Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 32 - Evidence, October 23, 1998 (p.m.)
MONTREAL, Friday, October 23, 1998
The Standing Senate Committee on Banking, Trade and Commerce met this day at 1:45 p.m. to examine the present state of the financial system in Canada (Task Force on the Future of the Canadian Financial Services Sector).
Senator Michael Kirby (Chairman) in the Chair.
[English]
The Chairman: Our witnesses this afternoon are from the Mouvement des caisses Desjardins, led by Mr. Claude Béland, whom many of us know.
Mr. Béland, before I ask you to proceed with your opening statement, may I just say thank you very much for coming. This is, I think, the third time in the last five or six years or so that your organization has appeared before the banking committee. We are always delighted to hear your views since you hold a unique position in Canadian financial services; we find your views very helpful to us in attempting to formulate policy.
[Translation]
Mr. Claude Béland, President of the Mouvement des caisses Desjardins: I would like to introduce my colleagues, Mr. Yves Morency, who is the Director, Government Relations, Confédération des caisses populaires et d'économie Desjardins du Québec.
On my right is Mr. Jean-Guy Langelier, Chief Financial Officer and also President and Chief Executive Officer, Caisse centrale Desjardins, and on his right, Mr. Huu Trung Nguyen, Vice-president, Administration and Operations, Caisse centrale Desjardins.
First, I would like to thank you very much, Mr. Chairman, and the members of the Senate Banking, Trade and Commerce Committee for giving us the opportunity of discussing with you the conclusions and recommendations of the Task Force on the Future of the Canadian Financial Services Sector.
I believe you already know the Mouvement Desjardins fairly well. It stared at the turn of the century. It was the pooling of popular savings. Today we have more than 5 million members. Our structure is a democratic one that allows us to always be aware of our members' needs.
Over time, we have become an important integrated financial group. I believe we can say that we are one of the most open financial institutions in the world.
The assets of the Mouvement des caisses Desjardins are currently more than $72 billion, which puts it sixth in the ranking of Canadian financial institutions, even though we do business primarily in Quebec. We are the first and main private employer in Quebec; we are number one among the deposit institutions, on both the savings and credit sides.
We are first in the personal insurance field and second in loss insurance. We now cover the entire Quebec territory. We often say with pride that we are the only financial institution in 675 municipalities in Quebec. We therefore have significant socio-economic leverage in the environment.
We can count on 15,000 volunteer managers, and I underline the term volunteer, because it is still true in 1998. These people are elected by the members of each caisse. There are 1,416 caisses, including 141 in New Brunswick, Ontario and Manitoba.
In our opinion, the MacKay report diagnoses correctly the context in which the Canadian financial sector is evolving and will continue to evolve, and identifies appropriately the challenges and opportunities that will arise. We can only thank the Task Force for tabling such a report, complete with informative documents that are, in our opinion, of high quality and extremely relevant.
In general the Mouvement des caisses Desjardins is comfortable with the positions taken and defended by the members of the Task Force. In the main, they are in line with the proposals we submitted to the task force.
However, I would like to share with you some additional comments and state a few reservations about some elements of the report.
First, the issue of personal information. The protection of personal information is one that has always been a concern in our organization. Consumers must feel that they are protected against any abusive or unjustified use of information about them by their financial institution or by any other business.
In this regard, the rules about consent in the matter of information exchange should of course meet minimum standards and the consumers' expectations, but on the other hand they should not entail overly high administrative expenses for the financial institutions.
In the matter of protection of personal information, we believe that institutions under federal jurisdiction should comply with the relevant laws in the territories where they do business. In Quebec, for example, they should comply with the Civil Code of Quebec and with Bill 68.
To avoid any interpretation problems, there should a clear clause to this end in any future bill by the government or the federal parliament.
In addition, since the regulated financial institutions are not the only ones that can sell financial products, all provinces should adopt regulations regarding the protection of private life that would apply to all businesses, whatever the nature of their activities, and the regulations should be harmonized among the provinces.
The second subject is bankinsurance. Like the authors of the MacKay report, we believe that the liberalization and splitting in the distribution of financial products and services are irreversible phenomena.
In this regard, given the interests of consumers, it is important that regulated financial institutions, especially deposit institutions, not be segregated in an overly limited distribution world. A properly regulated offer of integrated services that is not overly burdensome would be of great benefit to consumers.
In recent years Quebec consumers have benefited from a greater openness in the distribution of financial products and services. For example, and we believe this is a positive consequence of this greater openness, since 1987 the cost of car and house insurance premiums has grown less rapidly than the consumer price index for Quebec and less rapidly than the premiums in many other provinces for similar coverage.
If the federal government allowed further allowed further financial deregulation of federally chartered institutions, the latter should be forced to comply with relevant provincial regulations regarding the distribution of financial goods and services.
In terms of the access to the payment service, we are comfortable with the proposal in the MacKay report but we believe that this openness must be achieved rigorously and prudently because it is a critical element of the financial system and the national economy. The participation criteria are currently based on a rigorous framework; it is important that it be kept and that future participants in the national payment system be required to comply with it.
As for the cooperative bank, we are very happy to see that the Mouvement des caisses Desjardins has managed to convince the task force members of the importance of allowing the cooperative sector to establish one or more cooperative banks and eliminate the legislative and regulatory barriers to the growth of the cooperative sector in financial services. This is necessary today for a number of reasons.
First, the means we have available to move forward with our members at the national and international level, especially small and medium businesses, are rather limited currently.
On the other hand, a plethora of banking and non-banking institutions operating with very light infrastructure costs covet our market share and target choice and low- risk clienteles.
In addition, financial disintermediation and the changes in consumers' savings investment habits will exert strong additional pressure on the supply of capital needs from the cooperative sector. That is why we have proposed that it be allowed to establish a cooperative bank, a central organization that would allow it to minimize the operational obstacles that it faces and also improve its efficiency. Such a cooperative bank would allow the Canadian cooperative sector to obtain a better position in the financial services market because it would allow it to: first, group together the so-called banking and financial operations; second, effect economies of scale; third, better approach the national and international institutional capital markets; fourth, to diversify its portfolios both at the regional and sectoral levels; and finally, to increase its capitalization. For us, that is an important step.
In terms of competition and competitiveness in the Canadian market, we believe that the limit of 10 per cent ownership should continue to apply to all Canadian chartered banks. In the Canadian context, these institutions are often regional banks when we talk about the smaller banks. The report discusses businesses that have capital of less than $5 billion. In the Canadian context, these institutions are often significant regional banks that have an important impact in one or two provinces.
