Racetrack, which has a very proud reputation in Canada. It hosts the Queen's Plate annually. It is a great institution and I am very proud of it.
In conclusion, I think that all parties can agree this bill contains some much needed updates for our financial institution legislation. I personally do not think the bill contains anything particularly contentious. I will be happy to provide it with my support, with the caveat that if it is referred to committee, the committee should look at a couple of the issues that I have raised today.
