FINA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Thursday, January 30, 2003

Á

1110

The Chair (Mrs. Sue Barnes (London West, Lib.))

Mrs. Diane Brisebois (President and Chief Executive Officer, Retail Council of Canada)

Á

1115

The Chair

Dr. Robert Kerton (Chair, Economics and Finance Committee, Consumers' Association of Canada)

Á

1120

The Chair

Ms. Louise Rozon (Director, "Option consommateurs")

Á

1125

Á

1130

The Chair

Mrs. Sue Lott (Counsel, Public Interest Advocacy Centre)

Á

1135

Á

1140

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Mrs. Diane Brisebois

Á

1145

Mr. Rick Casson

Dr. Robert Kerton

Mr. Rick Casson

Mrs. Sue Lott

Mr. Rick Casson

Mrs. Sue Lott

Mr. Rick Casson

Mrs. Sue Lott

The Chair

Ms. Louise Rozon

Á

1150

The Chair

Me Jacques St-Amant (Legal Counsel, "Option consommateurs")

The Chair

Mrs. Diane Brisebois

The Chair

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ)

Mrs. Sue Lott

Á

1155

Mr. Paul Crête

The Chair

Dr. Robert Kerton

Â

1200

Me Jacques St-Amant

Ms. Louise Rozon

The Chair

Mr. Paul Crête

Â

1205

The Chair

Mr. Paul Crête

The Chair

Me Jacques St-Amant

The Chair

Mrs. Diane Brisebois

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Â

1210

The Chair

Mrs. Diane Brisebois

Mr. Shawn Murphy

Dr. Robert Kerton

Â

1215

The Chair

Mr. Shawn Murphy

Mrs. Sue Lott

Mr. Shawn Murphy

Mrs. Sue Lott

Mr. Shawn Murphy

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Â

1220

The Chair

Dr. Robert Kerton

The Chair

Mrs. Diane Brisebois

Â

1225

The Chair

Mrs. Sue Lott

Mr. Bryon Wilfert

The Chair

Dr. Robert Kerton

The Chair

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)

Â

1230

The Chair

Mrs. Diane Brisebois

Â

1235

Mr. Nick Discepola

Me Jacques St-Amant

Â

1240

Mr. Nick Discepola

Me Jacques St-Amant

The Chair

Dr. Robert Kerton

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Me Jacques St-Amant

Â

1245

Mr. Roy Cullen

Dr. Robert Kerton

Mr. Roy Cullen

Dr. Robert Kerton

Mr. Roy Cullen

Â

1250

Dr. Robert Kerton

Mr. Roy Cullen

The Chair

Mr. Roy Cullen

Mrs. Diane Brisebois

Mr. Roy Cullen

The Chair

Mr. Roy Cullen

Mrs. Diane Brisebois

Â

1255

Mr. Roy Cullen

Mrs. Diane Brisebois

The Chair

Me Jacques St-Amant

The Chair

---

CANADA

Standing Committee on Finance

---

NUMBER 035

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Thursday, January 30, 2003

[Recorded by Electronic Apparatus]

Á  (1110)  

[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Good morning, everyone. Bienvenue à tous. We will continue our work pursuant to Standing Order 108(2), a study on the public interest implications of large bank mergers.

    I'd like to stress that we are trying to centralize this discussion around the public interest implications, not on whether the question of mergers is on or off, because that was settled and we have a law that deals with that. This is the process, and we would invite those giving testimony to stick to those points that would be most useful to the committee.

    Now I would like to welcome the witnesses: from the Retail Council of Canada, Diane Brisebois, who is the president and chief executive officer. We're very pleased to have you, and you will be our first presenter this morning. Before that I would like to also welcome, from the Consumers' Association of Canada, Dr. Robert Kerton, chair of the Economics and Finance Committee; from Option Consommateurs, Louise Rozon, director, and Jacques St-Amant, who is the legal counsel; and from the Public Interest Advocacy Centre, Sue Lott, who is the counsel.

    Many of you have been here before. I would invite my colleagues to be brief in their questions so we can engage all our witnesses in an appropriate manner and dialogue.

    Please commence in the order given. We'll hear first from the Retail Council of Canada.

    Thank you very much.

    Mrs. Diane Brisebois (President and Chief Executive Officer, Retail Council of Canada): Thank you, Madam Chair.

    I am confirming that the committee has received our full submission. As requested, we will be providing highlights specifically on the issues you would like us to address.

    Let me begin.

[Translation]

    Thank you. I will be pleased to answer all your questions after my presentation.

[English]

    RCC is the voice of retail and it represents 9,000 retail businesses of all sizes in every community in Canada. Retailing is a huge industry. To put it in perspective, retailers sell $300 billion annually, they employ 1.8 million Canadians, and they operate over 215,000 establishments across the country. Retailers have a unique perspective because they are heavy users of financial services every day, and these services are essential to the daily operation of their business.

    RCC is not opposed to bank mergers, we just want to ensure that retailers can get the financial services they need. We believe there are four tests: the breadth of coverage or access in all communities, the depth of coverage or access to all services, the quality of service or the quality and price of those services, and the choice of coverage or access to meaningful choices.

    Understanding the issues will require bottom-up consultations with the business and consumer communities served by the branches of these merging banks. We recommend that the Competition Bureau lead these consultations. We recognize that they have statutory obligations to keep confidential any information they gather in respect of a merger, but we believe the bureau is the most appropriate agency to examine the competition aspects. We believe it should be possible to have the bureau engage a respected third party to do the consultations and report the results to them.

    There are three core subjects, Madam Chairman, the consultations must address, we believe: loans to small businesses, the availability of local branch services, and the commitments made by the merger partners. Our submission identifies examples of questions the consultations must address in relation to each of these core subjects.

    In regard to loans, if a merger means branches will be closed, what would a retailer have to do to maintain a line of credit? If a retailer's accounts are transferred to another branch or bank, will the retailer have to requalify for credit? Are there other financial institutions willing to provide credit to businesses in that community?

    As to services, will the retailer have to renegotiate his or her banking services and agreements? Will a retailer have to travel longer to get financial services? Will a retailer have to deal with a large number of financial institutions to get all the needed services?

    As to other commitments, if a foreign FI buys part of the merged bank's business, will it provide services from Canada? Will an entity buying part of the merged bank's business commit to maintaining the business with quality service? What commitment will the merging banks make regarding service prices?

    What we tried to do in the submission and what I will try to do for just the next minute or so is to give you a sense of a day in the life of a retailer so you can better understand why we are stressing the importance of having those services provided, those services close to the community. Let me walk you through a day in the life of an independent merchant as well as of a mid-sized retailer or a branch manager of a large retailer.

