The Standing Senate Committee on Banking, Trade and Commerce
In the fall of 1995, the Banking Committee studied the broad issue of how the federal government's financial institutions, the Export Development Corporation, the Canadian Commercial Corporation, the Business Development Bank of Canada and the Farm Credit Corporation, currently function in relation to the private sector, and to one another. In addition, the Committee also looked at the operations of the Atlantic Canada Opportunities Agency, the Federal Office of Regional Development (Quebec) and Western Economic Diversification. The Committee focused on these agencies because of their importance to the Canadian economy overall, and to small business and exports in particular.
The Committee's overall conclusion is that Crown financial institutions have an important role to play in the encouragement and development of small and medium sized businesses. For maximum benefit, the aim has to be to let the private sector work to its fullest potential with Crown financial institutions assisting only those businesses that cannot get financing elsewhere. Government agencies have to stick to their role of identifying and filling gaps in the marketplace - gaps that the private sector is unwilling to fill. They need the funds, the resources, and a mandate that is unequivocally clear in order to do this important job. The reorganization proposed in this report, including the creation of a single integrated corporate structure for both financial and regional agencies, meets these objectives.
In August 1995, Industry Minister John Manley asked the Banking Committee to hold hearings with senior business people and investors on a number of broad strategic policy issues related to modernizing the Canada Business Corporations Act. The Committee held such hearings in February 1996, in five cities, receiving submissions and hearing from 59 witnesses, members of Canada's corporate community who came forward voluntarily upon invitation from the Committee.
The issues which were identified for discussion with stakeholders during phase II include :
the liability of corporate directors, corporate auditors and others associated with a corporation;
shareholder communications, both between a corporation and its shareholders and also among shareholders;
citizenship and residency requirements currently imposed on boards of directors and on board committees;
financial assistance granted by the corporation to directors, officers, shareholders and others;
insider trading rules; and
rules governing take-over bids.
The report of the Committee contains a number of specific recommendations dealing with each of these issues.
Report on 1997 Financial Institution Reform: Lowering the Barriers to Foreign Banks. (Ninth Report; tabled in the Senate on October 31, 1996, Sessional Paper No. 2/35-478S.)
Following the release in June 1996 of a Government White Paper on Financial Sector Legislation, the Committee undertook an extensive examination of the issues raised therein. Numerous written submissions and representations were received and public hearings were held October 1, 2, and 3 at which some forty witnesses appeared.
Although it was expected that the White Paper would deal with "technical issues" only, leaving the more substantive questions to a Task Force established to advise the Government on the appropriate financial services framework, certain changes were proposed that raised fundamental questions about public policy respecting foreign financial institutions wishing to do business in Canada. As a result of the testimony heard and the submissions received, the Committee is convinced of the need for a thorough examination of the issues related to the foreign bank entry regime. The current system needs modification to encourage foreign financial institutions that are currently operating in this country to expand their Canadian operations, rather than curtail them, as a number of them have been doing, and to attract new foreign financial institutions to Canada. In its Report, the Committee outlines four options for dealing with foreign banks that may wish to set up operations in Canada. The Committee then selects its preferred one of the four - one that will ease the entry of foreign banks into Canada - explains why it is the preferred alternative and discusses the steps necessary for its implementation.
Interim Report on Joint and Several Liability and Professional Defendants: (Eleventh Report; tabled in the Senate on December 18, 1996, Sessional Paper No. 2/35-555S.)
In August 1995, the Honourable John Manley, Minister of Industry, asked the Banking Committee to hold hearings on policy issues related to the modernization of the Canada Business Corporations Act. Among the matters that the Minister asked the Committee to examine was the issue of auditors' liability. The Canadian Institute of Chartered Accountants has proposed that all legislation dealing with the audit function be amended to implement a scheme of proportionate liability in connection with claims made in relation to financial statements. This would replace the system of joint and several liability which presently applies to such matters. The Institute argues that the existing regime of joint and several liability poses a serious threat to auditors and the availability of independent and impartial audits at an acceptable cost.
In its August 1996 report on Corporate Governance, the Committee expressed the view that the issue of joint and several liability as it affects all professional defendants, not just auditors, warrants further investigation and agreed to hold hearings on the subject. These hearings were held in Ottawa in October and November 1996. A sub-committee traveled to the United Kingdom to discuss the matter of professional liability insurance with insurance experts in the UK, to meet with Professor Andrew Burrows of the U.K. Law Commission, and to hold discussions with officials of the Department of Trade and Industry. Professor Jim Davis, of the Australian National University, and Mr. Ian Govey, of the Australian Treasury, appeared before the Committee via teleconference to discuss developments in relation to joint and several liability in Australia.
This interim report reviews the testimony and evidence that the Committee has received to date. By setting out a number of the factors that the Committee will have to consider, it creates the foundation for the Committee's future work. An Issues and Options document is now being prepared and will be circulated in the Summer of 1997.