Allowing excessive holding by a shareholder could lead to adverse impacts for the region if the shareholder's interests do not coincide with the economic development of that region of the country.
On the other hand we are in favour of the idea of allowing a greater number of participants in the Canadian market. That would give Canadian consumers more choice and allow them to be better served at a better cost.
However -- and we insist on this -- a progressive approach that takes into account the degree of preparedness by outside companies as well as Canadian companies should be favoured in terms of the distribution modes that will be authorized. In brief, the rules should be the same for everyone.
Such an approach would allow Canadian institutions to pursue the strategies that they have adopted to compete with world-wide entities and would give the various provincial, national and international regulatory bodies the time required to harmonize their regulations and apply mutual monitoring agreements.
Currently, the lack of harmonization deprives certain institutions of the means that would allow them to increase their competitiveness. For example -- and this point was not raised in the MacKay report -- provincially chartered insurance companies cannot acquire the portfolios of federally chartered companies but foreign companies can do so.
That is one example of inequality that penalizes provincially chartered institutions when one knows that acquiring portfolios is one of the most efficient ways of reducing unit costs and maintaining the growth of companies.
Over time, all participants in the offer of financial goods and services should be treated equally and fairly, whether they are Canadian or foreign companies, federally or provincially chartered companies, or companies that are regulated or not. At the end of the process, what is important is that the same rules apply to all participants working in a given area and that these rules be clearly defined and understood by all.
Those, very briefly, Mr. Chairman, are the comments that we wished to make on the MacKay report. We are now available to answer questions.
[English]
Senator Oliver: Mr. Béland, we have heard a lot of evidence, arising from the MacKay task force report, on the whole concept of tied selling and confidentiality of personal and medical records, and I would like to hear more about that from you.
You have told us that you sell insurance and that you have deposits and other banking activities. Can you tell us something about the way in which you separate the insurance operations of your enterprise from the banking part, and what protection there is for the privacy of insurance-related medical records?
[Translation]
Mr. Béland: First, it must be understood that in Quebec there are extremely severe laws about coercive tied selling. I believe the MacKay report makes reference to coercive tied selling.
In other words, it is forbidden by law to offer financial products and to make them conditional on the purchase of other financial products. If a financial institution contravened this law -- and I am talking about institutions under provincial jurisdiction -- the penalties would be very severe.
I would like to add that as far as we are concerned, an organization such as ours would obviously not take the risk of damaging its reputation as a good citizen and as an institution that respects the law by contravening what is mandated by law.
Therefore, there is first the legislative aspect. As for the second part of your question, when you ask me how this is done exactly in our caisses, I must make a distinction between what is happening now and what will be happening in a few months when we will put into place new measures allowed under the new act respecting marketing intermediaries, a quite recent act.
Until now, we offered general insurance products in our caisses. That was done by an intermediary representing the Compagnie d'assurances générales Desjardins, and the company paid rent to set itself up in the caisses.
In the future, both for general insurance and for life insurance, the services can be offered by employees of the caisses, as long as they have obtained the necessary permits and has received the training required to offer this type of service. Dual licensing will therefore be permitted under the new Marketing Intermediaries Act.
When it comes to insurance, however, we very clearly separate it from the credit operations; there is a physical separation. In other words, the employee who grants credit cannot offer insurance products, life insurance.
As for medical records, the caisses cannot hold them; that is completely forbidden. The caisses will have to keep the insurance files separate from the others unless a member grants specific authorization for them to do otherwise.
The new market intermediaries act, which puts us on the same footing as the brokers, etc., states all these rules for those who whish to offer financial services.
I do not know if that answers your question.
[English]
Senator Oliver: But with respect to the medical files, can the same employee who is working on insurance also be working on the banking activities with the same customer? Also, you said that the medical files for insurance are not kept in your branch; where are they kept?
Mr. Béland: At the insurance company.
Senator Oliver: But can the same employee work on insurance and on other things?
Mr. Béland: Except that he cannot extend any credit to a customer or to a member in our caisse.
Senator Oliver: Other witnesses have told us that if we let the banks get into the insurance side there will be a conflict of interest, because they will use the information gained from the insurance side in relation to banking. What do you do to keep these divided? Are they in separate parts of your branch?
Mr. Béland: No. In the future it will be offered by the same employee, just as it is in many parts of the world. I have just returned from a meeting in Europe and I can say as a fact that the cooperative banks in Europe offer those services through the same institution, and they have been doing that for the last 20 years and the consumers are perfectly happy.
Senator Oliver: But what about the issue of coercive tied selling? Is that a problem in these other countries?
Mr. Béland: No, because their laws in this respect are about the same as ours.
[Translation]
I must add this: We must not forget that the caisses are not autonomous, not independent entities. A caisse has no interest in refusing a mortgage loan because a member does not want to buy a life insurance policy.
All it will lose is a small commission it would get from the insurer. Its bread and butter is mortgage loans or more important financial transactions.
In that sense, there is no real threat to the consumer. I would even add that in the case of a tied sale made by an enthusiastic employee who wanted to do more than the others, the legislation in Quebec gives the consumer 10 days to cancel the transaction and keep only the part that meets his needs.
Therefore, having been submitted to pressures, if any, at the caisse, once he gets home, in peace and quiet, the consumer can very well say: "No, I do not want this insurance policy" and cancel it while keeping his mortgage loan or his investment fund.
The legislation therefore includes provisions to protect the consumer. All that we ask is that the rules be the same for everyone. Under these conditions, I believe that deregulation as we know it at home would be most useful and profitable for the consumer.
[English]
The Chairman: Given the extreme opposition, one might even say irrational opposition, that appears on the subject of financial institutions retailing property and casualty insurance, and leasing cars in particular -- it is a little less strong on life insurance -- and given your explanation of the 10-day rule and your explanation of how you avoid tied selling, can you help us understand why you apparently have been able to get acceptance of that in Quebec, given the amount of opposition we hear as we travel across the country? To get to where you are, how does one deal with the problems?
[Translation]
Mr. Béland: I could simply answer that here in Quebec there has been an evolution. In 1987, the government of the day allowed us to have representatives of the insurance companies in the caisses.
At the time we had the same general outcry, the same apocalyptic forecasts, according to which the brokers would disappear and the premiums would rise. We have tried this experiment for 10 years. I have here some tables that I could table for the committee about the evolution of automobile insurance premiums for passenger vehicles, comparing rates in Quebec with those in Alberta and Ontario, on the evolution of housing insurance costs in Quebec compared to those in Ontario and on the evolution of the costs of rental housing insurance in Quebec compared to those in Ontario. These tables show that the system that allowed us to make the insurance products more available throughout all of Quebec was quite profitable for consumers and that, in addition, the number of brokers did not decrease. On the other hand, the brokers organized themselves better in order to be able to offer us solid competition.
