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[Recorded by Electronic Apparatus]

Monday, October 16, 2000

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The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this afternoon. As you know, the order of the day is Bill C-38, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

We have a number of witnesses, who I'd like to welcome: from the CS CO-OP, Gary Seveny, president and chief executive officer, and Kenneth Boland, legal counsel; from the Investment Dealers Association of Canada, Mr. Joseph Oliver, president and chief executive officer; from the Ontario Securities Commission, Tanis MacLaren, head, international affairs; from the Interac Association, Judith Wolfson, president and chief executive officer, Marc-André Lacombe, corporate secretary and legal counsel, and Kirkland Morris, manager of policy development; from TG International Ltd., Peter Downing, president.

Many of you have appeared before this committee on prior occasions so you probably know how this operates. You have approximately five to seven minutes to make your remarks. Thereafter, we'll engage in a question-and-answer session.

We'll begin with Mr. Seveny. Welcome.

Mr. Gary M. Seveny (President and Chief Executive Officer, CS CO-OP): Thank you. Mr. Chairman and committee members, I want to thank you for inviting me to appear before you today to discuss Bill C-38. I apologize that my notes are in English only. They were not available to me in French.

Let me begin by saying that CS CO-OP strongly supports the stated objectives of the legislation, those being to promote efficiency and growth in the financial services sector, to foster domestic competition, to empower and protect consumers, and to improve the regulatory environment.

Mr. Chairman, I would like to focus my remarks today on what I believe is an important option presently missing in Bill C-38, that being the provisions to allow for the cooperative ownership of banks. We believe such provisions would serve to enhance the legislation's stated objectives.

I recognize the importance of passing this important piece of legislation in a timely manner. However, this should not preclude making important amendments that would strengthen it. Mr. Chairman, the legislative review process is taking place now. Therefore, the amendments to improve the legislation should also be added now.

I think it is important to provide you with a little background relating to the issue of cooperative ownership of banks. This will help to explain my concern that provisions allowing for cooperative bank ownership are not included in Bill C-38. Beginning in 1996 and following extensive consultations and a thorough review of information relating to the future of the financial services sector, and including the development of cooperative banks, the MacKay task force made the following recommendation in its report released in September 1998. The task force recommended:

    Federal legislation should permit co-operative banks and other financial institutions to be chartered as new institutions with ownership and governance to be based on co-operative principles.

Mr. Chairman, I think I can safely assume that this recommendation was not made lightly and that the task force conducted a thorough review of the issues relating to the creation of cooperative banks.

In December 1998 the House finance committee strongly endorsed the MacKay task force's recommendation and added the following:

    The Co-operative sector faces unique challenges in serving members. Institutions are often small and therefore can offer only a limited range of services. Provincial legislation restricts them from providing inter-provincial services. The Committee agrees that the creation of co-operative banks could solve many of these problems.

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Finally, in recommending its support for the cooperative ownership of banks, the Senate banking committee concluded in its report that

    ...if credit unions are to develop into strong competitors, it will be important for the Task Force's recommendations to be acted upon expeditiously.

Mr. Chairman, after reading these reports, I was quite confident that we were well on our way to seeing legislation that would allow for cooperative bank ownership. Unfortunately, I was wrong.

I would like to remind the committee of some of the reasons it recommended measures to allow for the creation of cooperative banks in 1998. I might add that nothing has changed in the past two years to reduce the importance of providing this option. During their extensive review of the financial services sector, the MacKay task force and both parliamentary committees heard numerous calls for a second tier of financial institutions to increase competition and in particular to better meet the needs of small businesses and consumers.

Cooperatively owned banks would provide an important alternative to the major banks, with strong ties to their local communities. Such ownership flexibility would allow cooperatives to maintain their cooperative principles of one member, one vote, which is so valued by our members. Cooperative banks would empower consumers by giving them a greater voice in how their banks are run. It would allow cooperatives to better serve their members on a national basis, with no provincial border restrictions, and would put cooperative banks in a better position to take over branches closed by larger banks in rural and remote communities located throughout the country.

Mr. Chairman, I believe there is some confusion about the difference between a credit union owning a bank, which is presently allowed for in the legislation, and the conversion of a credit union to a cooperatively owned bank, which is not. Credit unions are currently permitted to own a bank. However, cooperative principles cannot be attached to that bank. The customer of the bank is not also a member or owner of the bank. To illustrate this point, as of October 2 of this year, CS CO-OP became the sole owner of the CS Alterna Bank, a federally regulated chartered bank. Unfortunately, without provisions to allow for cooperative bank ownership, the customers of CS Alterna Bank cannot enjoy the benefit of being owners of the bank, with a share and a say in how their bank is run.

Mr. Chairman, Minister Jim Peterson indicated in a letter to me dated January 19, 2000, that the government remains fully committed to the concept of strengthening our financial sector through the introduction of a cooperative bank. However, the comment made recently by senior Department of Finance officials who appeared before this committee that further consultation is required before actual legislation to deal with cooperative bank ownership could be brought forward is disappointing.

Shortly before Bill C-38 was introduced last June, CS CO-OP, under the guidance of the law firm Osler Hoskin & Harcourt, submitted to the Department of Finance and the chair of this committee proposed amendments to allow for cooperative bank ownership. We had hoped to enter into further discussions with Finance officials over the summer on this matter, but, unfortunately, we were told that the issue required further review and that time would not permit the inclusion of the amendments to allow for cooperative bank ownership during this legislative review.

Honourable members, with all due respect, this issue has been studied enough. As I indicated earlier, the MacKay task force as well as this committee conducted significant consultations before concluding that cooperative bank ownership provisions should be included in the federal legislation. CS CO-OP does not understand the need to delay any longer our ability to provide Canadians with an important competitive alternative.

I would like to conclude by reiterating that Canadians and the financial services sector will benefit if provisions to allow for cooperative bank ownership are included in Bill C-38. I ask the committee to seriously consider making the necessary amendments.

Mr. Chairman, one cannot escape the possibility that the Prime Minister could call an election in the very near future and that as a result, Bill C-38 would die on the Order Paper. If this were to occur, it would certainly provide Finance officials with the extra time they've indicated they would need to amend the legislation to allow for the cooperative ownership of banks. I hope they will make the best of this potential opportunity, if it should arise.

Mr. Chairman, that concludes my presentation before the committee. I would be happy to answer questions as you see fit.

The Chair: Thank you very much.

We'll now hear from Mr. Oliver.

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Mr. Joseph Oliver (President and Chief Executive Officer, Investment Dealers Association of Canada): Thank you, Mr. Chairman.

I'm pleased to appear before the members of the House of Commons finance committee this afternoon on behalf of the IDA, which is the national self-regulatory organization and representative of the Canadian securities industry.

