Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 7 - Evidence - December 8, 2011
OTTAWA, Thursday, December 8, 2011
The Standing Senate Committee on Banking, Trade and Commerce, to which was
referred Bill S-5, An Act to amend the law governing financial institutions and
to provide for related and consequential matters, met this day at 10:33 a.m. to
give consideration to the bill.
Senator Michael A. Meighen (Chair) in the chair.
The Chair: Good morning and welcome to this meeting of the Standing
Senate Committee on Banking, Trade and Commerce.
My name is Michael Meighen. I am a senator from Ontario, and I have the
honour of chairing this committee.
We will continue this morning with our examination of Bill S-5, the financial
system review act. I will begin by introducing the senators present today:
Senator Hervieux-Payette, deputy chair of the Committee from Quebec; Senator
Larry Smith from Quebec; Senator Carolyn Stewart Olsen from New Brunswick;
Senator Donald Oliver from Nova Scotia; Senator Pierrette Ringuette from New
Brunswick; Senator Mac Harb from Ontario; and Senator Wilfred Moore from Nova
Our first panel this morning is composed of Brigitte Goulard, Vice-President,
Policy; and Brenda O'Connor, Vice- President and General Counsel, Credit Union
Central of Canada; and from the Canadian Life and Health Insurance Association,
we will hear from Frank Swedlove, President, who has recently appeared before
us; and Frank Zinatelli, Vice-President and General Counsel.
I want to welcome all our witnesses. Ms. Goulard, you have a short
presentation, so you may go ahead.
Brigitte Goulard, Vice-President, Policy, Credit Union Central of Canada:
Thank you, Mr. Chair, for inviting us to share with you some comments on Bill
S-5, the financial system review act. My name is Brigitte Goulard, and I am the
Vice-President of Policy with Credit Union Central of Canada. Joining me today
is Brenda O'Connor, Vice-President and General Counsel, also with Credit Union
Central of Canada.
Credit Union Central of Canada is the national association for the credit
union system, its member organizations, provincial centrals and, through them,
378 Canadian credit unions operating outside Quebec. Credit unions are co-
operative financial institutions that are owned by their members.
Canada's credit unions operate a branch network with more than 1,700
locations, and these branches serve more than 5 million members and employ
almost 26,000 people. I want to point out that credit unions are the only
financial institutions in over 380 communities.
Credit unions in Canada are provincially regulated financial institutions,
and while it would appear at first blush that the federal government has a
limited role in the regulation of the credit union system, in fact a number of
institutions within the system are federally regulated.
Incorporated as an association under the Cooperative Credit Associations Act,
the Canadian Central is a federal financial institution. Further, all of its
provincial central members have opted to be regulated under the Cooperative
Credit Associations Act. Additionally, Concentra Financial Services Association,
a strategic partner to the credit union system, is the only retail association
incorporated under the Cooperative Credit Associations Act. In 2010, the credit
union system welcomed the Jobs and Economic Growth Act, which proposed
amendments to the Bank Act to allow for the establishment of federal credit
unions. We eagerly await the regulations that will give credit unions the
opportunity to adopt a federal charter under the Bank Act.
For these reasons, we have a keen interest in Bill S-5. I would like to
comment on three portions of the bill. First, we want to note our support for
the proposed amendments to sections 9(3)(a) and (b) of the
Canadian Payments Act. These amendments will allow a federal credit union to
participate in the governance of the Canadian Payments Association as part of
what has become known as the ``cooperative class.'' The amendments will permit
federal credit unions to vote for CPA directors in the class designated for
financial cooperatives, rather than in the banks class.
Credit unions have functioned well within the larger financial services
industry as they have managed to leverage an ability to formulate policy and to
speak at industry level associations and forums with a unified voice, presenting
a single point of contact and a consolidated credit union system perspective on
a variety of issues.
Placing the federal credit union in the cooperatives class will preserve and
strengthen the credit union system representation at the CPA. It will ensure
that a federal credit union will be represented by a director, who speaks for
the interests of cooperative financial institutions in CPA matters. A strong
advocate at the CPA is important for the credit union system's ability to
advocate on behalf of credit unions and to continue to operate payments facility
efficiently and cost effectively, which has a direct impact on overall credit
union system competitiveness.
Second, we wish to indicate our support for the proposed amendment to
paragraph 376(1)(g) of the Cooperative Credit Associations Act. This
amendment would give associations a greater scope by allowing them to provide
technology services outside the credit unions system.
It would allow a central to provide payment technology services to any member
of the Canadian Payments Association. This expanded power will help strengthen
the payment operations of the centrals that are so critical to credit union
Finally, we want to say a few words on the proposed amendments to sections
425 to 428 of the Bank Act and the general topic of Bank Act security. The
proposed amendments have been introduced to address two recent Supreme Court of
Canada decisions in which the court determined that an unperfected personal
property security interest has priority over a subsequent but perfected Bank Act
While we understand the federal government's wish to clarify the situation
resulting from the court's decision, we seriously question why a mechanism that
is only available to banks should continue to be retained in the Bank Act. One
of the goals of the modern PPSA legislation was to bring greater certainty and
predictability to the resolution of priority competitions. To maintain the back
tax security defeats this purpose as it cannot easily be harmonized with the
priority rules of the provincial secure transaction regimes. Furthermore, PPSA
legislation is used by lenders for the registration of the vast majority of the
secured loans in Canada with the banks being the most frequent users. In this
context, the section 427 Bank Act security has been marginalized and is no
At a minimum, the Supreme Court decisions highlight once again the need for a
more thorough review of the policy and technical issues surrounding the topic of
personal property security in Canada. We believe it would be beneficial for all
financial institutions to have access to a coherent personal property security
regime that is simple to use and which places all institutions on equal footing.
There is a need for reform in this area, and the first step is the full
review of the competing personal property security regimes in Canada.
To conclude, Credit Union Central of Canada thanks the committee for the
opportunity to speak to you today about Bill S-5. We would be pleased to provide
you with any additional information on the topics covered. In particular, we
look forward to your questions.
The Chair: Mr. Swedlove or Mr. Zinatelli, we would like to hear from
you, and then we will go to the senators for questions.
Frank Swedlove, President, Canadian Life and Health Insurance Association
Inc.: I am happy to be here as the President of the Canadian Life and Health
Insurance Association Inc. Joining me today is Frank Zinatelli, Vice- President
and General Counsel of the Canadian Life and Health Insurance Association Inc.
The Canadian Life and Health Insurance Association represents the companies
that provide 99 per cent of life and health insurance in Canada today.
The Canadian life and health insurance industry provides products that
include individual and group life insurance, disability insurance, supplementary
health insurance, and individual and group annuities, including RRSPs, RRIFs,
TFSAs and pensions. The industry protects more than 26 million Canadians and
over 45 million people internationally.
We welcome this opportunity to appear before the committee as you seek to
develop your report to the Senate on this important bill. The industry is very
supportive of this bill and urges that it be passed in a timely manner. Among
the various statutes amended by Bill S-5 is the Insurance Companies Act, which
is the governing statute for the regulation of life and health insurers at the
federal level. Of course, life and health insurers are also subject to the rules
and regulations that are set out in provincial insurance acts.