    I, being the merchant, typically go to my bank every day during the hours it is open to deposit cash and cheques and to pick up change. I may often make a second trip at the end of the day to deposit receipts in the night deposit. On weekends and on other days the bank is closed, I deposit funds in the night deposit. There are times when I must make sure to take the deposit to the bank early in the day and ensure it goes immediately into my account to cover cheques and overdrafts.

    Often there are issues that arise regarding one of the many transactions we do as retailers: to pick up a cheque that has been returned by a customer's bank, to place a stop-payment on a cheque, to purchase a bank draft, or to ask my branch to help in resolving a problem with credit card transactions. If the transaction is not routine and cannot be handled by a teller or at the branch counter, such as discussing a line of credit change, I need to make an appointment for a specific time, perhaps for a few days later.

    Visiting the bank branch is a daily routine because we are in a business that deals with money, and this will not change any time soon. Bank branches are every bit as important to retailers today, perhaps even more important than, as they were before we heard about computer technology. Yes, we do have very successful debit card services and other ways to move money electronically, but cash is still important and will be important for a long time, and people negotiate every electronic service we use as retailers.

    The other important point to know about my retail business is the critical importance of cashflow management. I rely on my day-to-day cashflow to pay my day-to-day bills, and so my bank is an essential partner in helping me manage that flow and keep my business alive.

    In respect to keeping it brief, Madam Chairman, in conclusion, Canada's successful banks grew by providing services to local businesses in local communities, and markets were protected for them. Our members believe their role as clients in the growth of Canadian banks entitles them to a guarantee that they will continue to get the services they need after the dust of a merger settles.

    A key test of any merger proposal is the service Canadians can expect afterward from their local branch. Retailers are uniquely positioned to help the government apply this test to a merger proposal. Retailers are in the bank practically every day, and they could not survive day to day without the services of a branch. The public interest demands a process of consultation that reaches out to the businesses and consumers who connect with banks primarily through their branches.

    Thank you very much.

Á  (1115)  

    The Chair: Thank you. The fuller document has been distributed.

    Now from the Consumers' Association of Canada, Dr. Kerton, go ahead, sir.

    Dr. Robert Kerton (Chair, Economics and Finance Committee, Consumers' Association of Canada): I'm Bob Kerton from the Consumers' Association, which has been appearing before this tribunal over several years.

    One of our active degrees of participation concerned the introduction of the Competition Act. We're obviously happy with some of those measures that come from that source. That's not entirely the purpose today.

[Translation]

    The Consumers' Association of Canada works more specifically in the areas of food, health, trade, standards, financial services, communications and other fields of interest to consumers.

[English]

    Our position is that not everything banks are doing right now is wrong, and one might ask if we aren't now in as good a situation as we could be in. One could counter-pose the question--it's not possible to answer--but what would have happened if the two giant mergers that had been proposed had gone through in 1998? The answer might be that we'd be suffering fantastic, enormous losses now, because we would have been big time into the merger movement, using Canadian money abroad, and probably we would have had losses far greater than anything we're seeing now.

    So one could ask the question of whether it's prudent to organize your industry in such a way that you collect money from successful services in Canada to extend abroad. Our position is that we do want our large financial institutions to succeed abroad, but we want them to succeed because they're offering top-quality service at the international level, and that would be the reason they're able to pursue that.

    Today's hearings have to do with the question of whether or not there should be a public interest test, and whether the other two tests that are deployed in Canada--one on prudential grounds by the Office of the Superintendent of Financial Institutions, and the second by the Competition Bureau--are enough, whether they cover everything.

    Our argument is no, there are a number of other factors that have to be taken into account. The first is concentration of power, and Canadians have been concerned about that for quite some time. If there are two dominant financial institutions in Canada, the degree of influence would be something that is of concern to most Canadians. So that's an issue that does deserve parliamentary attention.

    The second one that isn't normally a concern of the Competition Bureau is the sharing of the monopoly benefits. If you did justify a merger on economic grounds, normally the question wouldn't be asked about who wins and how you share the benefits. When the Competition Act was first passed, we were eager as an association to have some indication in advance of a merger on how the benefits would be distributed to Canadians, and of course we didn't win that provision; it's not in the act. But it's still a legitimate question.

    We know right now from some recent statistical work that is quite convincing that even the number of branches in a town or village influences the interest rate that's paid on average. When you have fewer branches, the borrowers--the small firms, in particular, from this sample--pay a higher interest rate than when there are more branches there. So closing down branches does seem to have an impact.

    This study took account of a lot of other things, including the size of loans and other factors. So there is a legitimate question of how a system that allowed mergers to take place and harmed the individual firms in Canada and the Canadian consumers could actually be good for the country, because the ability of small firms to compete abroad depends in part on the cost of borrowing, and we need an effective system.

    The third point is the quality of services and innovation, and this item isn't too provocative, I don't think. The National Quality Institute has done two studies, in 1997 and 1998, which asked customers--there was a survey of 10,000 people in 1997--to rate service quality. Trust companies did reasonably well, insurance companies were just below the median, and banks were rather down toward the monopoly end where cable companies and organizations like that were.

    So on the service front, a degree of competition would be much more useful. We know that when Canada Trust was a vigorous competitor, it injected some competition that was effective for consumers, particularly on the basis of hours.

    There has also been a Swedish study, which found that when the degree of monopoly increases, the quality of service goes down. So one has to ask questions in that dimension.

    The fourth one is fairly simple. You've undoubtedly heard it before, the “too big to fail” argument. That is, when you have an organization that's really huge, the government can't necessarily allow it to fail, because it would affect the country too severely. What's really happening there is that they're shifting the liabilities or the risk from the shareholders onto the taxpayers, and that's not necessarily a good idea.

Á  (1120)  

    The defence of that is to say that the banks are already too big to fail. So you say, would you rather have one out of five or something twice as big? It's a bit like Mark Twain's story about the advantage of fishing at Niagara Falls. He said you didn't have to go so far to not catch a fish. It's an advantage that the thing you're not getting is closer at hand. I don't think there's any economic way to get around the “too big to fail” argument. Whether we as taxpayers want to be in the situation where we're behind that, I don't know.

    From all the economic studies, we see that the existing banks in Canada don't do too badly. When the MacKay task force did the survey, it indicated that the technological parts of the services are done well in Canada, better than in other places. What you'd like to see is people relying on things we do really well and succeeding abroad with that. But there are other items that aren't done as well in Canada. There are areas where we would like to see more competition than we have right now.

    In the interest of time, Madam Chairman, I'll stop there.

    The Chair: Thank you very much.

    Now we'll hear from Option Consommateurs. Who would like to start?

    Go ahead, madame.