This is the second time I have spoken on financial reform before the committee members. The previous occasion was in October 1998 to convey to you the industry reaction to the MacKay task force recommendations.

Prior to the task force deliberations, our association felt for some time that the framework governing federal financial institutions needed a comprehensive overhaul to respond effectively to competitive pressures in domestic and international capital markets. The need has become pressing in recent years because of the globalization of financial markets, the proliferation and convergence of products and services offered by financial institutions, and the formation of financial services groups.

The current legislative framework, in our view, has encumbered domestic institutions that want to restructure in response to client demand. It has also disadvantaged consumers by limiting competition through both domestic and foreign channels and by not providing adequate standards of disclosure and transparency.

The IDA recommended to the task force that more flexible legislation, particularly in respect of the ownership of and entry into the financial sector, would promote a more open, competitive, and dynamic securities industry and a more efficient and competitive financial system generally.

The IDA submission made several policy recommendations, but I only want to speak to two of them today in the interest of time: the Canadian payment system and the Financial Consumer Agency.

One of your key recommendations was to broaden access to the Canadian payment system to permit securities firms to offer payment services, such as chequing accounts and debit and credit cards, to their clients. This recommendation was adopted by the task force and is now embedded in draft federal legislation. We commend the government for taking this step, which will broaden consumer choice and level the playing field. We expect many of our member firms not affiliated with banks to join the Payments Association, likely as indirect clearers, and to contract for payment services from one of the 13 direct clearers. We recommend that the government move expeditiously to implement this legislation so that interested securities firms can begin offering payment services to their clients. It is also important that the Department of Finance and the Canadian Payments Association move quickly to implement the regulations associated with this legislation.

The proposed financial legislation will also introduce measures to better inform consumers and deal properly with them in distributing financial products and services. The improved disclosure and transparency of increasingly complex financial products and services and effective standards of conduct are necessary to help consumers make better decisions in the marketplace.

We caution, however, that measures to protect the consumer, introduced and monitored by the proposed Financial Consumer Agency, while well intentioned, should be structured to avoid excessive regulatory costs for domestic institutions, which are operating in an intensely competitive marketplace.

The proposed legislation establishes an adjudication system for aggrieved clients of federal financial institutions to seek restitution for damages. Clients would initially seek redress through an internal system organized by the participating institution. If this step fails, then the client can apply to a federal ombudsman. The proposal has a similar goal to the arbitration system that was established by the IDA in 1992 and is now available to clients of IDA member firms across the country. Our system provides a mechanism for clients involved in a dispute with their brokers to seek compensation for claims up to $100,000.

There are several important differences between the IDA arbitration system and the federal proposal. The arbitration decision is binding on the parties, while the decision of the ombudsman relies on moral suasion. The IDA system is straightforward: parties to the dispute attempt to settle the matter informally and then proceed to independent arbitration, unless both sides agree to submit to mediation first.

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The federal proposal contemplates a process in which clients seek redress through a more formal internal process within the financial institution, and then if necessary proceeds to a quasi-judicial forum involving the federal ombudsman.

A final point of difference is that clients of IDA member firms must share the cost of arbitration, unless the arbitrator decides to award costs, whereas clients can avail themselves of the federal system free of charge.

The federal system would likely impact on the IDA arbitration, although its focus may be primarily on smaller claims. The federal system will mandate that federally regulated institutions like banks and their affiliated firms, such as bank-owned dealers, must participate. But other security firms would be encouraged but not obligated to join. So the clients of member firms owned by banks would have access to the federal system. We believe that many of their clients would opt to participate in it as an alternative to IDA arbitration because it can be accessed free of charge. Clients of other firms would not be assured of this alternative.

In principle we support the federal government initiative to establish an adjudication process to resolve client disputes with federal institutions. However, we believe an integrated federal-provincial plan would be preferable since it would cover clients of all financial services firms irrespective of the jurisdiction of their regulator. The system should be independent, it should be cost-effective, and of course it should be uniform. What should be avoided, however, is a limited system that fails to cover all consumers but nevertheless duplicates other systems already in place.

The proposed federal ombudsman is not needed to compete with the existing IDA arbitration system for our industry, but rather should be structured to complement it. Over the years the IDA has acquired expertise in developing arbitration for clients of our member firms across the country. We would be pleased to participate in a joint federal-provincial effort to build a single alternative dispute resolution system for the domestic financial sector.

Thank you, Mr. Chairman.

The Chair: Thank you very much, Mr. Oliver. We'll now hear from the Ontario Securities Commission, Tanis McLaren, the head. Welcome.

Ms. Tanis McLaren (Head, International Affairs, Ontario Securities Commission): Thank you for inviting me here. First I would like to set the stage for my comments so that you understand the perspective I am reflecting. Then I'd like to touch on some of the concerns the Ontario Securities Commission has regarding Bill C-38.

The Ontario Securities Commission is an agency of the Ontario government and is charged with regulating the securities activities undertaken in the province or with its citizens. The Ontario Securities Act, regulations, and commission-made rules govern market participants who advise in, trade, or distribute securities, a term that is very widely defined to include virtually every type of investment product, save certain deposit products and insurance contracts.

We directly or through self-regulatory organizations, such as the Investment Dealers Association of Canada, regulate the largest securities dealers and portfolio managers in Canada, including some key subsidiaries of federal financial institutions. We also regulate the disclosure made by public companies, including banks and the de-mutualized insurance companies during the course of an offering of securities and thereafter.

Our statutory purposes are twofold: to protect investors from unfair, improper, or fraudulent practices, and to foster fair and efficient capital markets and confidence in those markets. Unlike the federal Office of the Superintendent of Financial Institutions, the primary purpose of the Ontario Securities Commission is not prudential regulation. Few of our rules are designed to prevent the failure of an institution we regulate. Rather we focus on market efficiency and consumer protection measures.

As you no doubt are tired of being told, there have been huge changes in the financial services market in Canada and elsewhere over the last ten years. The word that best describes these changes is convergence. The market for financial services is becoming a global one. Most of the rules separating the four pillars have been removed, allowing for a greater range of activities to be carried on directly by each type of institution.

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Innovation and customer demand have generated many new products and services, and most of these are offered by each type of market participant. These changes have produced one broad financial services sector populated with many types of financial services providers. It would seem logical in this environment that convergence, cross border and cross sector, should lead to greater convergence in regulatory activities and approaches. Why should the same activities be governed by very different rules that turn on what type of institution is offering the product or service?

At the provincial level, the Canadian securities regulators have been working together for years to try to provide a harmonious regime to cover securities activities in Canada. The provincial insurance, pension, and securities authorities have also formed a joint form of financial market regulator to enhance the harmonization efforts across these three sectors. At a purely interprovincial level, the Ontario government has announced the merger of the Ontario Securities Commission with the Financial Services Commission of Ontario, which is the insurance, trust, and pension regulator in the province.