Following up on the Minister of Finance's September 2010 request for input on
the scheduled review of legislation governing federally regulated financial
institutions, Bill S-5 represents a welcome fine tuning of the various financial
institution statutes. The bill contains provisions, first, to promote financial
stability; second, to fine-tune the consumer protection framework; and third, to
reduce the administrative burden and add regulatory flexibility.
With respect to the first of these objectives, we are pleased to see the
amendment to the Winding-up and Restructuring Act, which changes the priority
status of segregated fund policies in insolvency situations and will facilitate
timely transfer of policies.
With respect to consumer protection, the bill would strengthen the Financial
Consumer Agency of Canada Act and would also give the government broader
regulation-making authority in this area.
With respect to the third objective, increasing legislative and regulatory
efficiency, the life and health insurance industry is particularly supportive of
some technical but useful proposals in this bill. For example, amendments would
be made to the Insurance Companies Act as follows: to reduce administrative
burden for federally regulated insurance companies offering adjustable policies
in foreign jurisdictions by removing duplicative disclosure requirements; to
allow a segregated fund to invest in an insurance company through a mutual fund
that the insurance company controls, provided the shares of the company are part
of a recognized market access; and future adjustments on the limits on transfers
to shareholders from participating policy accounts will be facilitated by adding
We also support another useful provision that would provide federal financial
institutions with enhanced flexibility to issue shares to foreign institutions
owned by foreign governments. That being said, we are continuing to review this
provision in more detail in comparison to the equivalent provisions in the other
federal financial institutions statutes to make sure that Canadian life and
health insurers will have as much flexibility under this amendment as those
other financial institutions. We are continuing to discuss this issue with
The bill would also reset the sunset date for financial institutions to five
years after the coming into force of the Bill S-5 amendments. In this regard,
prompt passage of the bill will ensure the legislative stability and continuity
that are so important to the financial services sector.
In closing, I would like to add that the life and health insurance industry
strongly supports the provisions of Bill S-5. That legislation is relevant to
the industry, which is prepared to provide as much support as possible to ensure
the bill's timely passage.
The industry greatly appreciates the opportunity to participate in this
committee's study on Bill S-5. We would be pleased to answer any questions you
The Chair: Thank you, Mr. Swedlove. Could I ask you to confirm my
understanding that both of you made submissions? Were you both part of the 30 or
so institutions that responded to the call for comment and input?
Mr. Swedlove: Yes, we were, senator.
Ms. Goulard: We were as well.
The Chair: Did you both make your submissions public?
Ms. Goulard: No. I noticed yesterday during your hearing that you
asked that question, so I went to verify to ensure I knew the answer. The CUCC
made public within the credit union system; we distributed our submissions to
our own system but did not make it public on our site. We viewed these changes
as being very technical so we did not see the necessity of doing that.
The Chair: Mr. Swedlove, you did?
Mr. Swedlove: Yes, we made it available.
Senator Hervieux-Payette: You did what?
Mr. Swedlove: We made it available on our website. We made it public.
Senator Hervieux-Payette: Can we have access to yours?
Ms. Goulard: Yes, we can make sure you have access to it.
The Chair: You can send that to the clerk for our records.
Senator Harb: Thank you for your excellent presentation and for coming
to meet with us today.
The minister appeared before us yesterday along with officials and they made
a big deal out of the fact that this is technical and we are focusing on
technical issues; yet, this is a five-year review of the act and you would think
after a five-year review what the government should be doing is to go out and
truly and totally review the act and consult with stakeholders. You came before
us; you have some issues and some concerns, but nonetheless you do not want the
process to be delayed; you want it to go forward.
Would you agree that what the government should have done with this act is to
do a thorough consultation and involvement with the various institutions,
including yours? The banks have some issues they wanted to bring forward that
have not been addressed, and others perhaps the same. Should we just push it out
and wait for another five years to deal with some of those issues?
Mr. Swedlove: One of the great strengths of the system that we have is
that financial sector legislation is reviewed every five years. It does create
an opportunity to deal with issues. The last number of years have been very
interesting times for everyone. The general view of the industry is that no
major changes in policy direction were needed at this time and that overall the
financial system worked well through the financial crisis, and that probably
what was best to focus on was dealing with technical issues, problems about
regulatory burden, et cetera, that could be fixed.
We were not in a position to suggest major policy changes. There have been
changes over the last several years, in any event, to deal with some of the
fallout from the financial crisis. We felt comfortable with the direction that
the government took.
Ms. Goulard: I want to support that. We also felt comfortable with the
direction that Finance took. Also, we would like to mention that we have been
working very hard with the Department of Finance on the federal credit union
charter option. We have gone through a very heavy consultation process for the
past three or four years on that option, so we felt they were listening quite
well to us on that front.
Senator Harb: When it comes to cars, leasing and so on, banks as well
as leasing companies have raised some questions, and they thought that this
element should have been addressed as part of the review of the act. They moved
forward, yet, at the same time, in a very shy way. They also, like you, just
said, ``Put it aside. We will deal with it later. We will not make a big deal
out of it.''
I am beginning to be concerned about to what extent we are shy and do not
want to say what we want to see as part of this review. On the other hand, is it
a fact that we are quite happy, and let us deal with the problems later, in
another five years? Do you have any comment on that?
Mr. Swedlove: I will take a crack at that.
If there was a view that there were major policy issues and difficulties to
deal with, we would have encouraged the government to deal with them. It is just
that our view is the structure that we have in place is appropriate, that the
system has responded well from a regulatory perspective in that we have good
coordination mechanisms amongst OSFI, the Bank of Canada, the CDIC and FCAC all
suggest that, relatively speaking, or compared to what we see from a regulation
perspective around the world, that Canada does well.
We thought that the fact that we have shown that strength meant that a lot of
changes were not necessary, and so that is why we supported the approach that
Senator Stewart Olsen: To follow up on what Senator Harb said, I am
very pleased to hear you say you felt you were listened to, that you received a
good audience from the ministry and that you work well with the ministry. It is
my impression that the ministry tries very hard to keep in touch with our
financial institutions because we recognize that the prudence as shown by all of
you put Canada where we are. I am grateful for that. I know that when you make
changes and you review an act, you cannot do everything all at the same time.
We did hear the credit union saying what they might like to see looked at
next. I would be interested to hear from you gentlemen what you think we could
look at in the next review, along with open ears, I think, from the Department
of Finance department.
Frank Zinatelli, Vice President and General Counsel, Canadian Life and
Health Insurance Association Inc.: One area that we have been discussing
with Finance and that we hope the next time around will be considered is an
issue that we refer to as ``self-evaluative privilege.'' This is an issue
relating to companies doing self-examination or assessing how they are doing in
complying with all the rules to which they are subject. However, at the same
time, companies may be concerned under some circumstances of pooling all the
concerns they have identified within their own companies and then having to
disclose that in the context of litigation. That would be disclosed with
regulators, et cetera, but we would not want to share that with litigation
lawyers. Consequently, we thought a self-evaluative privilege would be a useful
inclusion in the legislation. This is something that has been done in one
province to date and that a number of other provinces are considering. That is
something that we hope we would discuss next time around.