[Translation]

    Ms. Louise Rozon (Director, "Option consommateurs"): Thank you very much Madam Chair and ladies and gentlemen. We would like to thank the Standing Committee on Finance for inviting us to appear before it this morning.

    As you know, Option consommateurs is a consumer association headquartered in Montreal. We provide services to a large population and we are involved in a number of consumer issues. We have been actively involved in the bank services sector for about 10 years.

    Last October, the Minister of Finance and the Secretary of State asked you to look at the new merger review process for major Canadian banks in order to clarify it. A number of bankers actually said that they would hesitate to propose mergers because they feel unable to make a reasonable prediction about the outcome of any such project. This consultation process is providing the consumer associations of Canada an opportunity to review this specific issue, but also to look at the entire framework set out in the Merger Review Guidelines announced by the Minister of Finance in 2001.

    We think that the guidelines are relatively appropriate and clear. However, we would suggest a few improvements. We also think that it would be difficult to include in it indicators detailed enough to help bankers better assess the chances of success of a merger proposal, without making them unwieldy and rigid.

    We will start by commenting on the process for evaluation of major bank merger proposals, and then we will look at the issues related to the evaluation criteria, before coming back to the matter of detailed indicators. You will find more information on these subjects in our comments, which have been distributed to you.

    First, the process. A proposal to merge two of our major banks would, of course, have a decisive impact on the Canadian economy and on consumers. In 1998, we were able to measure the scope of the damage surrounding such projects. We must therefore be pleased to see that the Canadian government has clarified the review framework for initiatives of this type. This framework means that the decision-making authority lies with the Minister of Finance, with input from the Competition Bureau, the Office of the Superintendent of Financial Institutions and two parliamentary committees. However, in recent weeks, some individuals have recommended that consultations by parliamentary committees be eliminated, and that the Minister of Finance base his or her decision chiefly on the findings of the Competition Bureau and OSFI.

    We think such an approach is fundamentally flawed for two reasons. First, some crucial matters do not come under the jurisdiction of either of these bodies. Think for example of the impact of a merger on jobs, or the impact on regional development of closing down a head office or the potential impact on the Canadian economy of the strategic repositioning of a banking giant. These are just a few examples.

    Finally, with all due respect, it does not seem advisable for a Minister to hear from his experts and no one else. If we were to push this reasoning to the limit, we could abolish all parliamentary committees and let the ministers and mandarins establish Canadian policy in all areas. The question is even more important when the stakes are so high. People must be able to take part in the debate and feel that they are actually involved. The question then becomes what body can hold the necessary public consultations. Unless we make some legislative changes or establish a commission of enquiry, we naturally think of parliamentary bodies.

    However, some procedural adjustments should be recommended. Parliamentary committees reviewing a merger proposal should, for example, require the bankers to answer some of the questions raised by the individuals who appear before them. Witnesses should be given more than seven or eight minutes, and the possibility of holding regional hearings should be considered.

    One thing at least seems certain to us: it is essential that Canadians and the organizations representing them be able to play an active role in a comprehensive public debate on a proposal to merge two of our major banks.

    Let us now look at what should be discussed. The guidelines set out by the minister require first that the bankers wishing to merge state their objectives. I would mention in passing that this issue, which is fundamental in terms of public policy, is largely absent from the mandates of the Competition Bureau and OSFI. We must know what bankers will do to determine whether the public interest will be as well served after the merger as before.

Á  (1125)  

    Do you want to consolidate the sector during a difficult financial period, diversify its geographic presence in the Canadian market, expand abroad, and become a world-class institution? I would just mention that you will find a brief comment appended to our presentation about the size of the major Canadian banks internationally. They are actually not as small as people sometimes say. In any case, the objective of any merger is a key component of the debate.

    We also know that the banking industry is already heavily concentrated in Canada, as the two previous speakers outlined. Consumers' associations also see daily examples of the poor quality of banking services and the dissatisfaction and disillusionment of consumers. If it is true, as the President of the National Bank, Mr. Réal Raymond, said when he appeared before the Standing Senate Committee on Banking, Trade and Commerce, that the public interest in the area of banking services meant receiving good service and being able to choose, we must conclude that we are far from achieving this objective in Canada. This must be taken into account in reviewing a merger proposal.

    The questions raised in the guidelines and in the letters from Mr. Manley and Mr. Bevilacqua deal with a number of these issues and constitute, in our view, a good basis from which to work. However, some points should be added to them. We are thinking about bank compliance with the legislation and with the commitments they made. For example, we would mention the commitments under the codes of voluntary practice, risk assessment, quality of service and the hierarchical and geographic distribution of certain functions, such as the provision of credit.

    There is also a change in business policy, for example, in a case involving a merger between a bank that withdrew from farm credit on the Prairies in recent years, and another one that remains very active in this niche. Will the merged bank maintain this type of activity over the next three years, or withdraw from it completely?

    These concepts are all relatively clear. Moreover, we think it is difficult to set a rigid order of priorities, for example. However, questions related to the quality of services provided to Canadians should play an important role in assessing the merger.

    However, listing these areas of interest does not settle all the problems. We need only think of access to basic banking services. Bankers know that they must deal with this issue, but what should they say about it? Will it be enough to state that there is a policy, that the merged bank will maintain this policy and that everything seems to be working well? Should bankers also have to demonstrate how they check whether their staff comply with the policy? Moreover, are they required to disclose the number of times they refuse to open a bank account in the recent past and why they did so? What is the cut-off point between acceptable and unacceptable behaviour? In other words, what do we expect of bankers?

    In this area as in all others, there is clearly a huge gray area. We have to choose between two options. We can decide to live with this uncertainty by relying on the good faith of all the parties involved and on their good sense. However, it will be difficult for bankers to anticipate what specific criteria will be used to evaluate them. They also will not know what the passing mark is.

    Is there another solution? We can review the main evaluation criteria and determine what behaviour is acceptable and what is unacceptable. For example, as regards access to basic banking services, it could be decided that a bank about which more than 20 valid complaints had been made in the preceding year would get a poor mark on this.

    However, establishing criteria of this type would be a considerable challenge. It would require a concerted effort on the part of the industry and the main stakeholders involved. Things would be more foreseeable, but the price of that would be a definite rigidity. We therefore think it is preferable to rely on people's good faith and flexibility. However, that means that the bankers who are proposing a merger will have to accept a certain amount of uncertainty.

    In closing, bankers would doubtless prefer that their merger proposal not be subject to an evaluation process. The importance of the institutions they run in the Canadian economy and the disillusionment and loss of confidence by Canadians regarding banks makes this process unavoidable. It is therefore important that the government play the role of regulator and adjudicator. No one is under-estimating the scope of this task facing the government and you.