Bill C-38 sets out to achieve many laudable aims. In broadening the ownership rules, providing more flexibility to invest in other businesses, and allowing financial institutions to operate using a holding company structure, the legislation should provide a more flexible and responsive framework in which the institutions may operate. This will benefit the marketplace.

However, Bill C-38 does not appear to reflect the trend towards convergence. When the last major overhaul of federal financial institution legislation took place in 1992, a conscious effort was made to align the legislation governing banks, insurance companies, and trust companies. This was desirable because many of the issues and concerns raised in these three types of business were seen to be the same. Eight years later, when the process of dismantling the four pillars is virtually complete and the convergence of the sectors is much further advanced, the federal legislation governing the institutions is moving in the opposite direction: the rules are becoming more rather than less differentiated.

The OSC has publicly supported many of the consumer protection aims set out in the MacKay task force report. In particular, we have been strong advocates for the need to harmonize legislation, to reduce duplication, overlap, and gaps in the legislation governing financial services providers in Canada, and to provide enhanced protection to consumers. However, the bill does not make a significant contribution to achieving these aims.

The creation of the Financial Consumer Agency of Canada, with a mandate to supervise compliance with an only slightly enhanced list of consumer protection provisions, will not add meaningfully to consumer protection. Arguably, many of the features in the more flexible framework established by Bill C-38 create an enhanced need for effective consumer protection provisions. Nor does the bill take the opportunity to reduce the chances of duplication and overlap by rolling in the consumer protection roles played by other federal departments. It may, however, significantly add to the opportunities for these overlaps and conflicts between the disclosure and other consumer protection requirements imposed by federal and provincial financial services regulators.

In essence, we question the need for the creation of yet another agency where there is such a large potential for increasing duplication and overlap without any evidence that there will be a significant improvement in consumer protection. If you take as a starting point that there is a need for a new agency at the federal level to address consumer protection issues, there are ways the proposed legislation could be amended for the benefit of both consumers and the industry.

Clause 3 of the proposed Financial Consumer Agency act sets out the objectives of the agency. Notably absent is any objective regarding elimination of duplication or ensuring harmonization among the various federal and provincial agencies charged with consumer protection. As noted in the MacKay task force report, many consumer provisions at the federal level have equivalence imposed on financial services providers at the provincial level, and it would be to the benefit of both consumers and the industry if these requirements were harmonized. In our view, a better result would be more likely to be achieved if the agency were given an express objective to harmonize and avoid duplication. Alternatively, language could be added to the act indicating that the agency should take into account the need for sound and responsible harmonization and coordination of regulatory regimes in carrying out its objectives.

The agency's proposed responsibilities extend to supervision of consumer provisions that apply to federal financial institutions. The definition of consumer provisions includes regulations made regarding the disclosure of information by federal financial institutions, including information relating to products or services offered. Some clarification should be made to ensure that these disclosure provisions do not overlap the prospectus disclosure requirements that remain the responsibility of the Superintendent of Financial Institutions and that expressly incorporate the requirements set out in securities legislation. Further, it's likely that many disclosure requirements will overlap with existing consumer protection provisions imposed at the provincial level, increasing costs and the opportunities for conflicting requirements. This is not in the interests of either the consumer or the industry.

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In carrying out its duties, the agency only has to have regard for the role of other provincial or federal agencies with similar responsibilities where the agency is reviewing compliance with voluntary codes, not other consumer protection provisions. Given that most of the federal financial institutions and their principal financial industry subsidiaries are also subject to consumer protection at the provincial level, this requirement should be expanded to apply to all of the agency's duties.

We welcome the extension of the tied selling provisions applicable to banks. Securities regulations contain a prohibition on tied selling in the mutual fund context, which prohibition we have recently proposed to extend to all types of securities registrants. However, we question why similar prohibitions have not been added to either the Insurance Companies Act or the Trust and Loan Companies Act. If the concern was not to duplicate existing rules at the provincial level, why is this objective only reflected here, and not with respect to the other consumer provisions that exist at the provincial level, such as cost of borrowing disclosure?

On the Canadian Payments Association Act, we have a couple of points to make. We note that many of the definitions used in the proposed amendments may not achieve the stated aim to permit investment dealers and money market mutual funds to become eligible for membership in the payments system. In particular, there are significant difficulties with the definitions used to describe money market mutual funds, and what entities would be entitled to be members of the association. There are established terms that have been used in the investment fund industry for years, which are not reflected in the proposed legislation. We are unsure whether this reflects a difference in approach or some misunderstanding on the part of the drafters regarding the legal structure in the industry.

We would welcome the opportunity to address these technical issues in more depth with the government as the legislative process continues. In fact, there are some general problems scattered throughout the bill regarding the terms used for mutual funds. The “mutual fund entity” definition used in the Bank Act is far closer to the common understanding of what constitutes a mutual fund, whether it is organized as a trust or a corporation. It isn't clear why the definitions in the CPA Act differ from those in the financial institutions acts. Also, the terms used in the clauses of the bill dealing with permitted investments in entities engaged in activities with respect to mutual funds also seem to be variable, to very little purpose.

I have one final point. On the Office of the Superintendent of Financial Institutions Act, subsection 22(2.1) allows the government to make regulations prohibiting, limiting, or restricting public disclosure by financial institutions, bank holding companies, or insurance holding companies of prescribed supervisory information. Where these entities are public issuers, such a regulation may put the issuer in an untenable position. Securities legislation requires timely disclosure of all material information about the company, while this regulation would prohibit it. This provision does not seem to be in accordance with some recent principles espoused by international banking supervisors. See, for example, A New Capital Adequacy Framework, proposed by the Basel committee, in particular pillar three, on market discipline.

The obligation not to disclose information seems to clash with the next obligation introduced by Bill C-38. New subsection 22(6) of the OSFI Act provides that the superintendent is to report annually on the disclosure of information by financial institutions and the progress made in enhancing the disclosure of information in the financial services industry. Further, how does this obligation fit with the Financial Consumer Agency in overseeing federal financial institution legislation consumer provisions, many of which go to disclosure made by the financial institutions?

Thank you.

The Chair: Thank you very much, Ms. McLaren.

We will now hear from the Interac Association, Ms. Judith Wolfson. Welcome.

Ms. Judith Wolfson (President and Chief Executive Officer, Interac Association): Thank you, Mr. Chair and honourable members. On behalf of Interac Association, I thank you for the opportunity to speak with you today to offer our views on Bill C-38. Our submission has been distributed in English and in French, and we have other copies here for those who require it.