Senator Stewart Olsen: Thank you for that. The policy of
incrementalism and doing what we can at the moment has proven very successful,
and I am happy to see you are supportive of this bill and what was addressed.
Senator Moore: Ms. Goulard, I want to ask you about the third item
that you mentioned on page 4 of your brief this morning. Could you run through
that for us on a practical basis as to what it means for credit unions if this
is not changed? Tell us how it works now.
Ms. Goulard: I will let my general counsel answer that question.
Brenda O'Connor, Vice President and General Counsel, Credit Union Central
of Canada: As you know, all provinces have personal property security
legislation where, if funds are advanced, security can be granted and registered
under the PPSA statutes.
The Bank Act has a special security mechanism that is only available to
banks. It does not align well with the PPSA registration system. It is extremely
old, and the Supreme Court cases that came out this year were a result of credit
unions that brought their issue to the Supreme Court, and the Supreme Court
decided in favour of the credit unions. They had unperfected security interests,
and they were held to be a priority of the Bank Act security. This is the reason
that the legislation is now being amended to deal with that gap.
Our feeling is there are a number of places where the Bank Act security does
not align with PPSA security and that it is possibly unfair for one banking
institution to have a special security mechanism as opposed to the others.
Senator Moore: How does this work if someone comes to a bank, borrows
$10,000 to buy appliances, and the bank puts a document on record? If the same
person goes to a credit union, what is the security there, and is the bank
security a priority over yours?
Ms. O'Connor: The bank security will have priority over ours,
depending when it is.
Senator Moore: The timing of the registration of it, but is it the
Ms. O'Connor: It is a different registry system. The Bank Act security
is registered with the Bank of Canada, and PPSA security is registered at the
provincial level. It is federal security as opposed to provincially regulated
Senator Moore: Yes, but the bank can also record its security in the
Ms. O'Connor: Yes, and they do that regularly.
Senator Moore: Yes, so tell me again what you want here and why?
Ms. O'Connor: We are looking for a review of the two security systems.
PPSA security is the more modern version of registry-based security. Bank Act
security has the tendency to give a preference to banks only because they are
the only ones who can take that security. It seems to us it is time for this to
Senator Moore: Does each province and territory have a personal
property security act statute on its books that credit unions are able to use?
Ms. O'Connor: Yes. I believe so.
Senator Moore: Or that they operate under in each province and
Ms. O'Connor: Yes.
The Chair: Ms. O'Connor, I do not want to put words in your mouth. I
am looking at page 4, the last paragraph of your brief in connection with what
Senator Moore was asking you questions about. Do I gather that your bottom line
position is you think there is a need for a more thorough review of the policy
and technical issues surrounding the whole matter of personal property security
in Canada, but, in the meantime, you are prepared to or can live with what is
Ms. O'Connor: That is right.
Ms. Goulard: To clarify, we have had this discussion with the
Department of Finance, and they have also agreed this would be a good subject
for discussion after the bill is passed. They also recognized that the
amendments they put forward are meant to clarify a situation that was becoming a
little more murky because of the Supreme Court of Canada decision, and they
wanted to lay the groundwork to clear it up but agree this is something that
would be subject to review. The law reform commission had looked at this issue
several years ago and suggested that this particular provision be reviewed as
Senator Moore: You say section 427 of Bank Act security has been
marginalized and is no longer needed. Is it no longer needed, or is everything
covered by the Personal Property Security Act? Is that what you are advocating,
so that would work for everybody, for all types of financing institutions, and
therefore we do not need the Bank Act provision?
Ms. O'Connor: Yes, that is right. The banks do use the Personal
Property Security Act legislation security, so they would not be disadvantaged
by not having the Bank Act security.
Senator Ringuette: Page 3 talks about membership classes and
participation of the federal credit union, if one is created and chartered by
law. This is just an in-case measure, as I see it. My understanding is that the
different credit unions and caisse populaires across the country have to go
through a chartered bank in order to have access through the payments act.
Ms. O'Connor: That is not the case. The credit unions access the
payment systems through their provincial central and the group clearer at the
Canadian Payments Association. It is a group clearer. It is actually Central One
Credit Union that represents the system at the Canadian Payments Association.
Senator Ringuette: You have one entity represented at that table?
Ms. O'Connor: Yes.
Senator Ringuette: How will the legislation change that?
Ms. O'Connor: When the amendments to the Bank Act were made a year or
so ago to allow for federal credit unions, because they were formed within the
Bank Act, the federal credit union was defined as a bank. If you look at the
Canadian Payments Act, there are two classes of membership. One is a banks class
for all banks, and the other is the cooperative class for coooperative
institutions. By defining the federal credit union as a bank, they automatically
fell into the banks class, and we had asked that it be moved into the
cooperatives class. This is one of the issues we brought to Finance into our
submission, and we had good discussion with them and were pleased to see the
amendments made to the Canadian Payments Act.
Senator Ringuette: If ever we have a chartered credit union, would
that displace your current group dealing with the Canadian Payments Act?
Ms. O'Connor: No.
Senator Ringuette: Would it substitute?
Ms. O'Connor: No, it would be additional. Group clearer would be there
to represent the credit unions that choose to clear through the group clearer.
Senator Ringuette: That is important because of the number of credit
unions out there that need an outlet.
I have another question. There are clauses here that increase the ownership
threshold for Canadian banks by 50 per cent. Have you looked at these clauses
within the act, and would you give me your opinion as to how this will affect
the financial sector in Canada, which you are part of?
Ms. Goulard: No, I am afraid we have not looked at that particular
section of the Bank Act. We have really focused on those particular provisions
that affected the credit unions, whether they be the provincially regulated
credit unions that are subject to certain provisions of the federal legislation
or, potentially, the federal charter, but we have not looked at the provisions
that affect solely the banks.
Senator Ringuette: I gather you have not looked at provisions in
clause 5(22) in regard to foreign bank ownerships and foreign bank participation
in the Canadian market and so forth?
Ms. Goulard: No. All credit unions are 100 per cent owned by their
members, which are Canadian citizens, so we have not looked at those provisions.
The Chair: Senator Ringuette, I do not know if it is helpful to you,
but the Office of the Superintendent of Financial Institutions will be here next
hour and the Canadian Bankers Association next week.
Senator Ringuette: Do the other witnesses have comments on my
Mr. Swedlove: There is the provision with respect to the ability of
banks to purchase foreign banks and the role the minister plays. That also
applies to the Insurance Act, and of course we have reviewed that.
With respect to the change in ownership shares, I am not sure of the
provision. I have not checked that specifically, but if it is the one that
relates to the requirement of banks to be widely held at a certain point or sell
shares on the stock exchanges, the concept is that that is reviewed from time to
time as the industry grows. We do not have any problems with that concept.
Senator Hervieux-Payette: I want to get back to one of my concerns and
especially the consultation mechanism. As you heard the comments yesterday, you
know that only a few briefs have been posted on line. However, I would like more
details on the consultation process. How did you find out that these briefs were
on line? Do you check every morning to see whether the Minister of Finance has
submitted something for consultation? Have you met with anyone and, if so, who?
