Mr. Speaker, I am particularly pleased to speak today. I gladly accepted to do so.
Before getting into specifics, I wish to remind the House that on May 11 the Secretary of State for International Financial Institutions acknowledged before the committee that, because of tax complications in the bill, this initiative had become practically useless for foreign banks operating in Canada.
In relating what the Secretary of State for International Financial Institutions said, I wanted to emphasize the fact that, improvisation aside, if the government had had a bit more vision, we might not be here today debating Bill C-67 because the government would have sent it back to the committee to make it even better.
Nonetheless, it is with enthusiasm that I speak to this bill, which deals with the establishment of foreign bank branches in Canada.
Before explaining the position of the Bloc Quebecois on this bill, I must say that the attitude of the finance minister shows he is true to himself. This minister is unable to look at the big picture with respect to national finances. He has lost all credibility as our national treasurer, because of both his budgetary forecasts and his financial achievements. The Minister of Finance always tries to deal with complex and general situations using a careless approach and in a piecemeal fashion.
We will recall how he dealt with the MacKay report on the future of financial services. The minister decided to ignore the true issues raised in this massive report and dealt with only one aspect of the document, bank mergers.
Acting unilaterally, and without waiting to see what would come out of the proceedings of the Standing Committee on Finance, the minister took a position on the bank merger issue and, based on incomplete preliminary data, decided to oppose the merger “for the time being”, adding that he would see later what could be done.
The Minister of Finance, who improvises on a daily basis and is an amateur financier with no strict timeline for his political agenda, continues along the same line with Bill C-67, an act to amend the Bank Act. This bill will allow the establishment of foreign banks.
To have legislation allowing foreign banks to open branches in Canada without affording any protection to financial institutions in Quebec and Canada is to open our market without protecting ourselves. How reassuring it is to be represented by such a government on the eve of negotiations with the World Trade Organization.
Like his colleague the minister of agriculture, who weakened Canada with his recent positions, the Minister of Finance is about to act incoherently by opening our market against the interests of our institutions. Did the finance minister take the time to read the MacKay report? Is he really aware of the impact of this review? I doubt it.
Since we are talking about banking systems, I will take a moment to look at the state of the Canadian banking system.
Out of the 51 Canadian banks that existed in 1874, there were only 22 left in 1914 and a dozen in 1946. In 1955 the Bank of Toronto and the Dominion Bank merged to form the TD Bank. In 1956 there was a merger between the Barclay Bank and the Imperial Bank and in 1961 the merger between the latter and the Canadian Bank of Commerce gave birth to the CIBC.
In the late 1960s Canada went through a period of intense economic nationalism and became increasingly concerned about foreign capital taking control of its economy. In that spirit, in 1967 a major reform of our banking legislation established the 10-25 rule, which provides that no individual shareholder can hold more than 10% of shares in a Canadian bank and non- Canadians cannot collectively hold more than 25% of shares in our banks.
Since 1967 the picture of the Canadian banking industry has basically remained the same, and we still have all the same key players, the so-called big five. However, there have been a number of changes in smaller institutions.
Six new banks have been set up in the west, two of which went bankrupt in 1985. In Quebec, the Provincial Bank took over the Banques populaires, formely the Banque d'économie du Québec, in 1970, Banque l'Unité in 1976, and the Financière Laurentienne in 1979 before it merged with the Bank Canadian National to become the National Bank of Canada, in 1980.
Later on this bank bought the Mercantile Bank in 1985 and in 1987 the Savings Bank became the Laurentian Bank.
In 1988, with the free trade agreement, the limit of 25% foreign ownership of shares of Canadian banks was abolished for American residents, and NAFTA granted the same privilege to Mexican residents.
In 1995 the negotiations of the World Trade Organization, or WTO, on financial services led to an interim agreement eliminating in all countries party to the agreement restrictions on foreign ownership of national businesses. The 25% rule will be eliminated for good when the agreement is signed, by January 1999. I take this from section 6.2 of the document of the World Trade Organization.
In March of 1998, there were eight banks in Canada, namely the Royal Bank—the “big five” as I said earlier—CIBC, the Bank of Montreal, the Bank of Nova Scotia, the TD Bank, as well as the National Bank, the Laurentian Bank and the Canadian Western Bank.
Nowadays we also have in Canada some 50 foreign banks, about 50 trusts, 2,500 credit unions, with nearly 1,700 of these in Quebec alone, 150 insurance companies and 80 mutual funds.
One has to wonder what the future will hold. Although there may be as many visions for the future of the Canadian financial industry as there are experts in the field, there seems to be a general consensus that new technologies will stir up the competition through the arrival of both new stakeholders and new services.
What with globalization, the growth of financial markets from which Canada and Quebec cannot hide, the ever changing business world, the rapidly changing needs and lifestyles of the consumers, today's financial system is facing huge if not unprecedented challenges.