Now they have had mergers. They have computerized, reduced their costs, but it has not been bad for the consumer. I understand that some would like to eliminate a competitor, because Desjardins is obviously a good competitor since we are the only financial institution in 675 municipalities in Quebec. Some would like the clients to go to the brokers rather that having the financial institution go to the people.
It is astonishing to realize that it is only in Canada that we hear these disastrous projections whereas everywhere in Europe deregulation is taken for granted and bankinsurance is almost universally recognized.
When I go to international forums, I realize that it is not even talked about anymore because it is a given. People are surprised that here in Canada we are still subjected to incredible lobbies that cause us to hesitate to start deregulating financial institutions. We therefore have extremely complex legislation, as we have for drug stores or other businesses where there are barriers, corridors, blindfolds and secret files.
It is somewhat surprising in a globalized world, a world where we have long since deregulated financial services.
[English]
The Chairman: We would love to have that data when you are finished.
Senator Oliver: If the banks that compete with you in the province of Quebec achieve the right, as the MacKay task force recommends, to be able to sell insurance in their branches, are you ready and able to compete?
Mr. Béland: Yes. Competition has always been good for the consumer. We do not want exclusivity. I said that long before today, long before the new law. We really think that competition is good for the consumer.
Senator Oliver: A number of brokers in the province of Quebec have lost their jobs as you have grown bigger in the insurance business; is that not correct?
Mr. Béland: No, that is not correct -- at least not the ones who knew how to organize themselves and be competitive.
Senator Oliver: The Credit Union Central of Canada has proposed the creation of a national union that would leave the deposits and liabilities with the local credit unions and so on; can you comment on that proposal? When the representatives of VanCity appeared before us they said that they would like to see is a national bank. What are your views on that?
Mr. Béland: We are having discussions right now with the credit unions, but not to discuss their view of their own future. We want to see what we can do together, but we do not know how it will finish. They must do something; that is for sure. The credit union movement in Canada is quite important if we want to continue to serve the local market well. The global market is inevitable, but at the same time people want to live where they are and they want to have the services. Well, the mission of the co-operatives and of the credit unions is to supply that kind of service. So I think they must do something together; they must be more united and work together more. That is the trend they are aiming at, and that is good.
[Translation]
Senator Hervieux-Payette: I have the advantage today, compared to my colleagues, of being able to discuss in my language. I am therefore even more pleased to be able to ask questions about your brief.
First, you say you have 5 million members. At the last census, there were almost 7 million of us. So why 5 million? Does that figure include people outside Quebec?
Mr. Béland: No. That figure includes some of the people living outside Quebec, but they are not all faithful, they are not all exclusively Desjardins clients. One must not think that we have 5 million members and that the other financial institutions have 2 million, but we do know that we have 5 million open accounts for individuals and people who do business with us.
Senator Hervieux-Payette: I am asking you the question because in an age pyramid we normally include people under 18, which means that almost everyone opens an account with you from the age of 6 on.
Mr. Béland: But we also have school caisses.
Senator Hervieux-Payette: Ah! You are including those. It is just that the concept of member is obviously a little less known than that of customer. Does a non-member have access to your services?
Mr. Béland: No.
Senator Hervieux-Payette: So if I want a loan for my small- or medium-sized business, I have to become a member?
Mr. Béland: Exactly.
Senator Hervieux-Payette: Is it the same price as before?
Mr. Béland: $5.00, yes. You have to buy a share.
Senator Hervieux-Payette: There has not been much inflation.
Mr. Béland: No, fortunately. We call it a qualifying share.
Senator Hervieux-Payette: I ask the question because it comes up often: Is everyone who does business with Desjardins a member? Therefore, at the start, yes.
Obviously the same questions will come up again because you may be unique in that regard. There is the question of car leasing. You have given some statistics about premiums. When an automobile insurance plan is managed by the government, a good deal of the risk is almost known in advance. There are no more $100 million or $5 million lawsuits; we have fairly set amounts, but that is not the case in all of Canada. In fact, all provinces do not have this type of plan.
At that level, the question that often arises is the following: In case of a disaster or a dispute, if you lease the car through car leasing and it is demolished and you own it, where does the customer who is not satisfied with the settlement appeal?
You will be told that you are in a conflict of interest; on the one hand, you own the vehicle and on the other you were being paid for the car lease. However, the insurance was with you.
With an institution that is on both the insurance and leasing sides of the board, how do we ensure that the customer receives fair treatment?
Mr. Béland: I will ask Mr. Langelier to answer the question if you will allow it --
Mr. Jean-Guy Langelier, Chief Financial Officer and President and Chief Executive Officer, Caisse centrale Desjardins: First, on the leasing aspect, if you are referring to the interventions by the car dealers, Desjardins sets up those kinds of leases in partnership with the dealers.
We do not lease the vehicles directly. In fact, it is an option that is offered to the customers, therefore to members of Desjardins, to take a lease using the services of our company or of the manufacturer in many areas.
But we know that on the manufacturer's side, whether it is GMAC or Ford Acceptance, there are often promotions for certain types of vehicles but not for others. In that area, I do not believe that the car dealers feel that we are in conflict with them. On the contrary, I think that they accept that kind of partnership very well.
As for the insurance, as Mr. Béland has already mentioned, we do not make coercive sales, meaning that an individual who leases a vehicle from our company is under absolutely no obligation to get risk insurance from our company.
In fact, since the car lease is with the car dealer, he does not offer our insurance. So if the person has insurance with us, it is because he or she is a member of Desjardins and has decided to take out insurance. It is not even our employees who grant the lease, but the dealer's. There are therefore no crossed or coercive sales.
As for the claims, we know how they are handled by the insurance companies. However, even in the automobile part, therefore as car charterers, we also offer insurance coverage. Sometimes, given the size, we also provide insurance as co-insurers, so with third parties and not only with our own internal companies. Up to now, we have not had any problems.
Senator Hervieux-Payette: If a consumer, a client or a member is dissatisfied with the settlement -- because the car is a few years old, there is a difference between the residual value and the cost of supplying a new car -- Sometimes the person will receive a certain amount to fix the car, keep the old car or think about a new one. If I lease a car, I will obviously opt for a new car, and you, as the owner of that car, will probably choose to have it fixed. If we do not agree, who decides?
Mr. Langelier: There are always many possibilities. For example, people always have the right to come forward and present certain claims, after discussion, to the Regroupement des assureurs. If the customer still feels that he or she has been treated unfairly, Desjardins is one of the first institutions to have created a complaints commissioner; its office covers various products. One can therefore get in touch with it and demand a review of the case.