I am wondering what kind of a relationship you have with the Department of
Finance. I am under the impression that you are in contact. Do you meet? Are
there any designated officials? Everyone has their own area of expertise; you
are in charge of insurance, others are in charge of banking, and so on.
That means that only the Department of Finance can see the big picture.
Nevertheless, I assume that officials talk to each other. However, as in any
large organization, people often work in silos.
I would like to demystify the consultation process used in this case compared
with the consultation process I preferred. As part of the old process, the
banking committee would hold general consultations across the country. It would
ask each organization what it needed to work better over the next five years.
The committee would also receive comments from the country's various
organizations. We do, after all, have 30 of them. I think that we heard from
over 100 groups when we held public hearings for the comprehensive review of the
Bank Act. There is a difference between 30 and 100 groups.
I want to know about the next step, the cohesion among the various
organizations affected by this legislation. I also want to know what the actual
process will consist of.
Ms. Goulard: We have an excellent relationship with the Department of
Finance, largely because we have long been working on a federal charter option
for credit unions. We have already established a solid relationship. Some
employees of the Department of Finance are dedicated to the credit union issue
because of the federal charter option.
We have been engaged in dialogue from the very beginning. The question was:
will you issue a white paper and how will the consultations for the 2012 review
be conducted? We already had an idea of what would happen owing to the ongoing
dialogue with the Department of Finance. An announcement was made that the
consultation would begin soon. The process used would probably be based on a
document setting out guidelines and amendments to be made to the legislation.
The Department of Finance held a round table with the various stakeholders, who
were encouraged to make submissions. We met with them a few times to discuss
issues that were important to us, such as access to the payment system. That was
a very important issue for us because it would guarantee the co-operative aspect
of a co- operative bank under the federal charter.
We felt that we were really consulted by the Department of Finance. I know
that no public consultations were held as they were during the last review, but
we have not felt that the Department of Finance has neglected to consult us.
Senator Hervieux-Payette: So how do you explain the fact that the Bank
Act has not addressed the issue of security to your satisfaction? Was it not
raised or did they simply not accept your proposal? Securities are extremely
important in the case of a bankruptcy, as it is fairly important to know where
we stand. I am asking myself the following question: were you told why that
issue was not addressed?
Ms. Goulard: Yes, we have discussed that matter. The reason why the
issue was not addressed was its high importance, which required a certain amount
of consultation. We work with provincial centrals that would perhaps also like
to consult their own province so as to involve it in the consultation process.
Some documentation was provided and research was conducted, as I mentioned, by
the Law Reform Commission of Canada.
The Department of Finance said that this was important, it was something they
wanted to look at, but there was no time to do it within the set timeframe for
2012. However, it is something that will be addressed eventually. We may have
been a bit disappointed that it would not be done right away. But we understand
where they are coming from and are prepared to live with that decision.
Senator Hervieux-Payette: I had a look at the document. I think it was
the other group that talked about the date set by the Canadian Life and Health
Insurance Association, April 2012. Do you think that enough time was allocated
for consultation? When did the consultation process begin and how long did it
I think it is important to know whether time was a factor in getting to the
bottom of things. I should not ask this as a parliamentarian, but are the four
months we have left to pass the legislation sufficient? Factoring into that time
is the period when Parliament will not be in session. We will not be sitting for
almost six weeks, or a month and a half. That means that there will be some
If we want to make amendments, the legislation will be referred back to the
House of Commons, and if they decide to make amendments — Well, you get the
idea. We do not have much time for an in-depth study of the bill.
Here is my question: what kind of timeframes do you envision for the next
review in order to improve the related consultation process, which will
preferably be done by our committee?
Mr. Swedlove: Having gone through many of these financial sector
review exercises, my sense is that each one is quite different largely because
the issues can be quite different. The approach taken by the government this
time appears to be appropriate. In September 2010, those who were interested
were asked to submit their proposals for change in the 2012 review. It was
determined early on that this would be more of a technical review than a major
policy review, so the timing seemed to us to be appropriate.
In terms of process, we made a submission, following which we had discussions
at a series of meetings with the Department of Finance on our proposals. There
was an attempt on their part to understand more fully the rationale for the
proposals. Many of our proposals were accepted and adopted in the proposed
legislation. A number of proposals that were not adopted were viewed by the
Department of Finance as needing more time for reflection to gain a better
understanding; and we understood and respected that. As Ms. Goulard has noted,
sometimes these things can be quite complicated, requiring more time and
discussion to reflect on change. The consultation process was very positive and
reflected the technical nature of this review.
Senator Hervieux-Payette: You are so politically correct, I must say.
Was the process in terms of the framework to garner a series of proposals? We
were not made aware of it, and I do not consult the Department of Finance
website regularly. When they issued that document in September, was it in the
form of questions? Were you asked for an opinion on various sections of the
bill? Were they limiting the scope of the review? You said that some parts you
wanted to review were not accepted at this time and would need additional time.
Was it because they were not in the department's document or was it because you
were satisfied with the content of the document? I conclude that everything you
submitted was not taken into consideration at this time. Was a delay mentioned
Mr. Swedlove: A delay?
Senator Hervieux-Payette: A delay for addressing the questions that
were left with a question mark.
Mr. Swedlove: For us, it is important that the legislation be passed
on time. The measures in the bill really do contribute to increasing the
efficiency of the industry and how we operate. While a number of elements are
not included, possibly because more time is needed, it is more important for us
that the bill be passed according to the timetable specified so that the
five-year financial sector legislation review is maintained as an important
principle for Parliament. That is more important to us than the issues that were
left on the table or remain for further discussion.
Senator Moore: Ms. Goulard, with regard to section 427 of the Bank
Act, you said that security has been marginalized and no longer needed. In your
submission, did you request that the section be repealed?
Ms. Goulard: Yes, we did.
Senator Moore: What response did you receive?
Ms. Goulard: The response we got was that this section actually
required more study. It was a policy decision outside the framework of technical
amendment and required further discussion with other groups, rather than the
small stakeholder groups only.
Senator L. Smith: It is a highly technical document. I am glad I went
to law school because I was lost by page 45. I have a simple question for people
who may not be technicians.
You mentioned your very good relationship with the ministry, the framework of
technical adjustments, which was the focus of this review, and that in the next
review you will raise issues that will propel further changes — messaging for
the average Canadian. In view of the economic times we live in, what would you
like to share with people who may not be technically oriented and understand all
the intricacies of the Bank Act?
Is there something simple that you could say that would be interesting for
people listening who may not be technically inclined?
Ms. Goulard: That is a good question. I am a lawyer and Ms. O'Connor
is a lawyer, so I can understand that this is very technical. We had to bring
other lawyers to help us understand this legal morass. Perhaps my comment would
be directed not only toward this particular bill — I am not trying to be
politically correct here — but for the public to take comfort that the
Department of Finance is actually very keen on making sure that all aspects of
the financial services sector in Canada are well looked after. I say this from a
perspective of credit unions that are provincially regulated and that one would
think might not get the interest of the federal Department of Finance to the
same level that they have given to us.