I'd like to focus today on one small clause of Bill C-38, clause 236, which deals with oversight of private payment systems, of which Interac Association is one. We have some minor yet very important suggestions for fine-tuning clause 236, which would help the government accomplish its goal of protecting consumers while ensuring that Interac and others like us are able to continue to provide world-class service to Canadians.

Now, folks say we have a habit of calling ourselves “world-class” across Canada in things we offer, but indeed Interac is a unique Canadian story. We are touted as the best in the world for what we do, and it is true.

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We are a private, not-for-profit association. Our 89 members have cooperated to build a network that links automated banking machines and retailers all across the country. And we're concerned that the oversight proposals in Bill C-38 could jeopardize the high level of service Canadians certainly deserve and have come to expect.

Bill C-38 will establish a new regulatory framework for Canada's private payment systems. That's Interac, Visa, MasterCard, Mondex, and potentially others. We fully support the government's stated goals of promoting efficiency and competition, ensuring safety and soundness, and protecting the interests of consumers. However, it is our view that the proposed regulatory framework goes far beyond what is needed to accomplish these objectives, and indeed does not provide the necessary checks and balances appropriate for the sweeping authority it establishes.

Let me explain. We have three major concerns with clause 236 of the bill. First, we believe that the new regulatory framework would overlap considerably with existing regulations. Interac is already governed by the Competition Act and a specific consent order from the Competition Tribunal. These measures are far more than sufficient to ensure a vibrant and competitive payments marketplace. In addition, the Payment Clearing and Settlement Act gives explicit powers to the Bank of Canada to regulate payment systems from a risk perspective in order to promote safety and stability. So introducing new measures to deal with competition and safety and soundness under a separate statute would only add unnecessary overlap and duplication in these two areas.

Second, the bill gives the Minister of Finance the power to designate individual payment systems to fall under direct supervision. For these designated systems, we believe the oversight measures proposed in the bill are more intrusive than necessary, potentially involving the Minister of Finance in day-to-day decision-making. For example, if the minister chose to designate Interac under the powers proposed in the bill, all of the technical rules and regulations we develop on an ongoing daily basis in managing our business would have to be reviewed by the minister. This is a complex business we operate, and involvement of the minister in day-to-day rules and regulations would create significant costs for the industry and indeed for the government.

Third, the proposed framework falls short of providing appropriate checks and balances. Bill C-38 establishes virtually no rules, conditions, or processes for designating a private payment system. There are no defined triggers for designation. There are no timelines established. There is no provision that gives a payment system the opportunity to fix a problem prior to being designated. The bill simply does not establish a clear and transparent framework for oversight.

To remedy these concerns, we are proposing some very simple amendments to Bill C-38 that we believe strike the right balance between maintaining the government's ability to protect consumers and the industry's need for regulatory certainty and clarity.

First, clause 236 should focus on consumer protection issues and avoid overlap and duplication with the Competition Act, the consent order from the Competition Tribunal, and the Payment Clearing and Settlement Act. Otherwise, there is unnecessary cost and duplication.

Second, with a focus on consumer protection issues, there should be a simple, well-defined, transparent process for designation should the minister feel it is necessary. There should be three simple steps: one, the minister should articulate a specific public interest concern with the payment system; two, the system should be consulted and given an opportunity to address the minister's concern; and three, if the system fails to adequately address the minister's concern, the government should have the power to designate through an Order in Council. This would maintain fully the government's ability to protect consumers. It would simply make designation a last resort rather than a first step in solving a problem. It would also ensure that the designation process is transparent and fair.

Third, if and when a system is designated, the Governor in Council, on recommendation from the minister, should have the power to issue directives to correct problems. The government does not need to review each and every rule and regulation of a designated system. This would create a huge amount of work for both a designated system and the government. It would be costly, slow, and bureaucratic.

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In summary, we support the government's goal of protecting consumers. We are keen to work with the government to ensure that Canadians are always well served by Interac services.

The changes to Bill C-38 that we are proposing are simply fine-tuning. They do not alter the government's stated intentions. They do not limit the government's ability to protect consumers. They simply put in place some due process and transparency that ensures the interests of consumers are protected in an efficient, cost-effective manner that continues to promote innovation and excellent customer service.

We have provided copies of an amendment to the bill, and we'd be happy to answer any questions the committee has in that regard.

The Chair: Thank you very much, Ms. Wolfson.

We'll now hear from TG International, the president, Mr. Downing.

Mr. Peter R. Downing (President, TG International Ltd.): My name is Peter Downing. I have a blend of business, academic, government, and international development work experience.

Since the mid-1990s I've been researching how to develop a triple bottom-line approach to corporate accountability. Triple bottom-line reporting is the concept of the annual accountability of a company's economic, environmental, and social performance.

I will be speaking about Bill C-38's public accountability statements. I will be reviewing the key information I presented to this committee in my written brief of August 4.


Ladies and gentlemen, I would ask you to forgive me in that I will not be making my presentation in French. However, you have in front of you a translation of table 1 as well as figures 1, 2 and 3, which were submitted with my brief on August 4.


A Bill C-38 legislative goal is that financial institutions with equity in excess of $1 billion are to publish on their websites annual public accountability statements. These public accountability statements are to describe the financial institution's contributions to the Canadian economy and society.

This committee will hear and read different views on the pros and cons of public accountability statements. There will be the view as expressed in the July 4 Financial Post editorial, “The great bank inquisition”, which opposes Bill C-38's enactment of public accountability statements. The editorial writer asserted:

    ...mandatory public accountability statements for private-sector companies are in principle intrusive and unnecessary.

Ladies and gentlemen, some 60 years ago CEOs resisted and resented the new law demanding that the annual financial reports of publicly traded corporations be subject to an independent financial audit by outside public accountants and that the audit findings be made public. We now have the hindsight to see that the mandatory financial audit law was, and still is, wise legislation for the protection of shareholders and potential investors.

Bill C-38's public accountability statements will also prove to be wise legislation for the protection of business and community stakeholders. That being the case, I am advocating that Bill C-38 regulations should require financial institutions to publish accountability statements that will contain a minimum common core of disclosure and transparency practices. Disclosure practices govern what relevant and reliable information will be on each financial institution's community involvement web pages.

If you would please look at table 1, you will see the diversity in the website disclosures that now exists among the 11 financial institutions that will be required to produce annual public accountability statements. The CIBC, the Royal Bank, and the Bank of Montreal's community web pages show the influence of last year's white paper on banking reform by specifically citing several contributions to the Canadian economy. The other three banks' web pages were silent. Only the Royal Bank presented an annual community report. Three of the six banks gave a report on the regional donations, while three did not. Three of the five insurance companies' websites did not even have a community involvement web page. Only Manulife had an impressive community web page.