    For the time being, I would be pleased to answer your questions. Thank you.

Á  (1130)  

[English]

    The Chair: Thank you very much.

    From the Public Interest Advocacy Centre, Ms. Lott, go ahead, please.

    Mrs. Sue Lott (Counsel, Public Interest Advocacy Centre): Thank you.

    My name is Sue Lott, and I'm with the Public Interest Advocacy Centre. We're a non-profit organization that provides legal services and research to Canadian consumers on a range of issues dealing with public services like telecommunications, broadcasting, energy, and financial services, as well as public transportation.

    Actually, we very recently did a publication. We did a national survey of users of the alternative financial services sector--that's the payday loans and the cheque-cashing outlets--and we examined the relationship between these users and mainstream financial services.

    So we have a history of interest and involvement in financial services issues. I most recently made a presentation before the Senate committee dealing with this issue as well.

    I am going to try to be very brief. My submission deals at much more length with some of these issues, but my focus in speaking to you today is really on the public interest considerations that the minister himself raised in his letter to your committee, issues of access, choice, and price. You'll note that the issue of price is not mentioned in the minister's letter, but it does arise in the Competition Bureau's guidelines and in the finance department's guidelines.

    On the issue of access, we're talking about not just substantive access, being able to access basic banking services, but geographical access as well. This is a really important issue, particularly for low-income, disabled, and rural customers. What we mean here by access to basic services are standard low-cost bank accounts, just the ability to cash a federal government cheque, lines of credit, overdraft protection, and short-term loans.

    We're aware that the federal government is actually introducing regulations to the Bank Act in this area, and we think this is a really good thing. Our question on this issue would be, how are bank mergers going to address these access issues? How will possible divestitures of core services to other entities, such as foreign-owned or non-deposit-taking institutions, protect vulnerable customers with respect to the issue of access if federal regulations under the Bank Act don't apply to them?

    We've also seen some evidence before the Senate committee that divestitures aren't working, that they haven't actually produced more competitors and more branches.

    On the issue of access to basic branch banking locations, we're currently seeing a lot of branch closures; we're seeing a lot of replacement of branch banking by ATMs. This concerns us because it further removes customers from any kind of direct relationship with a bank. So our question again would be, how are mergers and inevitably some rationalization of services going to improve access to bank branches, and how is it going to ensure that low-volume areas, areas in which services are not competitive or highly remunerative, are going to remain open and accessible to rural and regional bank customers?

    Our concern with the guidelines specifically is that when you look at the public interest impact assessment under bullet 3, there's an implication that branch closures are a given and that the focus here really is only on the issue of timing and impact and getting in place alternative service delivery measures--which I'll talk about next.

    On the issue of choice, given that mergers would appear to lessen both competition and therefore choice, there are guidelines in the finance department's guidelines that focus on this issue of “remedial or mitigating steps” such as divestitures. Our concern would be about what this means.

    The Senate committee concluded in their report that competition would be enhanced by new entrants such as foreign banks. But there is evidence, and there was some evidence before the Senate committee, that foreign banks aren't successfully entering the retail banking market because they can't compete with the market dominance of the major banks, which would only be further increased by further mergers of these major banks.

    It also raises the issue of loss of Canadian control of financial services. We know when the MacKay task force did their series of studies, reports, and surveys, Canadians overwhelmingly said they thought it was important to maintain Canadian control. We know we don't have Canadian ownership anymore, but the issue of Canadian governance or control of the domestic banks was important, even if it meant higher prices.

Á  (1135)  

    That brings me to the final issue here, of price. Our concern is simply that mergers are going to result in increases in banking costs overall, given that we now have more electronic banking. We have bank ATMs now. We have these no-name or white label ATMs that are owned and operated by private companies. The bizarre thing about this is that when the Competition Tribunal basically opened up the ATM market to private companies through its decision in 1996, this meant a flood of competitors in the market. We now have tonnes of no-name ATMs. You see them everywhere. But the irony is that in fact we now have higher prices. The consumers are potentially paying three tiers of fees when they use these ATMs. That's our concern.

    We also know that banks are entering this no-name market through wholly owned subsidiaries, which is probably meaning that they're closing their own branches and replacing them with the no-name or retail ATMs. It's difficult for us to see how mergers are going to protect consumers from further price increases if ATMs are viewed as appropriate replacements for bank branches, and we did hear that in the testimony of Mr. Godsoe before the committee.

    Mr. Godsoe also described these ATM fees and bank service charges as irritants. Maybe they are for Mr. Godsoe, but they're not for many Canadians. These charges and fees describe Canadians' daily experience with bank transactions, and they're the source, I would say, of a lot of confusion and frustration.

    We applaud the existence of the guidelines in the finance department and the Competition Bureau. We think they need to be reinforced and clarified with regard to consumer interests. That is talked about more in my submission; I don't have time to talk about that here. They identify important public interest considerations.

    We disagree strongly with the Senate committee's recommendation that the minister permit a merger as being in the public interest if it's approved by and simply meets the conditions of the Competition Bureau and the OSFI. We think that the report is premised on macroeconomic concerns defining the public interest. We would suggest that the public interest must include the interest of individual citizens in being able to participate in the financial life of Canada.

    We also have very strong concerns that the Senate committee recommendation would remove parliamentary committee review of bank mergers. This is the only opportunity for citizens to have input into such an important public policy decision via their elected representatives.

    In conclusion, we feel that what's driving this is the banks' desire to grow and expand outside of Canada. But it's important to remember that banks still provide retail banking services to millions of individual Canadians. Our concern is that mergers will mean an increase in non-bank, foreign-owned bank, and ATM delivery of bank services at greater cost, less Canadian control, and therefore less protection for consumers. In our view this does not further the public interest.

    Thank you very much.

Á  (1140)  

    The Chair: Thank you very much.

    Thanks to all of you for your presentations.

    Now I'm going to allow 10 minutes for everyone here to do questioning. We'll start with Mr. Casson.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): Thanks, Madam Chairman.

    Thank you all very much for your presentations.

    I want to address my first question to the Retail Council, Ms. Brisebois. You indicate that a business needs hands-on experience with banks, that the innovations that have been made through electronic banking and ATMs just don't do it. You have to deal with bad cheques and credit lines. Do you see any way that what has transpired to date as far as advancing technology is concerned could be taken a step further to where you could do your banking right out of your office? I'm thinking of smaller communities. I live in a community where there are two banks. If one closed, I know it would make a lot of difference to how businesses conduct their business, including deposits, cash, etc. Could you just elaborate on how much that means to you. Do you see any options that could come forward?