We have our annual general conference every year. Always someone from the
Department of Finance comes to that. I put in a call; all the time they answer.
We have members come in; they take the time to meet with them. They are very
much in tune with what is happening at the financial services centre, whether it
be at the big bank level, who are always in the news, and with the small credit
unions that are looking at those changes. We take comfort that although this
particular legislation, this particular review is very much technical, the
Department of Finance actually looks at all kinds of issues that are not only
the technical ones.
Mr. Swedlove: Senator, I would say that aside from the removal of
regulatory restrictions, the more technical things in the bill, what occurs in
this bill is the government ensuring that it has all the levers possible to
continue to ensure the safety and soundness of the system, plus levers to ensure
that consumers are well taken care of.
The fact that there have been changes in the act to allow for more regulation
in the consumer area reflects a desire that if the government feels it is needed
to act, it has the tools and the ability to act. That is a positive part of the
bill and, if anything, it improves on the already very strong, good system we
have in place.
The Chair: It is nice to hear accolades for our hard-working civil
servants. We do not always hear that. We know we are blessed in this country
with an excellent civil service.
Senator Oliver: I do not have a question on the technical aspects of
the bill, but I do have some sympathy for questions raised both today and
yesterday by Senator Hervieux-Payette and Senator Harb about the system. I have
an interest personally in parliamentary scrutiny and parliamentary oversight. I
have heard many of you today saying that you have wonderful relationships with
the Department of Finance and you meet with the Department of Finance, you
discuss with the Department of Finance, you look at making amendments with the
Department of Finance. Nowhere have I heard any of you, other than coming here
today for an hour and giving some views about your conversations with the
Department of Finance, say anything about the role of Parliament and
parliamentary scrutiny on these very important matters.
In one brief, someone said that we strongly believe that there is a need for
reform in the area and the first step is a full review of the competing personal
property security regimes in Canada, federal and provincial. I cannot think of
anyone better who should be involved in something like that than a parliamentary
committee or a committee of the House of Commons and the Senate.
My concern is that too often in the things that we hear coming before us
there are unilateral or bilateral communications with a department and a company
or a group or an association and Parliament. The legislative branch of our whole
parliamentary system is excluded, and it concerns me.
I have heard other senators expressing the same thing. There should be
someone looking into ways in which parliamentary oversight can become a more
integral part of this process, because right now it seems as though it is
The Chair: That sounds like more of a comment.
Mr. Swedlove: As you said, senator, you were not asking a question.
Senator Oliver: Would you care to respond?
Mr. Swedlove: From the perspective of an industry association, we are
given a system, a process, and asked to participate in that process. We are
certainly pleased to do so. If the government chooses another process, we would
abide by that.
I would note that we as an association have been fortunate to appear before
this committee and the House of Commons Finance Committee on many issues and
feel that we do have the opportunity to make representations to you also quite
often on many issues. We appreciate that access also very much.
Ms. Goulard: I have two short comments.
In terms of the section 427 security issue, I assume that whenever changes
are made, and we hope that through our lobbying efforts they will eventually be
made, it will eventually come before parliamentary committee because there will
be legislative changes.
We were before you last week putting forward that the FCC is one of those
bodies that we believe should be subject to parliamentary oversight. It is
currently not in their legislation to be subject to oversight. We do very much
believe that there is a place for parliamentary oversight in our institutions
and we gave an example of that last week when we appeared.
Senator Gerstein: I must say that in my three years of having the
honour of sitting on this committee, I have never heard a personal question
asked of a witness, so it was with some surprise that I heard my esteemed
colleague this morning ask of you, Ms. Goulard, or Mr. Swedlove, whether you
were shy. I might say that I have now concluded that you definitely are not and
that you properly did not answer the question yourselves, but I will answer it.
Having said that, I wonder if I am missing something here with regard to your
relationship with the Department of Finance. I have heard the terms, and again I
have never experienced this during my time on the committee, that you have
excellent relationships; you view that you have had excellent consultations; you
view that the department encouraged discussion; and that you view that the
department had a genuine desire to consult. That sounds like a five- star
answer. Is there something I am missing or misinterpreting as to your views of
Mr. Swedlove: Obviously, five-star would be that they took our
submission and put everything into legislation.
Senator Gerstein: That is not necessarily so. It is just that you had
Mr. Swedlove: Our view is that we got very much a fair hearing. I do
not think that was out of the ordinary. Historically, because everyone knows
these reviews are coming up, there is the opportunity to plan for them, to get
your ducks in order, if I can use that expression, so that you are in a position
to enter into meaningful dialogue.
However, in the submission we made there are a number of technical areas that
the Department of Finance would not be aware of as being an issue for the
industry. That is the whole purpose of asking for submissions. It is reasonable
that there be a dialogue and an attempt to understand what is going on.
One of the positive aspects that both Ms. Goulard and I have referred to are
the fact that even in the areas where we have not seen what we wanted to see,
there is an openness to continue the discussion, which we think is positive. It
does not mean that at the end of the day there will be agreement, but at least
the dialogue will continue.
Ms. Goulard: I will give Department of Finance five stars when we get
our regulations for the federal charter. Hopefully, Finance is listening right
Earlier, Senator Hervieux-Payette asked whether or not there were issues that
they had not raised in their consultation document and that we made a submission
following through the process. One of those was having access to the cooperative
membership class under the CPA act. This was not one of them that had been
identified in the beginning by Department of Finance and we were able to bring
this forward on the table through the consultation process and we able to obtain
that particular amendment.
Yes, there was a true dialogue, so it was not an
everything-is-done-and-ready-to-go process. For us, it was very important.
The Chair: Unfortunately, our time is up. On behalf of all of my
committee colleagues, I want to sincerely thank our witnesses. My colleagues
would give you five stars for your presentations, which are very useful to us.
Thank you for being here and until next time.
We will start the second hour of our hearings this morning and continue with
our deliberations on Bill S-5. We welcome on our second panel, from the
Financial Consumer Agency of Canada, Commissioner Ursula Menke and Deputy
Commissioner Lucie Tedesco; and from the Office of the Superintendent of
Financial Institutions Canada, Patty Evanoff, Senior Director, Legislation and
Approvals Division, and Philipe Sarrazin, Managing Director, Legislation and
I gather that Ms. Evanoff has a presentation, which I think all members have
received, and Ursula Menke would like to make opening remarks as well.
Ursula Menke, Commissioner, Financial Consumer Agency of Canada: Good
morning and thank you very much for allowing me to make this presentation today.
My opening remarks will be brief and focus on the impact of Bill S-5 on the
FCAC, the Financial Consumer Agency of Canada.
The FCAC welcomes the changes the government is proposing to make to our act.
The changes are largely technical amendments or clarifications to existing
One of the changes that will impact our activities is cheque cashing. The
proposed amendment will help standardize the service to consumers — be they bank
clients or not — in terms of cashing government cheques.
That will enable Canadians, including bank clients, to cash government
cheques of up to $1,500 free of charge at any bank in Canada.