It must be frequent that someone would prefer a new car over a repaired one. However we know that at the level of the Regroupement des assureurs automobiles, there are appraisal centres that are, I believe, neutral parties decided upon at the time.
In many cases, when we look at the insurance side, offering a new vehicle may be cheaper than making repairs.
Mr. Béland: If you are interested, the new law that Quebec has just adopted will also allow dealers to act as insurance marketers. I therefore feel that the balance will be reestablished. The act has just given dealers the right to sell insurance, to fill out forms and to represent a general insurance company.
I believe that the relationship between the vendor and the insurer is even closer than that which exists when a caisse grants credit to allow someone to rent or buy a new car.
Senator Hervieux-Payette: In any case, I thank you for bringing it to our attention. I am not sure that I am reassured, but anyway -- Because our role, precisely, is to ensure that the regulatory framework will protect the people that, to all extents and purposes, are in a position where they do not have the means of protecting themselves. In your brief, there is, on page 3 I believe, a sentence that you will have to explain to me yourself, Mr. Béland, where you say:
In this regard, the rules about consent in the matter of information exchange should of course meet minimum standards and the consumers' expectations, but on the other hand they should not entail overly high administrative expenses for the financial institutions.
What are overly high expenses?
Mr. Béland: Currently, to meet all the legislative requirements, we are spending a few million per year; the forms are extremely costly. We are told that we have to play by the rules, but they should not be continually added on, especially if we are the only ones subjected to those types of rules. That is what we mean when we say that the same rules must apply to everyone and ensure that the operating costs of such protections are reasonable so that we can remain competitive financial institutions.
Senator Hervieux-Payette: In this light, do you not believe that consumers could protect themselves better by having stronger, better funded associations? If an existing, well-organized, professional consumers association asked the Mouvement Desjardins to include, twice a year, along with a monthly statement, a form soliciting membership in a consumers' association in order to reduce excessive regulatory expenses, would you oppose, for example, a voluntary membership by your customers to one, two or three associations, in other words giving them a certain choice of belonging to the group that most closely met its -- Because the associations tell us that it is extremely expensive to contact each of these consumers. They would be satisfied if they could contact the consumers and tell them they will represent them, do the research and provide the necessary information, and if they could do their little general advertising. Could I be allowed to become a member of one of these associations, whether it is my bank or the caisse, could I receive a document that would allow me to sign up, to subscribe and to send the form to the company or association of my choice?
Mr. Béland: I would have to submit the case to the board, but I do not think there would be any objection. There are consumer associations -- some are more militant and more active than others -- and we, at Desjardins, have been meeting with them regularly for ten years or so. It is statutory, not a once in a while thing. We meet with them on a regular basis, we submit our projects to them, we explain our new products to see what they think and I find that in the end consumer complaints are often based on disinformation or a lack of information. We deal with reactions that, in the end, we have to correct by providing information after the fact. We prefer to provide it in advance and, if there are associations that, objectively -- obviously it would be different in the case of lobbies -- wanted to make the rules clear to the consumers so that they understood the advantages and disadvantages of some financial products, I would personally be in complete agreement.
Senator Hervieux-Payette: You must obviously have had a lot of claims after the last ice storm. I was wondering if you had finished dealing with those disasters and if, to all extents and purposes, it had been a nightmare for your company? How did you live through this avalanche of claims, and were special facilities set up so that consumers could get on with repairs and do everything they had to do to repair the damages they had sustained?
Mr. Béland: I would have liked our insurance company president to be here to give you more specific information. What I can tell you is that it was quite a remarkable operation. We obviously have the advantage of decentralisation, of having a large network, which allows people to quickly access some information. The claims have been settled and we even made advances in some cases without asking too many questions because we knew the needs were real. The claims were settled quickly, as our policyholders asked. It was a remarkable operation; in fact, we received many testimonials. It is not completely over because there are still people who are debating the amounts, but that is normal. Some cases are still contentious, but I know that our reinsurers have paid a lot of money.
Senator Hervieux-Payette: So, according to you, when one goes into general insurance, knowing that you sold insurance at a given time and that you can often be the mortgage holder on the house where people are living at the time of the recent claim, does the fact that you were on the one hand part owner of the house even though you were not the owner, but had a lien on the house, and on the other hand had to settle the claim, did you not feel yourself to be in a conflict of interest?
Mr. Béland: Not at all. First, there is the caisse's interest, then there is the insurance company's interest. It is not the same person, they are separate, autonomous entities, subject to specific management rules and they are accountable to their shareholders. We must not forget that the Société financière Desjardins Laurentienne is not wholly owned by Desjardins, that we are minority shareholders. We therefore have to follow the rules of the game, we cannot make gifts because the minority shareholders would complain. We play by the rules and everything works fine.
[English]
Senator Kolber: First, can you tell the committee of your vision of the future of the financial services industry, nationally and in Quebec? Does it differ from the vision outlined in the MacKay task force report?
Mr. Béland: I cannot say that it is very different from the vision outlined in the report. We agree with that vision.
Senator Kolber: Second, in a speech earlier this year you suggested that the mouvement could not and would not merge with the bank. Given that the recommendations in the MacKay report would actually facilitate the establishment of cooperative banks, do you foresee the possibility of the corporate status of the mouvement changing? Do you think your competitive position would be enhanced if the mouvement became a cooperative bank as envisaged by the task force? Would the mouvement, in your opinion, be interested in forming legal alliances with the credit union movement elsewhere in Canada if such was permitted by law?
[Translation]
Mr. Béland: I believe there would be no advantage, indeed there would only be inconveniences if the network of caisses altered its nature and changed its cooperative formula to one of a share capital business. I believe that with the Mouvement Desjardins in Quebec and the Credit Union for Canada, we have a formula that the French or others call hard core, i.e. businesses that are inalienable. There is no possible takeover of the Mouvement Desjardins, just as there is none against the Credit Union, since there is democratic control. You could buy as many common or qualifying shares in the Caisses populaires du Québec as you want, you would still only have one vote and you would not have made a very good deal if you thought you would be getting control.