Given the demand for increased efficiency and competitiveness at the international level we must react. The future world banking industry is not yet fully set up, but is starting to take shape. The future of the Canadian financial sector is up to us. The decisions we will be making will greatly influence events for decades to come.
Let us examine the banking system used elsewhere in the world. There are, of course, no universal formula or general models for a banking system. In the United States, there are almost 9,150 different banks. The five biggest of these manage less than 10% of the total assets of the financial services industry. Then come 400 banks. The five biggest of these manage close to 80% of the total assets of the financial services industry.
Some countries like the Netherlands have opted for universal banks that can provide every financial service one can imagine: banking services, securities, insurance, mortgages, et cetera.
Other countries, such as Sweden, appear to favour specialized niches and companies. Sweden has savings banks, commercial banks, investment banks, development banks, independent mortgage societies and brokerage houses, as well as more than 500 different insurance companies which cannot provide both life insurance and damage insurance. In short, they have a relatively regulated system with a number of players.
Although each country has developed a banking system peculiar to it, we note that generally the smaller countries have a more concentrated banking industry than the larger ones.
In nearly all countries, as well, there is a trend toward liberalization of the industry, which takes the form of an unprecedented wave of mergers and acquisitions on the one hand and a greater decompartmentalization between the various financial sectors on the other.
Negotiations within the WTO framework accelerated this trend, which is liable to be accelerated still more by the MAI. Judging by the extent of the Asian crisis, which most observers attribute to an opaque and corrupt financial system, there appears to be a consensus that the solidarity of a banking system lies primarily in the quality of its regulation. Without proper and sufficient regulation to supervise and monitor institutions, and to force transparency, at one point any country could fall prey to a crisis of confidence which would be catastrophic to its economy.
The finance minister, like his Liberal colleagues, hastens to say he consulted various socio-economic stakeholders involved in this issue. I submit that is pure bunk.
I would like to know if the finance minister consulted the deputy premier of Quebec before introducing Bill C-67. Was the president of the Mouvement Desjardins, Claude Béland, consulted? If so, how?
The analysis of Bill C-67 leads us to the conclusion that this piece of legislation introduced by the Minister of Finance is an attack on the know-how and expertise of Quebec.
I draw your attention to clause 128, which amends the Office of the Superintendent of Financial Institutions Act. Let us have a closer look at clause 7.1, which reads:
7.1 (1) The Minister may, with the approval of the Governor in Council, enter into agreements with the appropriate authority of a province
(a) with respect to the administration, application and enforcement of provincial legislation in respect of trust, loan or insurance companies incorporated or regulated by or under an Act of the legislature of the province;
(b) in order to authorize the Superintendent to exercise or perform the powers, duties and functions on behalf of the appropriate authority of the province, that the Minister may determine, in respect of trust, loan or insurance companies incorporated or regulated by or under an Act of the legislature of the province; and
(c) in order to(i) make applicable the Trust and Loan Companies Act, the Insurance Companies Act or this Act, or any provisions of these Acts, and the regulations made under any of these Acts, with the modifications that the Minister considers necessary, in respect of trust, loan or insurance companies that are incorporated or regulated by or under an Act of the legislature of the province, and(ii) limit the application of provincial legislation in respect of trust, loan or insurance companies that are incorporated or regulated by an Act of the legislature of the province.
We can see once again an undisguised attempt by the Minister of Finance, through this legislation, to get involved in areas that come under Quebec's jurisdiction.
Every day the Bloc Quebecois condemns the numerous federal intrusions in areas of provincial jurisdiction, including those of Quebec. This is why we are opposed to the principle of the bill and will vote against it.
We could have voted differently, of course, had satisfactory amendments been made to section 7.1, which allows the federal government to squarely intrude into Quebec's areas of jurisdiction.
This one-way provision would allow the government to appropriate and control Quebec's know-how. This is why the Bloc Quebecois is asking for the following amendments, which are essential in the current context.
First, any agreement mentioned in section 7.1 should be the result of government-to-government negotiations. Second, section 7.1 should be amended to provide for reciprocity. Under such reciprocity the appropriate authority of a province, and a provincial government, would enjoy the same privileges as those enjoyed by the superintendent and the federal government under section 7.1. In other words, the Inspector General of Financial Institutions and the Government of Quebec could subject federally chartered financial institutions to Quebec laws.
Let us now take a look at the main amendments found in Bill C-67. The amendments set the general requirements that must be met by a foreign bank to establish a branch in Canada, the type of business that such a branch can conduct, and the standing regulatory requirements that will have to be met. The bill also includes a number of changes concerning access by foreign banks to the financial services sector.
Under the proposed system, on top of being allowed to establish a Canadian subsidiary, foreign banks will be able to set up either a full service branch or a loan branch.
We bemoan the lack of overall vision on the part of the government regarding the future of the Canadian banking system and financial markets.