Among the changes that will also be impacting our agency's activities is an
increase in the maximum penalty for a violation of a consumer provision. The
amendments will increase to $500,000 the maximum administrative penalty that the
FCAC can exact, bringing it in line with other federal regulators, such as the
Office of the Superintendent of Financial Institutions and the Financial
Transactions Reports Analysis Centre.
A final important change for us is that the bill provides that the
commissioner, officers and employees acting under their direction are not
compellable as witnesses in any civil proceeding on matters relating to their
duties or functions. The remaining amendments are minor and technical in nature
and will have no significant impact on the work we do.
That ends my remarks, and I look forward to answering your questions.
The Chair: Thank you, Ms. Menke.
Patty Evanoff, Senior Director, Legislation and Approvals Division, Office
of the Superintendent of Financial Institutions Canada: As mentioned, I am
the Senior Director of the Legislation and Approvals Division at OSFI, and my
colleague Mr. Sarrazin is Managing Director, Legislation and Policy Initiatives.
Among other things, we contribute to the development of legislation regulations
and guidance on OSFI's behalf.
I would note that a number of important legislative changes were included in
other pieces of legislation over the past several years. This five-year review
of the financial legislation provides another opportunity to review the purpose
and effectiveness of federal laws governing financial institutions in Canada.
The bill before the committee today contains further technical refinements to
what we already consider to be a strong legislative framework.
From OSFI's perspective, the financial institutions legislation in Canada is
clear, effective and enforceable. During the superintendent's appearance before
this committee a short while ago, she mentioned the importance of clear and
focused mandates for the federal agencies.
This bill does not affect OSFI's mandate, role or powers. The portions of
this bill relevant to OSFI, for the most part, provide more clarity and
consistency across financial legislation.
A key element in OSFI's mandate is to advance and administer regulatory
framework that promotes the adoption of policies and procedures designed to
control and manage risk. To fulfil this broad mandate, we look forward to five-
year legislative reviews, such as this one, but we also regularly refine our own
guidance, which is within the purview of OSFI, to ensure that we have an
effective regulatory framework that is sensitive to developing risk and promotes
industry best practices.
Thank you for the opportunity to appear here today, and I am happy to respond
to your questions.
Senator Harb: Thank you for your presentation.
You mentioned the issue of the maximum penalty for violation. Would you tell
the committee if there have been any penalties that have been levied against any
institution over the past few years? If so, how many and how much was the amount
of that levy?
Ms. Menke: I did not bring that information in detail, but we do
regularly levy penalties. Last fiscal year, for example, we levied approximately
a total of $175,000. The year before that, it was about $450,000. Those are
totals for the year. It varies from year to year depending upon what we find,
and our penalties are levied depending upon the nature and the impact of the
Senator Harb: It strikes me, from what you are saying, like we are
trying to hit a fly with a two-by-four. The total punishment all around was 174,
when your ceiling last year was $200,000.
Ms. Menke: Yes.
Senator Harb: What is the rationale now for suddenly jumping to
$500,000, when probably the chance is pretty good you would never get there,
Ms. Menke: I am not so sure about that, although I have nothing
specific in mind, obviously. I think it is just to keep it in line with the
other penalties and other organizations that have similar maximum, other
organizations that are in the same sort of area in financial institutions area.
It is unlikely, I would say, that it would ever get to a maximum, but it has
happened that we have gone to the maximum in the past, so it is not impossible.
``Unlikely'' is probably the correct word, yes.
Senator Harb: You are saying you want to use it as a deterrent to
scare off the bugs?
Ms. Menke: Absolutely.
Senator Harb: This applies to institutions, right? You are changing
it, taking it from $200,000 to $500,000. What is for individuals?
Ms. Menke: It is at 50, and it is remaining at $50,000.
Senator Harb: Why?
Ms. Menke: We have actually never fined an individual.
Senator Harb: Why?
Ms. Menke: There have been no cases where we found an individual
specifically at fault for a noncompliance issue at this point in time. Yes, all
actions of an institution are done through individuals, of course, but it is the
institution that we penalize because we usually hold the institution
Senator Harb: In a sense, to be fair, we can all hide behind an
institution, but if you are really trying to achieve what you want, and that is
deterrence, perhaps you could have asked for something along the same lines for
Ms. Menke: We did not because $50,000 would be an awful lot for an
individual anyway, and we have never, as I said, penalized an individual at this
poiont in time, so really the issue did not come up.
Senator Harb: Ms. Evanoff, with this technical amendment to the act,
the minister seems to be doing something that is more than technical in nature,
and that is, in a sense, saying that you can only go to this point, after which
he or she does not need you any more and will make the decision when it comes to
From a bureaucratic point of view, can you explain how that will work? What
mechanics do you have to put in place in order to make it happen? When an issue
comes before you and it hits a threshold and you have to turn it over to the
minister, what are the mechanics?
Ms. Evanoff: It is pretty much business as usual in some senses.
First, are you talking about the ability to acquire a foreign institution?
Senator Harb: Yes.
Ms. Evanoff: That is a power that had been in previous versions of the
financial institutions legislation and had been taken out, I believe, probably
just as part of a streamlining initiative. It has been considered at this time
appropriate to bring it back.
We would treat it like we would treat all ministerial approvals under the
statute. From an administrative point of view, OSFI reviews all applications
that require approval, whether or not that is superintendent approval or
material approval. We analyse it from a legal point of view and a prudence point
of view to determine whether we consider the institution has the financial and
operational resources in order to be able to undertake the transaction. Then we
would provide a recommendation to the minister, which the minister would then
obviously consider and take into account any additional factors that he would
We very much support this provision and, again, it is very much in keeping
with the way the legislation works today.
Senator Harb: It will not impact your impartiality? You have an
employee-employer relationship with the minister. You will not go to the
minister first and ask how they feel about this and turn around and make the
recommendation in order to fit what the minister is saying, will you?
Ms. Evanoff: No, sir.
Senator Harb: You will look at the merits of the case and make the
recommendation to the minister.
Ms. Evanoff: Yes, senator. We have a very well established approvals
regime at OSFI, and we take that role incredibly seriously, as we are guardians
of the legislative scheme.
Senator Harb: Even if it contradicts what you think the minister might
want to do?
Ms. Evanoff: We will make a recommendation based on our mandate, which
is with regard to the safety and soundness of individual financial institutions.
The minister, of course, has the opportunity to add additional considerations
that he may have in regard to the stability of the financial system or the
overall size of the institution, which would be beyond prudential
considerations, and that seems perfectly reasonable.
Senator Ringuette: My first question is to Ms. Menke in regard to the
violation penalty. Last year, you said that there was $175,000. Would that
include MasterCard or Visa violations of the code of conduct?
Ms. Menke: No. I have no authority under the code of conduct to
undertake enforcement action. The code of conduct is a code for the
institutions, and all I can do is basically monitor it and report to the
Senator Ringuette: Thank you very much for specifying that to the
members of this committee. In reality, you have no penalty mechanism, and your
powers are extremely limited in regard to the oversight.