    Mrs. Diane Brisebois: I would direct your attention to page 8 of our full submission. We have surveyed our retailers across the country over the years on how they have interacted with financial institutions, and the realities of their businesses.

    We also address in the submission the issue of technology. There's no question that technology has allowed financial institutions and businesses to work together without the necessity to be in the same room, office, or location. Those are limited services for small businesses, but it also affects our large retailers. If a large chain has a store in Lethbridge, Alberta, for example, the store manager will be interacting with the local branch. So it doesn't matter if it's an independent merchant or a large business, because they're affected in the same way.

    In answer to your question, they need the business services of that branch and they need those services to be accessible. A lot of our small members are concerned because they deal with cash, and not having branches within their communities means that at the end of day, when they're doing deposits or even when they need those person-to-person services, they need to get into their cars and drive long distances. That's just not feasible for a retailer, specifically a small retailer who does not have 12 people to run their store while they worry about trying to find a business branch that can provide the services they require.

    I will repeat what I said earlier, that we are certainly not against bank mergers, but we reflect some of the concerns mentioned by the consumer associations here today, that the consultation needs to be done seriously and systematically. We need to look at all the different scenarios on mergers and then ensure that consumers and businesses are provided with the services they require locally.

    In our case, obviously, the issue is business services: lines of credit, dealing with the credit card issues, cash, currency exchange, change, bad cheques, and so on. Those are things that are rarely done by phone.

    Finally, one of the concerns with using technology as a way to communicate is that very often a local branch manager is of great assistance to the business community and our retailers because he or she is aware of the different environment in that community, can make decisions based on the economic health of that community, and understands the business. So if our retailer goes into a local branch, the branch manager usually understands what's happening in the community and can provide better advice and services than a branch manager 100 kilometres away who has no sense of what's happening in the retailer's community when he comes to negotiate with him.

    So there are several issues that need to be addressed before I believe we can proceed with considering bank mergers.

Á  (1145)  

    Mr. Rick Casson: Thank you.

    Does anybody else want to comment on that aspect?

    Dr. Robert Kerton: I think one of the risks of the new information economy is that a lot of information can be collected on individuals or firms that allows the seller, whether it's an airline or a bank, to know a lot about how much you're willing to pay. This allows price discrimination to take place, and you find out who's willing to pay higher prices.

    For example, in the credit card market a lot of people are paying 18% and some are paying 28%. You say, wait a minute, you're supposed to have competition here. Why doesn't the market work so the price gets driven down to a sensible level of 9% or 10%? It's partly because the information in the system now allows you to find out which people are willing to pay higher prices, and then you have to figure out a way to get that person to pay a higher price.

    I'm not taking a great moral position here; I'm just saying it's a fact of life that all this extra information allows price-setting to be done in a much more sophisticated way than before. So not everything in the new technology is designed to be a guaranteed benefit for the ultimate consumer.

    Mr. Rick Casson: I suppose we also need to look at everybody, from individuals, low-income people, right up through to the big corporations, and how it affects each one.

    I resisted getting an ATM card for as long as I could, but now I have one and I quite enjoy it. I can go to my branch any time of the night or day. But it took a long time to convince me that was the way to go. Also, we do a lot of our banking from home on the Internet, and a lot of people don't have that ability or desire. Some say it might be a little dangerous to do that. There are all kinds of options coming forward.

    Ms. Lott, being an advocate for people who are handicapped or on the lower end of the income scale, if banks were merged, how do you think would it affect their ability to better their lives or just go on with their daily lives?

    Mrs. Sue Lott: Do you specifically mean low-income persons?

    Mr. Rick Casson: Yes.

    Mrs. Sue Lott: Well, as I pointed out quickly as I was going through this, there's a real issue here already for access to basic banking services by low-income Canadians. We know the government is looking at regulations that will be put in place under the Bank Act. Our concern is about those financial institutions that aren't covered by the Bank Act once those regulations are in place. For mergers, if we have divestitures to other kinds of entities that don't come under the Bank Act, then how is access going to protect those people? They're not going to be able to get the so-called benefits from other players coming onto the scene, and there might be more difficulties in terms of access to basic banking services.

    I had a call the other day from a gentleman who is disabled and who has difficulty paying for the cheques that are issued by his bank, cheques he is required to purchase from his bank, because he is disabled and has a low income. Even something like that becomes an obstacle for somebody, so there are a lot of basic banking issues for people.

    Mr. Rick Casson: You mentioned cheque-cashing services and some of these types of things. Are those the things you're referring to as not being covered by the Bank Act?

    Mrs. Sue Lott: I'm talking about foreign banks, schedule 3 banks that don't come under the Bank Act legislation, non-deposit-taking institutions, other entities that aren't deposit-taking that fit the definition of a bank. That's the kind of thing I'm referring to.

    Mr. Rick Casson: Thanks, Madam Chair.

    The Chair: I think there are some other people who wish to answer. Go ahead.

[Translation]

    Ms. Louise Rozon: I would like to add a comment.

    I think Ms. Brisebois gave a very good explanation as to why it is important for business people to continue to have access to counter services in a bank, given that they have to make deposits almost every day.

    Even today, consumers need access to counter services. Close to 20 per cent of Canadians still never use debit cards for their banking transactions. Almost 40 per cent of low-income individuals still need access to counter services, because they are not at all comfortable with electronic transactions.

    So this is an important issue to review when two financial institutions want to merge. We have to ask what impact this could have on access to counter services. This is another example of things that should be looked at in the case of mergers, which require a much broader consultation than just a review by the Competition Bureau and OSFI, as suggested by the Senate committee.

Á  (1150)  

[English]

    The Chair: Mr. St-Amant.

[Translation]

    Me Jacques St-Amant (Legal Counsel, "Option consommateurs"): I would like to add one point.

    In 1998, we did a study on what had happened to bank branch networks, particularly in Montreal.

    People may remember that at the beginning of the 1980s, the Provincial Bank and the Bank Canadian National merged in Quebec.

    In the central part of the Island of Montreal, which for the most part is a low- or medium-income area, between 1977 and 1987, the combined number of branches of these two institutions, which merged, went from 102 to 51. Clearly, a merger can have a significant impact on local services.

[English]

    The Chair: Madame Brisebois.

    Mrs. Diane Brisebois: Madam Chairman, there was a comment about technology providing some benefits to consumers and to businesses. However, I think it's important to note that in the end technology usually provides a lower cost of operations. However, it's interesting to note that with the advance in technology and its application in the credit card business, it has provided lower costs for financial institutions, yet it seems that the merchant rates go up every year or every so often. It is very difficult, including with debit cards. The issue is, if indeed it has become popular, if indeed the technology has been around for a while and you would assume then that the cost of the technology has been written off over a period of time, why have consumers and merchants not seen a drop in the cost of utilizing that service? I think that's the point that needs to be made, not the fact that it's popular or not.