TGI's corporate community score card concept, as shown in table 2, addresses the issue of a minimum common core of web page disclosures. A corporate community score card would enable business and community stakeholders to compare the performance of one financial institution with another, while a free-for-all reporting approach to public accountability statements would not. Transparency is concerned with the clarity of information: how understandable will the public accountability statements be to the reader?

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On the next page, in figure 1, the Ford TGI statement of corporate citizenship reporting components—business fundamentals, environmental progress, community support, and philanthropy—are analogous to the common core of components found in financial statements. For instance, a balance sheet has three reporting components: assets, liabilities, and shareholders' equity. As with financial reports, the notice of the public accountability statements will be an integral part of the statement's information.

TGI's statement of corporate citizenship framework provides a triple bottom-line perspective: economic, environmental, and social accountability.

This spring the Royal Bank Financial Group published Community Report 1999, a 40-page, highly coloured, and professionally presented social report. It was made available to the public through the Bank's website and branches, as asked for in the white paper. It does not have a public accountability statement.

On the previous page, figure 2, is TGI's rough draft of the Royal Bank's 1999 statement of corporate citizenship, showing this committee what a financial institution's public accountability statement could look like. TGI's reporting model captured all nine public accountability statement disclosures, as specified in last year's white paper on banking reform. The Royal Bank's Community Report 1999 touched eight of these nine disclosures. The ninth disclosure, the white paper's request to sight the locations of opening and closing of branches, was omitted.

In all fairness to the Royal Bank, it was the only publicly traded corporation in Canada in 1999 to have issued a corporate social report. My critique of the Royal Bank's Community Report 1999 is consistent with the apprehensions expressed by others in the United States and Europe as to the quality and integrity of the current state of the art of corporate social reports.

This past May, Ford Motor Company issued its first corporate citizenship report Connecting with Society. This was a 98-page effort available on its website. Ford's Connecting with Society does not have a public accountability statement.

Figure 3 is TGI's rough draft of the Ford Motor Company's 1999 statement of corporate citizenship, showing this committee that a minimum common core reporting approach to public accountability statements is a viable transparency practice. The application of TGI's statement of corporate citizenship four-component framework to the Royal Bank's Community Report 1999 and Ford Motor's Connecting with Society report summarizes in an orderly and common manner how each corporation has contributed to their country's economy and society.

There are important benefits to be obtained by all stakeholders from Bill C-38's regulations that would require a minimum common core of public accountability statements and web page information. Foremost it would greatly enhance the comprehension for the Canadian public as to how each financial institution has contributed to the Canadian economy and society. Public accountability statements will prove to be a competitive marketing advantage for these 11 large financial institutions. It will better enable them to attract highly skilled employees, maintain and increase their market share, and increase investors' demand for their shares. So when smaller financial institutions begin to voluntarily issue their public accountability statements, a generally accepted reporting framework and content would enable the Financial Consumer Agency to better manage the increase in the volume of their mandate to protect Canadian financial services sector consumers.

The next benefit is very important. Bill C-38 will require large banks to prepare public interest impact assessments as part of any merger proposal. Prior years' public accountability statements could serve as baseline data to enhance the comprehension of the merger proposal for all stakeholders, including government regulatory agencies and members of Parliament. Picture for a moment, if you will, that you have in front of you a 60-page bank merger public interest impact report. It will have public accountability statements from the two banks for the past several years that have not been prepared in a comparable common framework and content. The proposed bank mergers public accountability statements forecast will have components and content not seen in their prior statements. How will you be able to assess the impact of the proposed merger on the Canadian economy and society? How will the Canadian public be able to tell?

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My recommendation to the committee is that for Bill C-38's public accountability statements to become wise legislation, Bill C-38 regulations must specify the need for a minimum common core of web page disclosure and public accountability reporting comments.

Thank you for hearing me.

The Chair: Thank you very much, Mr. Downing.

We'll now go to the question-and-answer session. Mr. Harris, we'll begin with you for a 10-minute round.

Mr. Richard M. Harris (Prince George—Bulkley Valley, Canadian Alliance): Thank you, Mr. Chairman.

I just want to focus initially on the presentation by CS CO-OP. It really seems strange that despite the MacKay task force recommendations, recommendations by this committee, the Senate banking committee, and our committee—especially our committee—the provisions that would allow for cooperative-owned banking to establish in Canada were very noticeable by their absence in Bill C-38. Indeed if the goal of the government was to provide increased consumer choice, they sure missed the boat on this.

I just want to ask Mr. Seveny a question. In your report you say that comments recently made by senior Department of Finance officials...that it required further consultation to bring this.... Did they explain what type of consultation they were talking about? It seems to me that the suggested amendments you have presented, while they require a stamp of approval, appear to be pretty accurately presented. What further consultation...did they allude to it?

Mr. Gary Seveny: The consultation that I recollect they made was that they needed to consult internally with the Department of Justice as to the amendments. There was no issue of consultation other than that. Time was not available to them, given that they have many things to bring forward to the House with Bill C-38. Although that's three to four months ago now, I would have expected that we would have greater answers to our proposition.

Mr. Richard Harris: Mr. Chairman, one has to ask the question, considering that this bill is almost 900 pages in its entirety, and also that this bill is about five years in the making—there's been a lot of consultation in the last five years. It appears to me that...I don't like to use the word “sabotage”, but somebody in the Minister of Finance's office—perhaps the parliamentary secretary might be able to answer this one—has said no, we don't think this one is going to go through. Someone has made that decision, and there seems to be a distinct lack of any type of rationale for the exclusion of that provision, considering the recommendations. Do you share that opinion? Maybe when you get around to Mr. Cullen, you might have a chat with him about that so we can all be informed about it.

Mr. Gary Seveny: I share the opinion that the actions we seek are not there. It's not to point any finger, but we feel there needs to be a greater will to cause the changes to occur. We've been working as closely as we possibly can with the Department of Finance officials, most recently advising them that we would meet with the committee members to try to enforce our plea for these changes and try to cooperate as much as we can to get these changes to occur. Again, I can't point directly to where there has been the stoppage, but the stoppage appears to be there.

Mr. Richard Harris: I guess I could point some fingers, because there have been three very strong recommendations, especially by this committee. The finance department appears to have put these recommendations on ice.

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If these provisions had been included in Bill C-38, how prepared are you people? How far along on the program are you in establishing them? What kind of a timeline could we have looked at to see the establishment of a national cooperative bank?

Mr. Gary Seveny: CS CO-OP itself has tried to take a lead within our industry and has moved ahead with the creation of CS Alterna Bank, which is a wholly owned subsidiary of CS CO-OP. It's the only way we could progress to a federal legislative level. So we established that bank on October 2. When and if cooperative ownership of banks is permitted, we would as quickly as possible like to convert the bank from a wholly owned subsidiary to a cooperative bank owned by all of its members who are customers of that bank.