I have some questions in regard to the increase in the ownership of banks. In
2001, the ownership was at $5 billion. In 2007, it was increased to $8 billion.
This legislation now increases it to $12 billion. In the last 10 years, there
has been a 240 per cent increase. Knowing the rules that you have to enforce,
how do you see this increase of 240 per cent in the current situation of the
financial crisis, capital requirement and so forth.
I really want to have your perspective on this. You specified at first that
you are on the legal advisory committee of OSFI. I do not know if you have all
the implications in regard to your mandate, and I am having a very hard time
seeing the liquidity requirement of Canadian banks to meet this increase.
The Chair: To be clear, to what financial institutions do the figures
that Senator Ringuette gave you apply?
Ms. Evanoff: Senator, I will do my best to answer your question. I
will step back for a second.
There are, let us call it, three classes of financial institutions, banks,
for ownership purposes. There are the five large banks, which must be widely
held in perpetuity. There is a second set of three banks that are currently
widely held. It is within the purview of the Minister of Finance to consider a
reclassification of those three banks to become closely held at some future
point, based on public interest considerations. Then there is a smaller tier of
banks, which can be closely held. They are the Canadian Tire banks and that kind
Those three classes of banks are delineated by a threshold based on
shareholders' equity. Under this and previous reviews of the limits, those three
classes of banks all stayed the same. In other words, the same institutions that
must be widely held in perpetuity will still have to be widely held in
perpetuity; the same institutions in the middle still exist in that class, and
the smaller ones will still fall below the new threshold. Therefore, it does not
change the ownership regime in Canada; it merely reflects growth in those limits
Senator Ringuette: If it is in this legislation, it must have an
impact. So what is the impact?
Ms. Evanoff: There is no impact in practice because the institutions
in those three bands, for ownership purposes, are exactly the same institutions
as today. It reflects the technical increase in the band to keep them in those
three slots based on the growth that has occurred since the last increase.
The Chair: It is an increase in the ceiling?
Ms. Evanoff: Correct.
The Chair: Or the floor?
Ms. Evanoff: Yes, the increase in the band or the delineation between
the three classes of banks.
Senator Hervieux-Payette: I do not understand. We want to know why. It
went from $8 billion to $12 billion. What was the rationale behind that? In the
minister's testimony yesterday he said that below $12 billion you are the only
one responsible to review it, and over is $12 billion you do the review and
recommend to the minister. That is the way I heard it.
You have a lot of confidence in your institution, but why did we go from $8
billion to $12 billion and why do we have that big discrepancy over the years?
You talk about growth, but it does not explain why it would not be reviewed
twice. When you review it and recommend to the minister, I suppose the minister
also reviews it in line with the other groups.
Can we have the rationale for this amount of money? Did you recommend it?
Ms. Evanoff: No, this really is a matter for the Department of
Finance. They have proposed the revised thresholds but, as I explained, my
understanding is that it is a continuation of the status quo and a continuation
of the ownership policy as we have it today and as it is administered today. It
is not the introduction of a new ownership regime.
Senator Hervieux-Payette: That does not give the answer. Why from $8
billion to $12 billion and why would you be solely responsible for the review up
to $12 billion with the minister coming in only after $12 billion? Why is there
that gap? Is it because there are too many or it is too comprehensive? We want
to know the rationale behind that.
The Chair: Or is it because the minister only wanted to review very
large transactions and $12 billion is larger than $8 billion?
Ms. Evanoff: Perhaps there is a little misunderstanding here. The
ownership regime and the review of it are seamless. When anyone wants to make an
investment in a Canadian bank, regardless of its size, if an approval is
required it is always ministerial approval for significant interest in a
Canadian financial institution, and it always has the review of OSFI prior to
recommending the approval of a significant interest, or a controlling interest
in the case of a small bank in Canada. That is not changing.
I am wondering if there might have been a bit of confusion between the limit
for the foreign acquisition and the $12 billion that applies to the ownership
Senator Ringuette: It is the ownership regime that started in 2001. It
was established at $5 billion and 10 years later we are looking at $12 billion,
which is a 240 per cent increase. I want to know the rationale for this
You explained very well the three classifications and so forth, but unless
you tell us that in the last 10 years the assets of our Canadian banks have
grown by 240 per cent, there has to be a rationale. We cannot approve
legislation without having facts and rationale.
I understand it is not your mandate, but OSFI is playing a very important
role in this, and I want to know your rationale.
Ms. Evanoff: Senator, the only thing I can say is that it does not
change the ownership regime for banks and it does not change the role that OSFI
plays in regard to reviewing the ownership of banks. It makes no policy changes
per se. I can appreciate you would like a rationale for the change in the actual
number. That is a proposal brought forward by the Department of Finance, not by
I am afraid I have done my best to explain.
The Chair: Senator Ringuette, we will have some time next week.
Perhaps we could inquire whether someone from the Department of Finance could
come before us to explain that. Would that be helpful?
Senator Ringuette: Yes, please.
Senator Oliver: The minister explained it yesterday in his evidence.
The Chair: Let us review that and see. I do not have the text of what
Senator Oliver: I do not have it here, but he explained that point
yesterday, and I thought quite clearly.
The Chair: We will have a look and we can consult with Senator
Ringuette. If that is indeed the case, she will have her answer; if not, we will
try to find someone from Finance. Would that be all right?
Senator Ringuette: Yes, that would be very much appreciated. I
understand that Ms. Evanoff looks at the legal aspect of bills and not the
``whys'' and ``why nots.''
I thank you very much.
Senator Moore: Ms. Evanoff, you say this bill does not affect OSFI's
mandate, role or powers, but that is not quite right because the minister has
now taken back the power with regard to the approval. You now would make a
recommendation but before you approved the transactions, right?
Ms. Evanoff: Yes. When I say powers, I mean our supervisory powers.
Senator Moore: You say that a key element in OSFI's mandate is to
advance and administer a regulatory framework that promotes the adoption of
policies and procedures designed to control and manage risk. Does that extend to
the financial vehicles that institutions trade in or offer for sale?
Ms. Evanoff: No, it does not.
Senator Moore: Who looks after that?
Ms. Evanoff: It would be the securities commissions, for example.
Senator Moore: Do you have anything to do with that? Do they canvass
that by your office?
Ms. Evanoff: No, sir.
Senator Moore: Do you make opinions on that?
Ms. Evanoff: No, not on financial products.
Senator Moore: I am concerned about that. In the recent meltdown one
of the big problems was with derivatives and people's lack of knowledge of what
they were and what they contain. I still do not know if they do know. I am
concerned about there being no requirement for a prospectus to be prepared and
issued so purchasers can know what they are getting into. Do you have anything
to do with that?
Ms. Evanoff: No, sir, we do not.
Senator Hervieux-Payette: My question is for Ms. Menke or her
colleague. Could you explain to us why the witnesses are not compellable? In
law, people are rarely exempted from appearing before courts. Almost everyone in
Canada is answerable for their actions. I want to know what the reason is. Has
the government received a massive number of requests? We are generally
accountable for our actions.