    The Chair: Thank you.

    Monsieur Crête.

[Translation]

    Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Thank you, Madam Chair, and thank your for your presentation.

    The conclusion of the Public Interest Advocacy Centre's brief mentions that the Senate Committee's report states that a merger that has been approved by and meets the conditions set out by the Competition Bureau and the Office of the Superintendent of Financial Institutions could be allowed.

    You feel that this only takes into account macroeconomic issues and that the public interest “also includes the interest of individual citizens in being able to participate in the financial life”. You appear to link this with parliamentary consultations.

    I would like you to expand on this. Do you think that the minister should have some type of veto? If both parliamentary committees, that of the Senate and that of the House, declared themselves against mergers, but both institutions supported mergers, do you think mergers could be prevented on the basis of the parliamentary committees' position?

[English]

    Mrs. Sue Lott: Well, the minister has given himself this power. I think probably a lot of the origin of this story is the politicization of this issue and the concern about public reaction when mergers came on the public spectre a number of years ago. I think there was a political decision made ultimately to have a political control.

    Our concern is fundamentally whether or not there are public interest elements in the finance department's and the Competition Bureau's guidelines that reflect consumer and individual interests, not just macroeconomic concerns around what the public interest is, if those are clearly defined and stated.

    In my submission I indicate that I have some concerns about the way the Competition Tribunal guidelines interact with the legislation and the fuzziness around how consumer issues are defined and how the public interest is understood. At one point the interest of the financial system as a whole is what is deemed to be the public interest under the guidelines.

    So there are concerns about the fuzziness in the guidelines, in the legislation, and how they interact, and also, as I have indicated, in the finance department's guidelines. As brief as they are, some of those bullets are not clear.

    As I said before, there's an assumption that there will be bank closures and that there will be alternative service delivery. There's no description, no definition, of what that would be. There's a huge difference between an alternative service delivery that's an ATM machine or a branch bank with full, reasonable standard banking services.

    So if that were in there, it would be sufficient. And there should be parliamentary committee oversight.

Á  (1155)  

[Translation]

    Mr. Paul Crête: I, and I am sure others, would like to hear your comments on that. In the long-term, will the market rules not ensure that those institutions providing more personalized and appropriate services will keep their share of the market?

    For example, yesterday the Mouvement Desjardins acquired the Mouvement des caisses populaires de l'Ontario. Could this not be the long-term solution? Do you really think that parliamentary committees could effectively act as a barrier and be more than just an opportunity to express comments, suggestions or reservations regarding a merger? In other words, could they really affect any real change?

    Do you think the recommendations you have submitted are strong enough to stop financial institutions that undertake their streamlining in the way of a steamroller?

    I will finish my question with an example. Three or six months ago, a decision was made to close one of the caisse populaire branches in Rivière-du-Loup. Members reacted. There was a meeting, and the board changed its mind. That would never have happened with a bank. In fact, in Eastern Quebec, public opposition was not enough to prevent a branch from closing. I would like to hear your comments on this.

[English]

    The Chair: Dr. Kerton, then Mr. St-Amant.

    Dr. Robert Kerton: First of all, the ability to do this arises from time to time. We know that we had a bank that tried to charge a lot of money for changing nickels into paper currency. People got upset. We do get changes from time to time.

    But in the great flow of things, if you go from five large banks down to three, the local merchants have only three people to talk to in trying to get some loans arranged. It's very much more difficult to do this. Traditionally, the smaller the number of participants, the less the participants listen. So competition is a solution. But this is an industry that has a whole lot of barriers preventing it.

    Take the printing industry as a competitive example. They earn about 10% profit in good times. They're competing vigorously all of the time. If you allow banks to go down to our current level, they're not happy setting a target rate of return of 10%. They want to get more than that. This becomes built into the industry's expectations year after year. They want to see 16%, or something more closely related to an oligopoly profit.

    If you go down to three banks, then of course the target level may be even higher. Not only will you have fewer people to try to get a deal from, you'll also have a higher target. When they want to make that higher rate of return, they can't make it by serving marginal communities anymore because the return in these little communities is only 11%, 12%, or 13%. So they have to close down their service to these communities.

    So there are structural factors preventing new entrants from coming right in and providing the solution we want. This is an argument that we don't want to see a lot more concentration than we have now.

    Insofar as the effect of technology is concerned, it works both ways. Handicapped people now may have better access through telephone banking and maybe through computer banking, but the automatic teller machines are located in inaccessible locations. So this isn't perfect yet, either.

    I guess the reason you're here is that there are quite a few forces working all at once—not all of them in the same direction.

    Jacques.

  (1200)  

[Translation]

    Me Jacques St-Amant: What we're seeing out in the field on a weekly basis, for example, in Montreal, is bankers, banks as well as the Caisses Desjardins, telling young people that they don't want them as clients because they don't have the profile they're looking for. This happens on a weekly basis.

    Therefore, “competitors” spring up. The person who can't obtain a loan for $500 or $600 at a bank or a caisse populaire to replace her refrigerator, for example, goes to businesses that provide so-called pay-day loans and get a loan at an annual interest rate of 300%. For centuries people who have been turned down by traditional institutions have been finding other ways of meeting their financial needs, ways that are more or less legal, more or less correct, more or less decent and moral. For centuries—and I'm referring here to pawnbroking and other similar practices—governments have come together and said enough is enough.

    In some cases, government actions have encouraged traditional institutions to continue serving people. In other cases, certain excessive practices were forbidden. So there is an important role for the government to play. Yes, there can be a market, but it will be a market that will be extremely deregulated and will be extremely harmful to a segment of the population that is being isolated, side tracked. Is that in the Canadian public interest? Is it in the public interest of Canada that 3%, 5% or 10% of the population in one area not be able to open an account in a bank or a credit union?

    Incidentally, we do not feel that the draft regulations currently being considered for the Bank Act will solve the problem of access. These are very bad draft regulations. That was just an aside.

    Thus, yes, you have an important role to play, and it is important that the public have the opportunity to participate in discussions over mergers that may have an impact on those types of services. The mandate and legislative framework for both, the Competition Bureau and the Office of the Superintendent of Financial Institutions, make it very difficult to hold public consultations. In any case, their work is for the most part confidential. That is understandable and legitimate but there has to be some place where the public can express its fears. There are issues that are not under the purview of these bureaus and that the public may want to bring to the attention of government, parliamentarians and the minister.

    Ms. Louise Rozon: I would like to comment on the real impact of such consultations. The request was made in the past for public consultations to be held before a bank branch, for example, could close. The purpose of this was to assess the impact that closing a branch would have within the community and to decide, if the impact was significant, whether the financial institution in question should suffer any consequences for having decided to close its branch anyway.