I believe this is very important for certain Quebec and Canadian financial institutions. There is no place, in our view of things, for transforming the caisses into share capital businesses. However, what we say in our brief is that given the fact of globalization, it might be useful for the caisses -- because we, at the Confédération and at the Caisse centrale, are at their service, we are there to help them progress -- if the Mouvement Desjardins, which currently has a Caisse centrale, of which Mr. Langelier is the president, created under provincial jurisdiction -- When an act is not created under the Bank Act, the institution cannot call itself a bank, so we are a Caisse centrale, and it is difficult to make mergers, consolidations and alliances in such a structure. One of the reasons we are thinking about a cooperative bank is that cooperative networks, such as the Credit Union and certain European cooperatives, could unite under one structure someday so that the cooperative network of different countries or different provinces of Canada could grow together while maintaining their specificity. In that vein we have asked the MacKay Task force to open up that possibility, not because there are projects on the table, but because we say that one day it will be one way to go. There are very practical, very financial reasons for that, and perhaps you, Mr. Langelier, could explain a few. There are even significant financial advantages for a network like ours.
Mr. Langelier: I believe that the main element when we talk about institutional supply, because it was part of the opening presentation, is that we were saying that the Mouvement Desjardins, like all other institutions, will favour institutional savings more and more. So in terms of the Bank Act and other legislation governing many financial institutions, when we talk about primary liquidities, for example banker's acceptance, it is admissible for bank paper but not for paper from provincial institutions. As a result, since liquidities, at the Canadian and international levels, are more and more limited, only institutions that have a real surplus should have access to institutional savings from now on because our securities are not admissible on the normative side. Of course, this has a significant effect on the cost of borrowing those funds, and especially on their liquidity and transferability. There is also everything that is related, for example on the issue of regulations under the North-American agreement, the possibility of opening branches abroad. Given that we are not recognized by the OSFI, provincial legislation does not give us the right to do business outside the legislating province. That is also true for the Credit Union and it becomes extremely difficult to operate with the federal and provincial governments. That is the reason why, as Mr. Béland was saying, even without a concrete project our interventions with the MacKay group and the discussions with the Credit Union on the rest of the country have to do with how we could create a common entity that would serve the needs of the various provincial credit unions while having the structure for or accessibility to different markets.
[English]
Senator Kolber: My last question is slightly more micro. I really want to try to find out if the mouvement has a niche that the chartered banks do not occupy. The perception is that the financing of small and medium enterprise in Canada has been a major market failure. As well, the chartered banks have been criticized for failing to provide basic financial services to the poor. That is a two part question. Can you tell the committee how the mouvement presently deals with persons falling into the "poor" category?
On the question of small- and medium-sized enterprises, do you see the implementation of the recommendations in the report changing anything, or do we need a more aggressive policy in the form of initiatives from the state to ameliorate this market failure, or the perception of a market failure?
[Translation]
Mr. Béland: The Mouvement Desjardins, given that it belongs to its members, serves all member categories. For example, we know that we cash cheques for 70 per cent of social assistance recipients. We do not turn back this client base, we even give them bank cards so that they can use the automated tellers if they wish. I believe that at that level the Mouvement Desjardins respects the cooperative movement's open door principle. In that light, I do not believe the MacKay report goes far enough. It is obvious that a cooperative movement like ours or the Canadian Credit Union are dedicated to serving all social strata at affordable costs, as is done in the United States. We opened a bank in Allendale, Florida, not because we wanted to serve the Americans, but to serve the Quebeckers who spend part of the winter there, even if we did not fully know the American legislation, or rather that of the state of Florida, that requires banking institutions to spend part of their assets on loans to people who are less well-off or poorer.
We do it, and I do not want to boast on our behalf, but that is reality, I did not make this up. The Mouvement Desjardins is open to all social classes whereas others refuse them systematically. We have seen examples of this, not to say proof, when social assistance recipients go to certain banks and are simply told: "We do not do this here, go to the caisses populaires, the caisses populaires do that." Our reputation is made by the big banks in that area. In fact, the federal government recently, and I congratulate it for that, sent out Government of Canada cheques saying "Now you can address..." and gave the names of the major banks. Obviously I hope it will not refer them all to us because we could not meet such a high demand, but you can see that the government has made efforts to encourage the major banks to serve people who are not as well off as others. That could be included in the legislation or in the regulations. I would be in complete agreement with that.
[English]
The Chairman: Senator Kolber's question had a second part to it dealing with small- and medium-sized enterprises. How do you treat small business?
[Translation]
Mr. Béland: We are the major lender in Quebec in terms of the federal Small Business Loans Act. This shows that we are very close of small businesses. I think that one of our niches is service to small and medium businesses, especially small ones.
[English]
Senator Kolber: Mr. Béland, I must tell you, up until recently I was on the board of a large Canadian bank, where I sat for 26 years, and I heard the same story each year for 26 straight years -- that we could never crack the Quebec market because you were there.
Mr. Béland: And we will be there for a long time.
The Chairman: Do you also do what the major chartered banks would typically call "small corporate loans"? Do you focus your business loans on small and medium-sized business or do you, in fact, serve the whole range from Bombardier down?
[Translation]
Mr. Langelier: Some of our operations, certainly, especially at the level of the Caisse centrale, are at the level of the major businesses, but I can state that it is a minuscule part of our portfolio. About ten years ago, the Caisse centrale was perhaps oriented more towards big business, but since the beginning of the 90's, most of what we do, strictly in cooperation with the caisses, is focussed almost exclusively on small and medium businesses. Obviously the Caisse centrale finances the medium businesses more but the network of caisses finances small businesses at the 99.9-per-cent level.
Senator Joyal: It seems to me extremely important to put the debate back into the context of the objectives of the MacKay report. I refer especially to pages 5 and 6 of your brief. If we go back to the general objectives of the MacKay report, it continually stresses increased competitiveness in the financial services sector, especially the banking sector, in its recommendations, if the merger projects that must be studied do go forward. One of the report's major recommendations is to solidify, if not create, a second level of banking that would add a certain form of equilibrium to the system, especially, as I underlined earlier, if the merger projects were to go forward. Your presentation today, beyond the text, leads me to conclude, but this is perhaps a false impression on my part, that the Mouvement Desjardins is ready, in the near future, to move ahead with setting up a cooperative bank, as you have hoped yourselves, from what you said to the MacKay task force. What concerns me in that conclusion is that if we were to recommend the implementation of the recommendations regarding facilitating the creation of cooperative banks, and in fact we could do this, it would not be followed, according to you, by the appearance of a Desjardins cooperative bank, if it were to be called that, in a relatively brief time. This means that if we were to allow additional concentration in the banking sector, we could not expect, in the short term, that there would be a Desjardins bank to help maintain the choices recommended by the Task force to ensure competitiveness. Am I misinterpreting what you said or is that what I should conclude?
