| REPORT OF THE COMMITTEE | THURSDAY, May 31, 2001 |
The Standing Senate Committee on Banking Trade and Commerce
has the honour to present its
SIXTH REPORT
Your Committee, to which was referred Bill C-8, An Act to establish the Financial Consumer Agency of Canada and to amend certain Acts in relation to financial institutions, has, in obedience to the Order of Reference of Wednesday, April 25, 2001, examined the said Bill and now reports the same without amendment, but with observations and a letter, which are appended to this report.
Respectfully submitted,
Leo Kolber
Chairman
APPENDIX A
OBSERVATIONS ON BILL C-8 COMMITTEE OBSERVATIONS
1. When future legislation is brought about establishing a consumer complaints body, and following the recommendation of the Joint Forum, the Senate Banking Committee believes, that in addition to the provisions for monetary penalties for lack of compliance with relevant Acts, the government should consider other penalties against financial services institutions and individuals working for them.
2. The Committee has, in the past, recommended that the maximum ownership levels of large banks by a single individual or entity be raised to 20%. The rationale behind this recommendation was to increase the possibility of acquisitions, strategic alliances and joint ventures, both foreign and domestic, which could enhance the competitiveness of both the institution and the financial services sector as a whole. Bill C-8 does not reflect this rationale. The Committee therefore believes that the Minister should institute a policy restricting all such holdings to those which have the potential to enhance the competitiveness of the bank.
3. The Committee believes that the Minister has struck a balance for the immediate future regarding the Canadian Payments Association and the potential to designate payments systems in the future. The Committee, however, believes that the next review of the financial services sector should contain the designation of additional payments systems with the intent of increasing competition in the business of electronic payments.
4. Following the testimony of the Credit Union Central and CS CO-OP, the Banking Committee remains convinced that the consultation process, with a view to establishing a national co-operative bank, should continue. To this end, the Banking Committee would like a letter of commitment from the Minister that a timetable for this process will be established as soon as possible.
5. Further to the testimony heard, the Committee strongly urges that draft regulations made pursuant to Bill C-8 be tabled in the Senate and then referred to this Committee for consideration prior to publication in the Canada Gazette.
MINORITY OBSERVATIONS
1. A minority of the Committee suggests that the Minister exercise its power to revoke the widely-held requirement for large insurance companies under section s. 407 of the Insurance Company Act, and that the Minister reconsider its policy of "big banks shall not buy big converted mutual insurance companies" because a policy such as this is unfair and anti-business. This should ensure that there is a level playing field between large converted mutuals and other large insurance companies.
2. Regarding the Merger Review process, in order to remove the politics from the process, the Minister’s discretion should be removed from the merger process, allowing the process in the guidelines, as set out, to take place, with proper analysis completed by the different responsible bodies. The minority believes that if the Committee was able to remove the Ministerial discretion from the process, to be purely a review body, the merger should not be laid before either House of Parliament.
APPENDIX B
May 17 2001
The Honourable E. Leo Kolber
Chairman
Standing Senate Committee on Banking, Trade and Commerce
House of Commons
Ottawa, Ontario
K1A 0A6
Dear Senator Kolber:
I have been following with great interest the deliberations of the Senate Banking Committee on Bill C-8, and have noted in particular the concerns expressed about the greater flexibility offered for an investor to acquire 20 per cent of the voting shares of a large bank or demutualized insurance company.
The purpose of this provision is to provide increased scope for institutions to participate in joint ventures and strategic alliances, while preserving the benefits of wide ownership. In keeping with that purpose, the Government’s policy and legislative framework will continue to prohibit any single shareholder or shareholders acting in concert from exercising control over a large institution, thereby allowing such an institution to develop in the best interests of depositors and shareholders as a whole, free of unnecessary constraints. In Bill C-8, the Government has added a new legislative authority to allow the Minister to issue guidelines on control to ensure that an investor could not acquire control. The guidelines will clarify for investors and institutions the factual criteria as well as the policy objectives to be taken into consideration in assessing control. The Government will be developing these guidelines in consultation with representatives of financial institutions and the broader investment community in the coming months.
I recognize that the Senate Banking Committee has been an important and longstanding source of expert advice on financial issues. Accordingly, I would appreciate receiving the advice of the Senate Banking Committee on the control guidelines and propose to send a draft of the guidelines, when it is ready, to your Committee for your consideration.
I look forward to hearing your views.
Sincerely,
Original letter signed by
The Honourable Paul Martin, P.C., M.P.