Mr. Speaker, I appreciate the opportunity to speak to this important bill.
Today is a very opportune time to be actively pursuing the passage of Bill S-5, An Act to amend the law governing financial institutions and to provide for related and consequential matters.
Our government undertook a review of our financial sector and the legislation that governs it with the understanding that we live in an ever-changing world of evolving technology and financial sector innovation. The technical measures contained in this bill would ensure that Canada's financial sector regulatory framework stays ahead of the curve and accommodates these developments by mitigating risks, creating new opportunities and helping Canada's financial sector maintain its international reputation as a world leader in terms of its strengths and stability.
I am pleased to report to the House that this legislation was undertaken after a lengthy period of time of open consultation with Canadians from coast to coast to coast to ensure that Canada remains a global leader in financial services and maintains its sector advantage. This financial sector advantage is fundamental to Canada's remarkable economic performance throughout the global financial crisis of 2008. In our world-leading recovery from that episode in terms of jobs and growth, our advantage underpins this overall health that is found in our economy. That is why, in the wake of the financial crisis, our Conservative government took action to modernize the authorities of the Bank of Canada to support the stability of our financial system. This would allow the Bank of Canada to redistribute wealth and liquidity to financial institutions, buttressing them against the immediate aftershocks of the crisis and maintaining the vital flow of credit to Canadians and businesses during the so-called credit crunch.
While many foreign banks had difficulty raising capital on global financial markets during the crisis, Canada's financial system remains stable, well capitalized and underpinned by one of the most effective regulatory frameworks in the world.
Then, to further safeguard our financial system moving forward, we introduced measures in budget 2009 to strengthen the authorities of the Canada Deposit Insurance Corporation. This enhancement would contribute to the financial stability and protect insured deposits by giving CDIC a great variety of tools to manage the resolution of a troubled financial institution. An important element of this change is that it would allow CDIC to establish a bridge institution, known in the trade as a bridge bank, to preserve the critical functions of a financial institution facing trouble and to help maintain overall financial stability.
Among other things, Bill S-5 is important because it includes a number of technical refinements to ensure the effective implementation of this bridge bank tool and it includes other measures that would contribute to financial stability.
We have seen all too clearly in recent years how heavily interconnected the structure of global finance has become, and this can pose unintended risks here at home, which is to say that bad or risky decisions can have repercussions that can travel right around the world and land back on our doorstep with a lot of unpleasant financial consequence in tow, and not just for the banks but for the people and businesses who depend on them. All governments have an obligation to weigh these risks. This is particularly important as Canadian banks expand into foreign markets and foreign players similarly enter the Canadian market. With Bill S-5, the Canadian government would have another tool at its disposal to take action when it considers these risks to be unacceptable.
In short, the bill would reinstate the requirement for significant foreign acquisitions of financial institutions to be approved by the Minister of Finance. Since 2004, there have only been four instances when this provision would have been applied. While this role would rarely be used, there is no doubt that this kind of oversight should be brought back.
Michael King, finance professor at the Richard Ivey School of Business, says:
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.
Alec Bruce, noted Times-Transcript columnist, has reported that the finance minister has a point. “When our banks top up their foreign holdings in this environment they do, in fact...”, in essence, import many of the efforts they've made overseas and reject all of the contagion that comes overseas as well.
This also builds on recent stabilizing measures we have introduced to secure the financial sector. Budget 2011, for example, announced the government's intention to establish a legislative framework for covered bonds, which are debt instruments secured by high-quality assets such as residential mortgages. This will make it easier for Canadian financial institutions to access this low-cost source of funding and help create a robust market for covered bonds in Canada.
Consumer protection is another area where we have taken decisive action to strengthen Canada's financial sector. In 2009, for example, our Canadian government acted to protect Canadian credit card users. The measures we introduced mandated that the inclusion of clear and simple information on credit card application forms and contracts would be required, and also required clear and timely advance notice of changes in rates and fees from card providers.
We have also limited credit business practices that do not benefit consumers. For example, we require credit card insurers to provide consumers with a minimum 21-day interest-free grace period on all new purchases when consumers pay their balance in full by the due date. We also require a minimum 21-day grace period on the billing period as well if the consumer has an outstanding balance that needs to be carried forward.
We have moved key information such as interest rates, grace periods and fees out of the fine print buried in credit card applications and contracts into a prominent summary box, so that consumers signing an application know exactly what kind of financial arrangement they are agreeing to. This measure also provides a clear picture of their debt load as they pay it off.
These initiatives are in effect today and are providing Canadian consumers with precisely the kind of financial information that leads to better decision making. These measures, like those in Bill S-5, reflect the understanding that every part of Canada's financial system must be resilient and strong for the benefit of individual consumers, businesses looking to raise capital, or the banks and other financial institutions that can help them realize their goals.
That is why Bill S-5 is focused on those areas that must be fine-tuned so Canadians can continue to rely on one of the world's best financial systems for years to come.
I would therefore encourage the hon. members of this House to support the timely passage of this bill and to join our government in its ongoing efforts to build and maintain Canada's financial sector advantage.