Mr. Béland: No. We asked for that in our brief, so it is part of our vision. However, there are many things in the MacKay report and it seems extremely important to me to not implement it bit by bit, saying that the merger of the major banks or something else is the most important thing. I believe we have to know the rules of the game first. What are the rules in Canada in terms of the financial institutions and the underpinning orientations? How will regulated and unregulated financial institutions be treated? What are the rules in terms of foreign competition? There are many things that must be decided, and I could not announce today that yes, in the short term we will create a cooperative bank and that is all we are thinking about, because I do not know any. What rules will apply?
Still, we are left with a big question mark. What choices will the central government make? We do not know. You are asking me if we will settle -- We hope the government will authorize the mergers, because it is a whole other ball game if a new long-term way of developing financial services for all Canadians is developed for the entire country. That is something else and our strategy could be very different then.
You can understand that today, when we are only studying the conclusions of a report, I can hardly announce: "Yes, our short-term project is to create a cooperative bank."
Senator Joyal: It is strange, but as your advertising says, you are an organization with five million members, depositors or open accounts, whatever the qualifier. You have enormous assets. I would even say, almost a little naively, that the citizen who looks at all this no doubt hopes that the Mouvement Desjardins will one day be able to offer him the full range of services in the same way he can get them from a banking institution.
The citizen's simple reasoning, and one that I can make in a way, is to ask himself this: what are you missing? What certainty do you need to change into a bank if what you hope for is available? What I do not understand, despite your first answer, is what stops you from saying right now: "If the MacKay report is implemented, we are ready. We nave the necessary capital and the know-how," in short the professional institutional experience to change into a bank, since you are very close to being a bank. You do not lack very much.
It is not as though you were a general insurance company that all of a sudden decided to establish a bank with other financial institutions. You are in daily deposit financial operations.
Mr. Béland: Absolutely. We have banking activities.
Senator Joyal: So you are a member of the payment associations, you have a long history of reliability, you meet almost all the essential criteria to establish yourselves as a bank. So what is missing? I am surprised by your reticence in this matter, which, as I underlined earlier, is in my view an essential element in maintaining competitiveness in this country if we are to go ahead with recognizing or accepting the merger requests since the emergence of a second level of banking, if it can be described as such, is essential, I believe, to preserve the choices of consumers.
As you say yourself at the bottom of page 5, this ability to supply banking services would allow you to move with your companies to the national and international levels in a greater manner since you say yourself that they are limited. So this is one of the additional services you could provide.
There are others also that you mention on page 6, elements that would allow you to make alliances, as you say yourself, with other cooperative banks abroad. So territorial decompartmentalization would allow you, in a way -- at least in Quebec, since that is where the bulk of your activities are -- to occupy the second level of choice that should exist, in light of the MacKay report, if we allowed a certain form of concentration in the banks, in the first-level financial institutions.
Mr. Béland: Yes. First, at the top of page 8 we say that we create one of the bank cooperatives and we recommend the elimination of the legislative and regulatory obstacles to the growth of the cooperative sector in financial services. The first issue is that of property. If the Mouvement Desjardins is authorized to hold only 10 per cent of the shares in a bank that it wants to create, it is not interesting.
Senator Joyal: No, I believe not.
Mr. Béland: There are nevertheless issues to be resolved at that level, such as recognizing that a cooperative bank belongs to five million members, that it is a widely owned property, because we do not find that in existing legislation.
Senator Joyal: I am not trying to make you say what you do not want to say, Mr. Béland, please understand me. I am simply trying to get from you what essential elements should be put into place so that you can move quickly to setting up a cooperative bank. I do not want to suggest how it should be done; I would never pretend to that.
When the Credit Unions testified before us in Ottawa two weeks ago, they mentioned that their movement might not become shareholders in the bank, that the choice would be left to each one in terms of their interests.
The Caisse centrale Desjardins might want to imagine a flexible structure that would respect local autonomy, which is an essential element in the operations of your institution. But the fact remains that in my opinion it would be useful for us, as a committee, to know exactly under what conditions you would have the basis to start the process immediately.
Once again, I apologize for interpreting your attitude and your words, but I get the impression that you are somewhat reticent to go ahead.
Mr. Béland: Rather, I am reticent to say it.
Senator Joyal: Or to say you will go ahead -- I am sorry, Mr. Béland, but it is extremely important for us.
Mr. Béland: There are a number of technical points, but I will ask Mr. Langelier to -- It has to be well understood that we asked for it in our brief. We are repeating it today. Our intention is to be able to get there; that seems important to us, but there are intermediate steps.
Senator Joyal: Of course.
Mr. Langelier: In fact, if there is not yet a project to establish a cooperative bank, we are definitely serene and we have in the past started some discussions with the federal government to find out how it viewed and interpreted the idea of a cooperative bank.
I believe that the first element, in order to make a more in-depth study of the establishment of a cooperative bank, is to ensure that cooperative principles are recognized because in fact, with the current Bank Act, closing a deal with a shareholder is considered a tied transaction.
So the Caisse centrale, in its current form, is the treasurer for the entire group and the legislation allows us to enter into transactions with each entity. We want to be sure that a Caisse centrale could continue to operate in this manner, as allowed by the Loi de la Caisse centrale, especially in terms of payment of dividends to shareholders.
Those are all cooperative principles, especially the make-up of the board, who can sit on it, who can share, especially in terms of the coming of -- Whether it is the partners in the Credit Unions or international partners, the issue of the sharing of holdings, of separating the distribution of benefits according to contributions, which are in fact basic cooperative principles according to which we must divide not in terms of how much capital, but on the basis of activities -- such are the elements we want to discuss with the federal government; we want to see if it will recognize those elements in the principles of the creation of cooperative banks.
We are interested in talking about those banking activities that are allowed for banks. When we talk about a second-level bank, we want to know what is meant by that. Is it second-level in terms of size or in terms of ability to function?
It is for that reason that Mr. Béland said we wanted to know the rules of the game in order to know exactly if they include currently recognized cooperative principles at the provincial level and everywhere else in the world, applied to the Canadian milieu. Then we could think more seriously about creating such an entity.
Of course, internally we discuss with the cooperatives, whether out west or in Ontario, but no one yet knows what the beast will look like, except for saying that the principle could be recognized.
Senator Joyal: If these principles that you deem essential and that you have stated were guaranteed by law, how much time do you think you would need for the bank cooperative to be operational? We asked the Credit Unions the same question, and I want to state that we are not trying to put you on the opposite side; I will give you their answer. They said between three and five years. Realistically, how much time would you need so that you could open the Desjardins Bank, and for Mr. Béland to become its new president?
Mr. Langelier: I would have to fear for my job. We do not want to change the network of caisses; it would stay, as it is called, provincial, as we have said before. However, from the time those assurances are obtained, without saying it would be instantaneous, it could be done fairly quickly since the Caisse centrale, to all extents and purposes, is in operation. It has $11 billion in assets, it is active in that area. We are therefore talking much more about a change in status than about creating a new entity that other partners could join.