Mr. Richard Harris: I recall that when we were having public hearings on the MacKay task force report we had presentations by VanCity Credit Union and Richmond Savings Credit Union before this committee. It appeared at that time that there was a pretty powerful group as far as size—and I think your organization was before us too—representing the co-op system, lobbying for this national cooperative banking thing. Subsequent to that, I think two of the players dropped out. Do you think that could have a bearing on the finance department's decision to exclude it from this bill?

Mr. Gary Seveny: I can only offer my opinion again.

I think that when there were a number of us that were prepared to put forward this cause to create a combined cooperative bank across Canada, the Department of Finance could see that there was quite a force here that could come to bear to fill this void of the second-tier financial institution. When a couple of the parties withdrew, that created some instability of the progress of the legislative changes that would be necessary and a lot of distractions as to what next, what next. Frankly, CS CO-OP had to do its own part and try to promote the act changes by itself, because we had invested so much money in the original proposal that our partners in that proposal had to decline going forward any further, because they couldn't see the legislation coming about.

CS CO-OP, on the other hand, feels that this is a very important piece of enabling legislation. Whether the cooperative industry decides to take advantage of it, it's an option that's needed for the future.

Mr. Richard Harris: Okay. Thank you very much.

The Chair: Thank you, Mr. Harris.

Mr. Loubier.


Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Mr. Chairman, I will continue along the same lines as Mr. Harris, since I think this is a very important question. He asked his question of Mr. Cullen and I would like him to tell us why the solution favoured by the MacKay working group and by ourselves does not appear in the final project. It would perhaps be interesting if Mr. Cullen answered this question. That is my only question and my only concern with regard to presentations that we have heard.


Mr. Roy Cullen (Etobicoke North, Lib.): Mr. Chairman, I think it's highly unusual. The witnesses are here. I'll have a chance in my round to get into this discussion, but I think members opposite should address their questions to the witnesses. That's why they come here.


Mr. Yvan Loubier: I will hand over to you, Mr. Cullen. Please answer this question. I feel that it is important.

Mr. Roy Cullen: Was that the last of your questions?

Mr. Yvan Loubier: Yes. Go ahead.


The Chair: Your question, Mr. Cullen.

Mr. Roy Cullen: Okay. Thank you, Mr. Chairman, and thank you to all the witnesses for presenting.

Yes, I do have a question for Mr. Seveny. We did meet not too long ago, and certainly the members on this side and probably the members on all sides of the House want to see a strong role for the co-op movement. In fact, Mr. Seveny, perhaps you could clarify this for the committee. Credit unions are currently permitted to own a bank. In fact, VanCity owns a bank, and I think you have been given the authority to own a bank. But that obviously doesn't meet your needs. Could you just describe why?

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Mr. Gary Seveny: It doesn't meet our needs on the basis that we have formed the bank as an alternative. As we go forward in the process, the objective is to create an institution that is owned by its customers—essentially, that is a cooperative—so every member is an owner of the bank and has a right to vote in the running of that bank. It essentially is a pure form of a cooperative under the Bank Act. So there is nothing different about this bank from any other bank, other than the rights of ownership and the voting privileges. All the other conditions under the Bank Act apply to this bank.

The importance of it comes back to our 145,000 members who want to maintain cooperative ownership. They approve of the setting up of the wholly owned subsidiary as an interim, but the objective is to move to a cooperatively held bank.

Mr. Roy Cullen: Just coming back to the point raised earlier, there was an initiative underway with yourself and your bank and VanCity and Richmond Savings. Then VanCity, for one, bailed out, if I can use that expression. You said that you couldn't read into the various motivations of the government, of the Department of Finance, but you seem to imply that VanCity bailed out because they felt it was going nowhere.

I can tell you that the Department of Finance and the government were certainly interested in discussing the various models that were on the table, but that suddenly VanCity wasn't there. To try to work with various models that have been presented, and there were some issues.... Well, you may not accept that there were some issues to be dealt with. So I think the government was acting in good faith, and then suddenly the bottom fell out of this initiative. Maybe you could comment on what actually happened.

Mr. Gary Seveny: Clearly, my comment earlier about people backing away from the initiative was a result of VanCity's withdrawal from the group and the lack of will to move forward with the legislative changes at the federal level.

The point I state again is that VanCity makes their own decisions as to why they pulled away from this, but they saw that this was quite an uphill battle to get these changes into play, and their board made a decision that they were under a friendly legislative regime in the province of B.C. and they would be moving to a less familiar legislative regime from the federal level.

CS CO-OP, on the other hand, feels that it's important to progress on one issue. When we made the approaches to the finance department originally, it was for a very comprehensive cooperative banking act, with many powers, special concessions. The changes that are before you now are exclusively to ownership of the bank as a cooperative. Providing cooperative ownership of a bank is the only thing that's being sought in these changes. That is a tremendously different proposition from what was made to the Department of Finance two years ago and a year later. Those propositions are off the table. We are coming forward with one change to the Bank Act or Bill C-38 only, and that's cooperative ownership of the banks.

So all the powers are not being sought. The concessions are not being sought. That's the only change that's being sought.

Mr. Roy Cullen: Mr. Chairman, will I have Mr. Loubier's time plus my own?

The Chair: Yes, we could arrange to do that.

Mr. Roy Cullen: Okay, thank you.

Mr. Seveny, certainly I don't argue with the principle of trying to expand the role of the co-ops to provide more choices for consumers, but does what you're proposing here today have the support of the co-op movement?

Mr. Gary Seveny: I can't speak on behalf of the entire co-op movement. I can speak on behalf of several credit unions that are part of a peer group of large credit unions who have recently congratulated us in support of our establishing CS Alterna Bank and our pursuit of cooperative ownership of banks. On that basis, the large credit unions across Canada are the bulk of the assets of the credit unions, the bulk of the membership, but that's not to diminish the importance of the smaller credit unions. There are many, many credit unions across Canada, and I cannot speak for all of them. In fact, nobody can. They're a disjointed group.

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Mr. Roy Cullen: Yes, but you probably read the testimony the other day of Mr. Bill Knight, president and CEO of the Credit Union Central of Canada, who basically said there are some significant federal-provincial issues here. He actually said some caution is required. He didn't recommend that we dabble with this for another five years, but he certainly felt another year.... You heard the minister saying the other day that if we have the right solution, he's prepared to proceed. Does your proposal, for example, have the approval of the provinces, or would it not require that?

Mr. Gary Seveny: We have discussed it with the province in which CS CO-OP has been chartered, and we have requested continuing legislation that provides for the continuance of a credit union into a federal level, such as a bank. Those changes are to come about with the revision of the Ontario credit unions act. The Province of Saskatchewan has already incorporated those revisions, and other provinces are considering those revisions. Our parent company, the CS CO-OP, is chartered in Ontario, so that's the primary focus for us.