Since 1993, the finance minister, who does not know where he is going on this issue, has been improvising. He is putting at risk one of the pillars of our economy, the financial services sector. He should listen to what the Bloc Quebecois has been telling him for years now, namely, first strengthen our national industry, then open the market, and finally liberalize.
The Bloc Quebecois has always been of the opinion that the merger debate should be seen as part of a broader debate on the future of financial institutions. The same is true of the bill before us today.
The government is acting irresponsibly. By refusing to proceed cautiously according to the logical order suggested by the Bloc Quebecois, it is leaving Quebec and Canada open to inconsistencies and discrepancies in the quality of services between poor and rich regions.
Let us not forget that under the federal Insurance Companies Act a federally chartered insurance company or a foreign company cannot sell policies in Canada to an insurance company set up under provincial legislation. Only a federally chartered insurance company, with the approval of the Minister of Finance, can buy these blocks of business. This situation is unfair to Quebec insurers.
This situation shows clearly that, while our financial markets are about to become more and more open to financial institutions, there are still barriers between our own institutions and we do not have full competitiveness within our own borders.
I remind the House that the Bloc Quebecois has proposed a three-step approach that provides for a methodical opening up of financial markets.
As a first step, the Bloc Quebecois asked the federal government to change the ownership rules for banks and some of the accounting rules in order to allow and foster the grouping of medium and small size financial institutions into financial holdings. For instance, a bank could join with a life insurance company, an investment funds company and a brokerage.
This first step would allow the establishment in Quebec and in Canada of giant financial institutions which would be able to truly compete with megabanks.
The government should allow a period of two to three years for the establishment of these holdings, which would be subject to the 10% rule and whose operations would remain compartmentalized, as is already the case for banks. We should begin by taking the necessary means to encourage competition with the help of new major national players.
Second, the federal government could then allow bank mergers. For instance, we would have on the Canadian market eight to ten players of similar size and strength and we would therefore have sound competition in our domestic financial sector.
Sound competition is vital if we want consumers and small and medium size businesses throughout the country to have easy access to services at competitive prices. In the interest of fairness, the bank mergers should occur at the same time that the multisector holdings become operational. All players should be able to start at the same time.
At the same time, the Bloc Quebecois would call for a greater democratization of banks and financial holdings along the same lines as the proposals of the Quebec association for the protection of savers and investors. We would also ask for a mechanism to encourage and measure the investments of banks and financial holdings in communities.
In view of the human aspect and of the socio-economic effects of this reform, the Bloc Quebecois will support measures aimed at protecting access to financial services for the whole population throughout the territory.
We will also be calling for a mechanism for parliamentary follow-up in order to measure the impact of the changes made on competition, service charges, employment, access to credit, transparency, and services to outlying and disadvantaged communities so as to be able to make the appropriate corrections and adjustments as we go along, if need be.
Third, the federal government could open up the Canadian financial services market completely to international competition. Having made it possible for the small players in Quebec and Canada to join forces, there are less grounds for concern that they will disappear or pass into the hands of foreign companies as soon as the market is opened up to international competition.
I remind hon. members that our concern has always been, and will always be, to increase the competitiveness of all sectors of financial services in Quebec and in Canada, and to increase competition in all of Quebec and Canada.
More competition means better and better-priced services for consumers and small and medium size businesses throughout the country. Enhancing competition is one of the concerns of the Bloc Quebecois.
Our third concern is that these changes be made equitably. All those involved in the financial sector must have an equal opportunity to make changes so as to enhance their domestic and international position, for example, by allowing financial holdings which bring together institutions from various sectors.
Hon. members will agree with me that today's debate is liable to have a great impact on our society. We must always remember that public interest comes first and that there are people behind the figures.
In this sense, the Bloc Quebecois has always advocated the establishment of a parliamentary committee to oversee banks and financial institutions, which would periodically check whether consumers and SMBs are well served at competitive prices throughout Quebec and Canada, regardless of their personal wealth. We have advocated the entry of new players into the market to increase competition and thus improve service to consumers.
I should mention that Quebec is at the forefront in protecting consumer interests. In October 1998 Quebec announced the establishment of the Bureau des services financiers to protect the public.
It receives public complaints, ensures the law respecting the distribution of financial products and services is applied, sets up an insurance information and reference centre to give consumers access to clear and complete information, establishes a fund to provide compensation in the event of fraud, keeps a record of offices, independent companies and independent representatives and issues certificates to representatives.
To avoid duplication, the federal government should give Quebec the role of protecting consumers in the area of financial services.
The Bloc Quebecois also advocated greater democratization of the banks. We share the concerns of Yves Michaud in this regard.
Moreover, I want to remind the House that the Bloc Quebecois is the only party to have tabled a bill on community reinvestment. We want the banks and other financial institutions to not only fulfil their social role, but also to be transparent about the means and objectives involved.
To conclude, I repeat that, barring appropriate amendments to permit government to government negotiations and reciprocity, we will vote against Bill C-67.