Senator Joyal: Mr. Béland, there is one thing I am thinking about -- and you will believe it is banking policy fiction. In my mind, if there must be banking entities able to compete with the two major banks that would come out of the merger, it seems to me essential to consider the hypothesis according to which Desjardins becomes a bank and makes a strategic alliance withe the Banque Nationale, since the MacKay report would allow the Banque Nationale to share with you a market that is in fact quite natural since the Banque Nationale occupies, as Mr. Courville has told us, a significant part of the small and medium business market where Desjardins wants to expand.
Is that not in fact a scenario that would allow exactly the kind of institutional equilibrium that we want to see in the market? You laugh, but you know that five years ago when we talked about the merger of Toronto Dominion and the CIBC, people would probably have laughed as much as we are laughing today about this approach. In practice, leaving aside all the legal implications it may have, is not the appearance of major banks, of powerful financial institutions, one of the options we should consider?
Mr. Béland: I believe it is difficult to foresee that because of two different philosophies that are quite different and not complementary. On the contrary I believe -- and I have the privilege of being the president of the Association internationale des banques coopératives -- that cooperatives worldwide now realize that in a world where distances are irrelevant, that it is possible to create alliances, but to do so with people who share the same philosophy, the same values and who have the same ways, the same structures in terms of how they do business. I cannot really see how one could take the structure of a share capital company where the shareholders hope that their assets will grow, acquire a plus-value, and merge it with a structure where there is no share capital, where the reserves are general reserves that belong to the group.
How do you bring this all together? You are going to tell me that it is possible to demutualize or to undo a cooperative, but then we would lose our inalienable characteristic. Is there not a greater risk that in five, six or seven years the big megabanks will make takeover bids and that the Canadian banks of that size, which we would represent, get into foreign hands if at a given time the legislation allows it? Knowing the rules of the game is important. We have been in existence for more than a hundred years. That is what has allowed us to prosper, to be owned by the community. We cannot be sold. There is no risk that we will disappear. You are stuck with the Mouvement Desjardins and there is no choice: you have to develop it.
For Quebec and for the Credit Unions, Canada has the great advantage of being able to rely on a permanent network that can be developed. Altering the nature of Desjardins to make it a share capital company would make it more fragile and more subject to being taken over. Neither the caisses populaires or the Caisses Desjardins would accept that; I am sure of that.
That is a significant force but it can be built into a major strength by making alliances with the Credit Unions, or perhaps with the American credit unions, or with the major banking cooperatives like those that exist in France.
In Holland, the largest European cooperative bank is the Arabobank (ph); there is the DG Bank in Germany; there are some everywhere. Today, in a global market, it is not impossible to think that one day -- not tomorrow -- everyone who believes in this form of cooperation, in its values, will unite to give themselves more strength. That is the great advantage of the global market and it is also the great advantage of [the cooperative movement? word missing in French] since we can, as it is often said, think globally and act forcefully at the local level.
Senator Joyal: In the end, you are confirming that the growth of the Mouvement Desjardins will be via the creation of a Desjardins bank?
Mr. Béland: Yes, but it would be a cooperative bank, as Mr. Langelier explained very well, were we would group -- If there are cooperatives from other countries that are interested in North America -- There are already some. I saw recently that Arabobank (ph) has just created Arabobank Canada Limited.
I obviously invited the Dutch by saying: "If you are interested in America, if you are interested in Canada, come with us, do not do it alone." I believe that in a global market, we will see such partnerships develop over time.
[English]
Senator Austin: Thank you very much for some interesting answers to some conceptual issues. What I should like to put on the record, Mr. Béland, is a bit of information about the movement so that we have it to refer to, perhaps handily. You were saying that the banking assets are $11 billion?
Mr. Jean-Guy Langelier, President and Chief Executive Officer, Caisse centrale Desjardins: That is only for the caisse centrale. The whole movement is $72 billion.
Senator Austin: Is it possible to have an equity concept number?
Mr. Langelier: Well, the equity base is close to $5 billion; of that, $3.4 billion comes from surplus that is a benefit from previous years. We have about $800 million coming from an instrument that we developed that we call "permanent shares." We have $800 million in permanent shares held by different members of the caisses. It is also important to point out that we issue on the market about $400 million in notes of the same type issued by the banking industry.
Senator Austin: Do you participate in inter-bank lending?
Mr. Langelier: We are not part of any inter-bank lending, but for sure we issue commercial paper and some of that is bought by the banking industry. However, they will buy our paper only when they are really in a surplus position and have an excess of liquidity.
Senator Austin: You say in your presentation that you agree generally with the MacKay report recommendations, but you have a variation on your approval on the top of page 7. I just wonder if we could have you explain that position, where you talk about the 10 per cent limit on ownership and you believe that it should be maintained below the $5-billion level. What is the policy reason for that position?
[Translation]
Mr. Béland: Because we do not see the advantage in allowing a group to hold up to 65 per cent ownership of a bank of smaller size, especially since these banks often do business either in one province or two provinces. We therefore find it a little risky to allow a group, which can often be a commercial or industrial group, to become the owner of a bank, to all extents and purposes, even if it has only $5 billion in capital, it is still -- It is $100 billion that allow one to acquire that wealth and use it for one's own ends without being interested in the development of the environment in that province, but rather in the development of one's industry or commercial group.
One can imagine that today there are groups that would be very interested in operating in parallel with a bank that could be found in a similar business. In that sense, we do not understand the nuance made in the MacKay report saying that for banks that have between one and five billion in assets we could allow up to 65-per-cent ownership. It is a proposal we have difficulty understanding.
[English]
Senator Austin: Do you think there is a cultural difference between your thinking as a member of the co-operative movement and that of an entrepreneurial culture? I ask that, because, in the MacKay report, the concept of building smaller financial institutions seems to imply or contain the idea of a culture of tighter ownership, or closer ownership; therefore, there are those who would be willing to risk their capital if they had a greater reward at lower levels of equity. We also see that as a substantial philosophy in the United States, where hundreds of banks are being created and all sorts of local banks are entrepreneurial-owned closely held banks. That is also true in Europe.
I am not challenging for a moment the culture of the co-operative system, because I think it is a valid and desirable culture, but is there not room for other cultures? And why would you be concerned about the entrepreneurial culture?
[Translation]
Mr. Béland: Perhaps I do not understand the question correctly, but we also include entrepreneurs because the owners of the 1,250 caisses in Quebec are people who have decided to create a financial institution together. We have some in all towns in Quebec, except that it is not for their own profit since there is no share capital or plus-value; it is for the community's benefit.