    So there has to be a way of allowing the public to express its opinions when a credit union or a bank branch decides to close.

    Unfortunately, the Mouvement Desjardins has begun restructuring. Several credit unions are merging and some points of service are being replaced by automatic tellers. Montreal is already feeling the impact of the direction the Mouvement is taking, despite its social mandate and despite the consultations that have taken place within the Mouvement Desjardins, which unfortunately have not been able to prevent this phenomenon.

    The Chair: Thank you.

    Mr. Paul Crête: You gave a very good example. In fact, the Mouvement Desjardins was able to choose not to give into pressure from its members regarding savings and reduction of services, or to get on board. Yesterday someone from the Canadian Federation of Independent Business told us that because of the Mouvement Desjardins, Quebec, compared to Ontario, has more opportunities of giving these services to smaller businesses.

    When we're looking at mergers and public consultations, should we not also look at that issue, that is not only the issue of mergers themselves, but also the global impact that they will have on other stakeholders or banks that are not merging but that will be caught up in that current?

  (1205)  

[English]

    The Chair: Thank you. A brief answer, please.

[Translation]

    Mr. Paul Crête: Do you want to make a comment?

    The Chair: Mr. St-Amant.

    Me Jacques St-Amant: That is one of the reasons we recommend including among the factors taken into account in the public interest impact assessment, the whole issue of risk and different types of risks, both for institutions that merge and for the other stakeholders.

    The problem is that we cannot predict today the potential repercussions two years from now of a proposed merger between institutions X and Y. That proposal could have consequences different from those of a merger between institutions A and B. So it's very hard to come up with a specific and rigid framework. I think you have to keep in mind that many factors will have to be considered and all interested stakeholders will have to be given the opportunity to ask whether this or that factor has been taken into account.

[English]

    The Chair: Thank you very much.

    Ms. Diane Brisebois: Madam Chair.

    The Chair: Yes, go ahead with a very short response, because I'd like to move on.

    Mrs. Diane Brisebois: I think it's important to make the difference between the argument about banks merging and closing branches and those still providing services through ABM machines. I think it's important to understand that while financial institutions might say the number of ABMs has doubled since 1995, most of the growth has been in cash-dispensing ABMs installed by non-financial institutions, meaning there are additional charges.

    Of the 60% of ABMs in Canada owned and operated by financial institutions, only a portion are full-function ABMs equipped to accept deposits. Moreover, ABMs equipped to accept deposits can physically accept only a small number of bills and/or cheques that are the size of an envelope. And customers wishing to make a deposit at an ABM typically must use an ABM located at a branch of their own bank today.

    So let's not forget that while there are a large number of ABMs, they are not replacing the regular, everyday services provided by financial institutions, let alone the services needed by the business community.

    Thank you.

    The Chair: Thank you.

    Mr. Murphy, go ahead for 10 minutes, followed by Mr. Wilfert.

    Mr. Shawn Murphy (Hillsborough, Lib.): Thank you, Madam Chairperson.

    My first question is to the Retail Council of Canada--and the other participants, if they want to jump in. This is on the whole process and, in particular, your request for public consultations.

    Thank you very much for your presentation. I believe you've defined the issues correctly. It seems to me that in the banking industry in Canada, there seems to be a fair degree of competition in the retail sector and in the upper business sector, the blue chip sector, but one of the biggest problems I see is the small and medium-sized enterprises, and especially the retail sector.

    One of the biggest problems I have seen in my past in banking is the withdrawal of banking from certain sectors and certain regions, based mainly on strategic decisions. I assume those strategic decisions were based upon return and weighted equity, as Dr. Kerton has described.

    But in fairness to the banks, if they are allowed to merge--and they are allowed to merge under our present Bank Act--there has to be some clarity as to what's going on, the process. There is a three-step process: competitive issues, prudential issues, and then this so-called public interest, however that's defined. We have to appreciate that for the banks, if they are going to merge, before they get to that stage some very extensive negotiations would have taken place. A fortune would have been spent on legal accounting and tax advice, careers would have been in jeopardy, and share price confidentiality issues would be there. So I believe the process of this exercise is to clarify the rules as to what constitutes public interest.

    It would appear to me, going back to the small and medium-sized enterprises, that the banks ought to be obliged to file a detailed plan as to how the new merged entity would continue to provide quality services on a comprehensive basis to all regions and all sectors within the country. Then we would determine the public interest based upon that plan, because I think that is probably the most important issue.

    But having said that, I don't see how a long, extensive period of public consultations would be feasible. There has to be a certain amount of clarity and a certain amount of timeliness to the issue. I think the banks would be entitled to receive a decision on a very timely basis, and the time is set out in the Bank Act. But on the background of that statement, I don't see how a very lengthy cross-Canada public consultation is feasible or wise, and I invite your comments.

  (1210)  

    The Chair: We'll start with Ms. Brisebois.

    Mrs. Diane Brisebois: Thank you, Madam Chair.

    I think it's clear that in our submission we are not proposing that these consultations occur in every community in the country or that they last an unlimited amount of time. There is a sense of reality here. In fact, in my opening remarks I suggested that we recommend that the Competition Bureau lead these consultations through a third party, realizing that there are statutory obligations that would not allow them to do those consultations directly.

    I think, however, the more important point here in regard to dealing with public interest, as other groups have mentioned, is to identify the areas that need to be studied very carefully, to ensure that if we go forward or if banks go forward with mergers, the public and small and mid-sized businesses still have access to the services they require, that they have the breadth of services and that those services are competitively priced.

    So I don't think it's the length of the consultation process as much as the content of what will be part and parcel of that consultation, to ensure that it's very focused, that it's addressing the issues of concern for the community and for small to mid-sized business.

    Mr. Shawn Murphy: My question is, the merging banks, most merging banks, would be required to follow detailed plans showing that they're going to continue to provide services to all regions and all sectors, and the Senate committee and the House of Commons committee would have to evaluate that, based upon that plan. Again, how are we going to add anything by going to Victoria and Calgary to...? I see a very extensive, complicated process.

    The Chair: Dr. Kerton.

    Dr. Robert Kerton: We're probably going to have to rely on you people a lot more. That's not out of the question.

    One does have to ask about a larger issue, though. If you had to maintain service at current levels, which are semi-competitive right now, it would prevent you from moving to the monopoly level. It removes a whole lot of the incentive in the deal in the first place, because a lot of the profits were going to be made by reducing the number of branches and by savings on supplying services. That's perhaps a good thing, in the sense that only truly valuable ideas will actually see the light of day.