Mr. Roy Cullen: But I think you'd probably agree, or perhaps you would, that for federal legislation, we would have to ensure that all the jurisdictional issues are properly dealt with in order to proceed with a bill through the House of Commons.

Mr. Gary Seveny: I don't see that myself. The provinces have the right to provide continuance or take it on an exception basis if their act so empowers them to provide continuance under their act on an exception basis. I don't think harmonization of every jurisdiction in Canada is necessary.

Mr. Roy Cullen: Well, certainly you have my undertaking, and I think you have the undertaking of the minister to try to work on a model that has some consensus—I'm not saying yours doesn't—within the industry, and that will also pass the test with the provincial jurisdictional issues, etc.

If I could, Mr. Chairman, I would turn to Ms. MacLaren, of the Ontario Securities Commission.

In your opening remarks, you said the Ontario Securities Commission is an agency of the Ontario government, so you're representing....

Ms. Tanis MacLaren: The full description says it's an anomalous crown corporation without share capital. It's a self-funded agency that's on one of the agency schedules. It's somewhere between an arm's-length and quasi-arm's-length agency. The chairman of our commission reports to the Minister of Finance in Ontario, but we are completely funded by the industry itself.

Mr. Roy Cullen: Okay, so what you're expressing here today may or may not coincide with the views of the Ontario government.

Ms. Tanis MacLaren: The Ontario government was not consulted.

Mr. Roy Cullen: Okay.

I just have a couple of questions. The federal government has exclusive jurisdiction over banks and banking. Why would we, as a federal government, want to hand over that regulation to the provinces? Why would that be in the best interests of the national government and the citizens of Canada?

Ms. Tanis MacLaren: I really wouldn't be able to say why it would be in the interests of the federal Government of Canada. I will suggest that what is proposed here is to take a series of're establishing a new regime where nothing has existed before to cover federal financial institutions. Of these, the insurance companies and the trust companies have historically been subject to an extensive degree of consumer protection legislation and regulation at the provincial level, especially the insurance companies. The principal subsidiaries of the banks—the only exception to that list—the financial institution ones, are regulated either by the securities commissions or the other financial institution regulators at a provincial level.

So what we have is one industry, the banking industry, that has been subject to fairly minimal consumer protection rules and the other three of the four pillars that have been subject to fairly extensive ones at the provincial level.

What makes sense? Do you establish a brand-new agency with a mandate to cover—I've forgotten, but I counted them—about 35 provisions in 4 acts with 30 people or more, or do you give the responsibility or the activity in some fashion—whatever would be politically palatable—to people who have been doing it for years?

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Mr. Roy Cullen: And that includes the regulation of banks? I'm just wondering. The reason I ask the question is obvious. If there was some regulatory mishap or some regulatory problem with a bank in Canada, would they go to the Minister of Finance or the ministers of finance in every province?

Ms. Tanis MacLaren: What we're talking about here—or at least what I am talking about here—is consumer protection legislation: disclosure regimes; cost of borrowing; prospectus disclosure; who's qualified to sell things; what conflicts of interest have to be disclosed, what don't; and, to some extent, what kind of information you have to tell your clients about how else you're going to use the information you have on record.

We're not talking about prudential regulation. As I note in my early statements, we're not a prudential regulator. We regulate some parts of the industry to achieve what might be categorized as prudential regulation, but it's not extensive. OSFI regulates to prevent failure. We regulate to minimize damage from failure. It's a very different approach. If a bank failed because of a consumer protection problem, it would be a very unusual circumstance.

Mr. Roy Cullen: I wasn't really...maybe we're talking about prudential issues, but let me give you an example. This bill calls for a low-cost account. Would we then end up with one kind of low-cost account in Ontario, another kind in Saskatchewan, and another kind in British Columbia? How are we going to get some harmonization or some standard when the federal government has some responsibility to make that happen?

Ms. Tanis MacLaren: I wish I could tell you that the way we do business at the provincial level is the ideal way and that the arrangements we have in place to minimize duplication, overlap, and disharmony amongst the various sectors are perfect. They are not. However, the alternative is suggesting a low-cost account for deposit accounts applicable to banks, of which there are a fairly limited number in Canada. And if the provincial governments wanted to apply an equivalent standard for their financial institutions, including the insurance companies that have products that bear a frightening resemblance to deposit accounts, and including the brokers who effectively take deposits, there would be another whole set of rules. The chances of those being exactly harmonious across the country would be even more slight with another level of consumer protection legislation layered on top by a federal regulator. It isn't going to get better with a new one, and I doubt it will get anything but worse.

Mr. Roy Cullen: Is it not possible that if you pursued the model that you did, you'd end up with Ontario basically calling all the shots and the other provinces tagging along?

Ms. Tanis MacLaren: I can only speak from my experience with securities regulation and the Canadian Securities Administrators—which is the informal group of the thirteen securities commissions or securities regulators across the country—and how it works. I guarantee you that it would be much easier for my day-to-day existence if Ontario got to call the shots, but that's not the way it works. It's a consensus decision-making process, and we spend a great deal of time listening to and getting input from the various securities regulators, and in fact the industry and the consumer groups and everybody else involved. It is a very transparent process, and it is a consensus decision-making process. That means it's slower than ideal, but you usually come up with a better result. And, no, Ontario doesn't get to call all the shots.

Mr. Roy Cullen: Ms. MacLaren, I have one more question for you.

The consumers' associations and organizations of Canada have spoken out quite strongly in support of the consumer protection agency that's proposed in Bill C-38. Are you saying they don't need that kind of protection, or that their support is ill-founded? Why shouldn't consumers be protected with these provisions in this act?

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Ms. Tanis MacLaren: Far be it for me to suggest that consumers shouldn't be protected. I can give you two characterizations, but they'd be pure speculation, on why the consumer groups are saying what you are suggesting. I really wouldn't want to speculate on their particular rationale.

From my point of view, the only particular upside of Bill C-38 is it actually creates somebody who has a direct responsibility for overseeing the consumer protection provisions applicable to banks. That's new. Other than that, the rest of the industry has been inundated with consumer protection provisions. So if the consumer groups are looking at it from the point of view that something is better than nothing, then I can understand their perspective.

Mr. Roy Cullen: In your brief you talk a lot about the duplication and overlap. There's a substantive issue: Are we creating more duplication, more overlap? But you seem to make the point—maybe I misread it—that this type of language should be in the act. My understanding of the consumer protection agency is it's a matter of consolidating several functions that are performed at the federal level to bring it under one roof. It's not a matter of adding a whole new staff and bureaucracy; it's a matter of consolidating. You're talking about presumably potential overlap and duplication between jurisdictions, or between different agencies. Maybe you could expand on that, because I see you shaking your head.