The rules of the game allow the savings of the area to be used for the development of the area and not the development of a commercial or industrial sector. I believe that we are both entrepreneurs, except that we do not have the same vision of the ultimate end. I believe that the cooperative formula that I just explained favours the interests of the consumer. The other approach favours the entrepreneurs, people who are looking, through their banking activities, to get good returns on the capital they have risked. They are two totally different approaches.
[English]
Senator Austin: Could we agree that the regulatory system in Canada would prevent the operation of a bank from being misused in terms of the support of commercial activities that were not appropriate banking activities? If we could agree to that, then I think the question is whether we want to foster what has been referred to as second-tier financial institutions, the growth of more competitive activity, particularly in the regional and community levels.
If these levels are not permitted to grow -- certainly they will compete with you at some point, but if they are not permitted to grow, the ultimate public policy concern is that we could end up with two or three universal, widely held banks as almost the only entities eligible to acquire other large financial assets in the country. If that were the case, how would we deal with that problem without creating a great deal of activity at the second tier?
[Translation]
Mr. Béland: That is why we say in our brief that these changes must be made only if we open the door to competition, a regulated and controlled competition because nothing would be worse than creating small entities that would take the best parts of the markets, leaving to long-standing institutions to deal with the small investors, the small businesses, the small depositors and allowing other institutions with less constraints, less difficult ones, simply by taking control of a bank, to say: "We are here to skim the market," if I can use that expression, and getting rich. I think there would be no more fairness. It is important to ensure that the ones that are in place are not faced with unfair or privileged competition. I think everyone must be on the same footing.
[English]
Senator Austin: What we are seeing now is that foreign banks, without necessarily having any establishment presence in this country, are cherry-picking some of the best profit centres in the financial services industry. You are not advocating that we prevent the large credit card issuers, whose business essentially is in the credit card spreads, from offering their cards in Canada. The question is how do we create competition for them? How do we hold the business here? The system is simply opening up wide to the world.
[Translation]
Mr. Yves Morency, Director, Government Relations, Confédération des caisses populaires et d'économie Desjardins du Québec: I believe that one of the concerns in the MacKay report is that all Canadians be well served, and not to see the arrival on some competitors that only serve a well-off clientele, one that, from the start, is sought after by many and will simply get more.
In the report it says we must not implement a CRA like in the United States -- we talked about that earlier. We have to find ways of serving people. When we talk about a level playing field with the same regulations for these single-product participants, we wonder "What will we require of them? How will we ask them to participate to serve all Canadians fairly?" Do we say to foreigners: "You have the right to take the more well-off -- as Mr. Béland said -- or to Canadian institutions -- We require that you be present everywhere and that you serve all communities, and we may impose legislation similar to the CRA so that you can do so?"
In the United States, when we opened our institution in Florida, they did not say: "You are a foreign bank, or a foreign company, you are required to do this." On the contrary, I believe that from day one we were required to reinvest in the community even though we were collecting no or almost no deposits from American citizens, but rather deposits from Canadian citizens who were on more or less prolonged stays there.
And that is what we are saying about regulation. Competition is welcome, but on the other hand everyone must participate in the collective effort asked, otherwise we will never be able to keep Canadian institutions in good health. We will ask them to deal simply with small operations and those that the others do not want.
Senator Joyal: About the specific nature of you activities in Florida, are you operating under -- I was going to say a law creating a bank or a law establishing --
Mr. Béland: A bank. It is the Desjardins Federal Savings Bank.
Senator Joyal: So it is a bank. You have a bank?
Mr. Béland: A share capital in which all the shares are held by the Mouvement Desjardins. Federal Bank.
Senator Joyal: Federal Bank, so all the shares are held by the Mouvement Desjardins. And that bank, as you underlined, if I am interpreting you correctly, is accessible to all citizens. It is not a bank that says: "You have to have an account with Desjardins in Canada or in one branch or another." An American citizen that did not have an account with Desjardins could come to you?
Mr. Béland: We have clients.
Senator Joyal: They are basically clients and if you work in this way in the United States, what would prevent you from having another bank, another type of bank? You could in fact buy another American bank?
Mr. Béland: We use to own the Banque Laurentienne not so long ago.
Senator Joyal: Exactly, that is it. That is what I want to get at in comparison. In practice, you could have 100 per cent of the assets of another bank. You could buy another bank; nothing is stopping you right now.
Mr. Béland: That depends on the legislation in each country.
Senator Joyal: Yes, of course.
Mr. Béland: You cannot buy a Canadian bank because there is a limit of 10 per cent.
Senator Joyal: Yes, of course. But if those limits were eliminated, you could in fact buy a bank given the share capital you have. The question in my mind is as follows. It is that we have had -- The President of Canada Trust, when he testified before us two weeks ago told of his intention, if the Competition Bureau, which must decide on the mergers, came to the conclusion that some of the four banks in question would have to divest themselves of a percentage of their assets, to acquire those accounts. My concern is that should this arise, given that you seem to express a certain reservation about going ahead immediately with this bank -- I wrote down your words, there is no project on the table, that is what you said earlier -- you would not be ready to buy those accounts. Another bank would have to do it.
Mr. Béland: However, we had done it in the case of the Groupe La Laurentienne. We still have the tools to allow us to act. There is the Société financière Desjardins-Laurentienne, which is a share capital company that owns Assurance-Vie Desjardins, the Groupe Desjardins Assurances générales, the Fiducie Desjardins, the Valeurs mobilières Desjardins and, not so long ago, the Banque Laurentienne Desjardins.
So it is not impossible and the Société financière Desjardins-Laurentienne could certainly make those kinds of transactions, but it would be to buy a financial institution.
The project we are talking about in our brief goes a little further and tries to find certain advantages not granted by current provincial laws. It is to allow us to go one step further, but on the question of acquisitions, there are no obstacles now since we have already done it and we are still doing it.
Senator Joyal: Agreed. Thank you, Mr. Béland.
[English]
The Chairman: Thank you very much. I must say I was not only delighted to hear your view of the future, but I was particularly pleased to hear your comments on the apocalyptic nature of all the things that people say will happen if insurance and car leasing are allowed. You have had 10 years' experience and you have not found it apocalyptic.
Second, I really appreciated your comments on the advantages of a cooperative bank. While this committee has, I think, always been inclined to do everything possible to support the credit union movement, you have given a business rationale for a cooperative bank that has not been presented to the committee before, and that is very helpful. Thank you very much for being here.
The committee adjourned.