Ms. Menke: It is not a matter of our actions; it has to do with third
parties that are facing off in court, where we are being asked to testify. In
that context, the purpose is to receive information that is usually minimally
relevant to the process. That has happened to us a number of times. I cannot say
that it happens regularly, but it has happened to us in the past.
We are asked to testify as to whether or not the institution is a bank, or
something to that effect. That is why this provision was included in the
legislation. Testifying in such cases was not a good use of our resources. Those
are obviously not cases we are involved in.
Senator Hervieux-Payette: I would like you to send us that document,
so that we can know how many cases there have been, how many of your staff have
been asked to testify on similar issues. Are we talking about 5, 50 or 500 of
your employees? I would like to know what the numbers are.
As I said, as soon as there is departure from the usual rules of law, I need
definitive evidence in order to know whether your institution could be crippled
by its court appearances. However, if you are asked to testify a few times a
year, I am less likely to agree with an exemption. This is not necessarily a
matter of taking sides, but of providing accurate information. In court, judges
always appreciate being provided with accurate information by neutral parties,
instead of having two sides give them two personal opinions in a debate.
Ms. Menke: I will send the clerk the information you asked for.
Senator Hervieux-Payette: The maximum cheque amount — and you
conducted a study on this — is set at $1,500. That is the first thing you talked
about. You talked about old age security pensions and the guaranteed supplement
over the next five years — I am talking about pension cheques including the
supplement. Will all those cheques be covered? The old age pension cheque is
less than $1,000, but I do not know what amount it comes up to with the
supplement. Is only one cheque sent per couple? In that case, the amount may be
higher. How did you arrive at $1,500?
Ms. Menke: That amount was set some time ago and has not been reviewed
since. The figure was established a while ago. I cannot answer your questions.
All I can do is ask around to try to obtain that information for you, as I do
not have it. Our office has not conducted any studies on that issue.
Senator Hervieux-Payette: For the benefit of my colleagues, we are
told that Ms. Menke does not know the maximum number for couples with their
pension and their supplement combined. If it is does not cover, this would be an
item that would be easy to correct. Maybe it is $1,550, maybe it is $1,700, but
I do not know and I do not know how the cheques are issued. With a couple there
might only be one cheque. If the amount is over that amount of money we could
I do not understand why a couple receiving the supplement — meaning they are
among the poorest of seniors in our country — would pay and another couple
receiving a cheque and has other revenue would not pay to change that cheque.
That would be very interesting to know. I suspect there are quite a number of
them. Certainly, there are thousands of couples in this country receiving the
pension and the supplement. We might be able to address this question and
perhaps make sure they are treated the same as any other seniors in this
Ms. Menke: We will have to get you that information.
Senator Hervieux-Payette: Thank you so much.
Senator Moore: Who established the number?
Ms. Menke: It would have been the Department of Finance.
Senator Moore: Along with the information you get for Senator
Hervieux-Payette, would you include the background and establishment of that
number? Has it grown? Could you provide that as well?
Ms. Menke: I will let you know that as well.
Senator Moore: That would be helpful. Thank you.
Senator Hervieux-Payette: I will be more specific: It has to be good
for five years because we will review the bill in five years. Therefore we need
to make sure. I know there is a small cost-of-living increase every year, but 2
per cent or 3 per cent could make a difference between having to pay to change a
cheque and not having to pay to change a cheque. Even though it may be a very
small amount of money, such as a few dollars, for some seniors it is a big
amount of money.
Ms. Menke: We will provide you with the information.
Senator Ringuette: In relation to the payment to change a cheque,
would that also apply to the payday loan? Are payday loans under your
Ms. Menke: That is not under our jurisdiction, or under the
jurisdiction of the federal government generally speaking. The Bank Act is
specific. That provision only applies to banks. Only banks are required to cash
Senator Ringuette: Remind me, and maybe I have forgotten, but in
regard to bank accounts I know, because I have read about it, that in the U.K.
they made it mandatory for any citizen who wants to have a bank account the
banking institutions could not refuse to open a bank account. Does Canada have
the same kind of legislation?
Ms. Menke: We do. Banks are subject to that.
Senator Ringuette: Is the caisse populaire subject to that?
Ms. Menke: No.
Senator Moore: The Government of Canada cheques up to $1,500 can be
negotiated free of charges in any Canadian bank, or would it be just in the
Ms. Menke: I think they are all considered to be chartered, but any
Canadian bank that has a branch. It is any branch of a bank.
Senator Moore: Someone mentioned a Canadian Tire bank earlier. Can
they go there or just to chartered banks and their branches? Is it cooperatives?
Ms. Menke: No, at this point in time cooperatives are part of the
legislation but we do not have any subject to the federal legislation.
Senator Moore: What are the institutions?
Ms. Menke: They have to have a branch. For example, the institutions
that are purely over the Internet would not be covered by that. That gives you
generally an example of what would not be covered. There needs to be a branch.
The consumer must be able to go to a branch.
Senator Moore: It can be more than our chartered banks.
Ms. Menke: Yes, absolutely. It is any bank that has branches.
Senator Ringuette: To clarify, in the instance of the Canadian Tire
bank, would a Canadian Tire store be recognized as a branch?
Ms. Menke: I would not think we would recognize the store itself as a
branch. It would need to be a branch of the bank.
Senator Ringuette: Going back to Ms. Evanoff and the three-tier banks,
it only applies to the first and second tier, not the third tier, the Canadian
Tires and the Bay, President's Choice and so forth.
Ms. Evanoff: It would depend on the business model of the bank as to
whether or not they had a place a client could walk into. I am sure that varies
The Chair: Colleagues, apropos of what Senator Oliver raised a while
ago, for the information of honourable senators I have been given what I believe
to be the text of what we heard yesterday from Ms. Pearse of the Department of
Finance in response to a question from Senator Harb. He said:
How did you decide on the $12 billion? Why is it not $16 billion or $18
Ms. Pearse said:
We looked at the growth in the size of the sector between the last
amendment in 2007 and the next five-year block. We made a decision that $12
billion was an appropriate minimum threshold to define the difference in
ownership structure between large financial institutions and medium-sized
That is what was said yesterday by Ms. Pearse. I do not know whether the
minister had any specific comment on that. That was the response of the
Department of Finance. Whether it is a satisfactory response to my colleagues, I
do not know, but I thought I should let you know what was said. We can discuss
that and see whether we need additional information.
Senator Ringuette: If you are looking at me, I will state publicly
what I said to you privately. If that means that in the last 10 years our
chartered banks have increased their capital worth by 240 per cent, it means
that growth, which is humongous, has been, for a good portion, built on
excessive fees, and I maintain that position. I wanted to put that on the
The Chair: I want to get on the record that you will not be surprised
to know that I firmly disagree with you, and you also neglected to take into
consideration the next five years, as Ms. Pearse said. They were trying to
protect growth over the next five years, not taking it over the past five years.
If senators have no more questions of our witnesses, I will thank each and
every one of you for being here. I am sorry that you were witness to a little
discussion between Senator Ringuette and me, which perhaps does not have
anything to do with your evidence, but thank you for taking the time to join us.
(The committee adjourned.)