Ms. Tanis MacLaren: Of course.

Mr. Roy Cullen: The other thing is presumably a consumer protection agency that was being managed well would try to avoid duplication and overlap. Are you saying we should put that in the act so it's painfully obvious?

Ms. Tanis MacLaren: We have a specific provision in our legislation that requires us to actively deal with and address harmonization and duplication issues. Even then it is extremely difficult to get the right players around the table to deal with the issues not just within a single sector. When you're only dealing with the securities industry, if you can actually draw a box around the securities industry these days, or only the insurance industry, or only the trust industry, maybe life is simple. But the industries are not so easily defined these days. So duplication and harmonization are important objectives for everyone. Unless you make it transparent and a requirement to do these sorts of things, it's much easier not to consult; it's much easier to determine that my way is the best way.

We're engaged in merger discussions with our insurance, pension, credit union, and other regulators in the provinces. We've had a number of discussions on particular issues. It's amazing, with exactly the same group of people you're trying to protect, how many different perspectives, how many legitimate and sustainable public policy objectives, and approaches to those, you can bring forward to the table that seem to be mutually incompatible. All I'm suggesting is that if you create an agency without an explicit obligation, one, to consider the other provincial regulators who have responsibility in this area and whose responsibility is going to overlap, and two, to take into account the need for harmonization and reduction of duplication, you are not going to get what you want.

Mr. Oliver includes among his constituencies the principal dealers that are subsidiaries of our principal banks. If we say we have one set of rules on what you have to disclose vis-à-vis your conflicts of interest with your parent bank on any one of a number of products, and the consumer agency of Canada proposes different rules—and God forbid, mutually incompatible rules—pray tell what is Royal Bank and DS, or CIBC and CIBC World Markets going to do? How much is that going to cost? For whose benefit would that be other than the printers? I can't see any benefits. It's certainly not for the consumers.

Mr. Roy Cullen: Mr. Chairman, can I have one more question?

The Chair: Yes, of course.

Mr. Roy Cullen: Ms. Wolfson, thank you for your brief. I must say I have some sympathy with what I think is the gist of what you're saying, that this world of Interac and other organizations is changing rapidly. You have different systems evolving rapidly and different partners you might want to engage. What are the rules? Could some system suddenly be designated off-line?

I'm wondering, if there was the kind of notice you're recommending, where, let's say, the minister would highlight that there are certainly rules or operating facts that are giving rise to some consumer issues and there would be a period of consultation to see if that could be brought into compliance, one item that occurred to me is that if there is something happening very quickly and consumers are at risk, would any sort of timing delay put consumers at risk given...? There is always a balancing act between consultation versus acting in the public interest. How do you see those playing out in the context of what you're recommending?

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Ms. Judith Wolfson: Thank you for the opportunity to answer.

It would be very hard for me to think of any consumer risk that wouldn't be dealt with under the Payment Clearing and Settlement Act. As I said at the beginning, that legislation would govern the ability to immediately deal with risk. I think risk is covered off, and of course the institutions that are the members of Interac are governed as well with their own obligations.

So we have certainly thought hard and long about if there were any possibility of risk that wouldn't be taken care of by the pieces of governing legislation, and we cannot think of that.

But in terms of consumer protection issues, I think the benefit of the consultation is that the structure as set up in the consent order is very clear in terms of the board and who they are—14 members on the board, as set up in the legislation, who meet very frequently, so consultation is very easy. It's a finite group who have very clear roles and who are involved on an extremely frequent basis. As a matter of fact, although the board itself meets on a frequent basis, members of the board institutions meet, it feels like, daily and I think it is at least weekly. So that consultation process is the best and easiest one to get through, and I think timely response is exactly what you would want.

The issue, if I might, Mr. Cullen, is that given the complexity of the issues that are there, it's important to have the ability to discuss things quickly. For instance, we are dealing with things that might seem like minutiae, but even tomorrow at a board meeting we're dealing with what should be disclosure for surcharging at ABMs. Those are the kinds of rules we're talking about, that we think you need an ongoing knowledge of and a constant involvement of the folks in. Therefore, if there were a difficulty with a specific rule, that's when we think that transparency is important for the government to say, we have problems here; please, let us know why it's an issue and then we'll work it out.

Mr. Roy Cullen: Yes, and you're concerned to have this kind of option because you may be in discussion at various times, or in fact forming alliances, and they might want to know what the rules are and can they change quickly without us knowing what the rules might be.

Ms. Judith Wolfson: Certainty is usually important. We, the members, have just embarked on a major investment of many millions of dollars to make the system more robust. The transaction volume, of course, as I'm sure everybody in the room knows, because they don't go to the bank at 3 p.m. on a Friday afternoon any longer and worry about whether they have cash for the weekend, is constant. We will do about two billion transactions just in debit this year alone.

So there must be certainty in order to keep the funds going, and the investment and the rule changes to meet the marketplace need have to be quick, and responsiveness has to be very quick.

Thank you.

The Chair: Thank you, Mr. Cullen.

Mr. Harris, you have a final question.

Mr. Richard Harris: Thank you, Mr. Chairman. The question is for Ms. Wolfson again.

In your presentation you touched on something that appears a little scary to our side of the committee here, and that is the almost god-like powers that have been granted to the Minister of Finance under this bill. It appears that the government is not satisfied with the regulatory system that's set up now, which is, in our opinion, very thorough and very complete.

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The industry has been self-regulating pretty much and things have worked pretty well. All of a sudden they want to say this isn't good enough and that our Minister of Finance must have the power to put his nose into the industry at will. I would think this must be a scary scenario for the industry. I don't want to get you into trouble with the finance minister or anything in your response, but it scares the heck out of us that a minister of the government could be given this much power. We wonder what's behind this move.

Would you like to comment on that observation by us?

Ms. Judith Wolfson: I certainly wouldn't presume to know what's behind the Minister of Finance, who I'm sure has given a great deal of thought to what he does. However, we would certainly agree that there are very broad, sweeping powers that need to be made more certain. And we certainly think that while the government absolutely should be concerned about consumer protection, has an obligation to and a responsibility to be concerned about consumer protection, the minister should be required to articulate what the concern is in order that we can then proceed to address it.

So we do think the sweeping powers should be defined and that regulation and direction in the marketplace is a last choice, and we should be given the opportunity to continue to function well in a business that, indeed, I am not embarrassed to say, is a terrific success story.

Mr. Richard Harris: Thank you.

The Chair: Thank you, Mr. Harris, Ms. Wolfson.

Ms. Judith Wolfson: Thank you.

The Chair: On behalf of the committee, I'd like to thank you very much. We're obviously going to keep your observations in mind as we attempt to improve Bill C-38. Once again, thank you.

The meeting is adjourned.