    The possibility that there are economies of scale is something that I think is assumed too easily. I suppose there have been about 200 studies done on this. When you have a lot of small banks--in 1995 there were 10,000 in the U.S.--it's obvious that putting them together gives you economies of scale, and you make some savings on the technology and that sort of thing. But it's very difficult to find further economies of scale once you have really giant banks, as we have. So it's not wise, I think, for us to start off by saying bigger is always cheaper. It's probably the case that we've gotten what we can get out of that. Some of the intelligent things that banks have done with back-shop sharing and so on have helped out with that, too. But it's not necessarily true that there are these efficiency gains to be made. The gains can be made from higher prices, and share values will go up.

    I've been impressed by some of the bankers' statements lately. They're not claiming benefits to the public; they're claiming that they want to have a rate of growth, and they say, if you want us to keep growing quickly, mergers are a lot faster than any other way. That's a true statement. So if you're only looking at shareholders, then monopolizing markets is a faster way to go. As a Canadian, though, you might prefer that they expand abroad by combining with other effective organizations and provide service, so that this is an agility method.

    The idea that there are economies of scale is not very well rooted in economics. You have a lot of cases of mergers that were put together in the late 1990s that were fundamentally unsound, 61% of them. This is not just in the banking industry; fortunes were lost with unwise mergers. So we do have to have the degree of scrutiny of these things that goes beyond the people who have the testosterone drive to get to be bigger and bigger.

  (1215)  

    The Chair: Mr. Murphy.

    Mr. Shawn Murphy: I have a question for Ms. Lott. Perhaps it's a clarification. On the issue of the lack of payday or short-term loans, I agree that there has to be a legislative mandate that the banks have to provide that minimum service at a reasonable price. But are you suggesting that there has to be some kind of legislation or regulation stating that these loans have to be granted by chartered banks?

    Mrs. Sue Lott: I start from the premise that we basically don't regulate the financial services sector in this country very greatly. We only regulate them in terms of disclosure. We don't regulate the amount of fees and charges they put in place. But because of the MacKay task force we are now looking at requiring banks through regulation to offer some very basic banking services to people, and that would be targeted to low-income people. That's an important thing to keep in place. It's important in any changes to the financial services sector that somehow those things are still in play and that everybody in a range of income has access to basic banking services.

    Mr. Shawn Murphy: I agree with that 100%. But you take it to the next step, that the banks would be legislated to make loans, and I don't agree with that. I agree with what you're saying on the access to certain services, such as cheque cashing. But then you've taken it another step to include loans, and I don't agree with you.

    Mrs. Sue Lott: It could be in the form of overdraft protection or reasonable lines of credit. It could take a number of forms. But there has to be some ability to access short-term loans at reasonable rates of interest.

    People are using these services not because they're buying luxury items but because they have a basic need for cash to meet their daily needs. It's a function of how much we've become a credit-dependent society. We have very little savings, and we are mostly credit dependent. It's a function of a lot of things. But the bottom line is that banking services should be accessible to everybody.

    Mr. Shawn Murphy: I agree, but with loans you've taken it to another step that I don't agree with. Perhaps we'll agree to disagree. I find that political legislation in the lending of money is a very unholy marriage and sometimes it can lead to all kinds of perverse ramifications.

    The Chair: It's Mr. Wilfert's turn now. Thank you very much, Mr. Murphy.

    Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you very, Madam Chairman, and I thank everyone for coming today.

    I think a number of very important points, very salient points, were made. Today all of you are representing essentially consumers, people involved with dealing with transactions of the financial service sector, which obviously has probably the biggest impact of any institution in the country in terms of the daily lives of individuals. Unlike some other institutions or organizations where we have seen mergers, this impacts obviously on the daily lives of Canadians.

    I was very interested in a number of the comments that were made. I don't know if there's anyone who can respond to the issue of merger processes in other countries and what has been the impact both on the consumer and on the retail sector, small business sector. Some of you alluded to some of it, but in ensuring consistency in the merger review process, what kind of elements should be in that so that we have consistency if we have in fact proposals that come forth?

    If I understand you correctly, technology is not a panacea as a replacement for human contact. As one who has a bank card, all I do is get money out. Unfortunately, it doesn't make it, but it only withdraws it. But I don't use all the other services that I have access to because I like the human contact.

    In that regard, I think of the comments you made with regard to the issue of someone going to look for a loan as a small retailer. It's very important to know your community, and at the same time there's more to accessing a loan than just raw numbers. It's knowing the community, it's knowing the people, it's knowing the impact. Obviously if you're a very small business, and most of them are under five employees, you can't take two or three hours out of your day.

    In terms of the issue that competition may take different forms, I would like maybe some further comments about the varied aspects that can take or impacts it could have. It's ironic that in one way the Bank Act allows for banks to merge, yet at the same time we're saying, you can merge, but. I don't agree with some of the comments I've heard that we should just let OSFI and the Competition Bureau decide. There is clearly a litmus test that has to be done. But the litmus test has to be the same for all proposals. Therefore, I wanted to get some comments with regard to consistency.

    Finally, Ms. Lott, I share your concerns about foreign-owned banks, more ATMs, and loss of control. I would agree with all those things. And I think this is also very important in terms of the part of our discussions with regard to the Bank Act as well, which is outside of the purview of this. I don't want to get into over-regulating either, but on the other hand, I think there are certain standards that we need to have in this country, wherever you are, whether you're in the most remote part of the country or whether you're in downtown Toronto.

    So those are some general comments and some questions that maybe, Madam Chairman, some of us could answer.

    The final question would be something we didn't really talk about, which is, if you have a merger of five to four or five to three, the vacuum that is often created for other entrants into the marketplace and the failure of other entrants, because often, particularly in the retail trade and others, they're very specialized and they may not have necessarily the broad range of services that a small business owner or even a consumer may need. What's the impact of that?

  (1220)  

    The Chair: Who would like to start this?

    Dr. Kerton.

    Dr. Robert Kerton: The Australians are very much in the same situation as we are. They have four giant banks and are very reluctant to allow any further mergers to take place. It compares pretty well.

    The situation in Europe was one where they expected with the freeing of the market--the 1994 changes and so on--that there would be expansions of banking institutions into other countries. It certainly didn't happen. Liaisons happened. If you were a French bank and you were going into Spain, the French culture and the French bank doesn't serve the Spanish customer very well, so what we saw was a whole lot of mergers there.

    The case that might be most interesting if you think big is better would be Germany, where they tried to get the world's largest bank, but Germany is a different situation for consumers in another way. The federal government provides the Stiftung finance test--this is a consumers' organization--with a huge amount of money to run consumer testing on banks and financial sector activities to see how well they're performing. There are service tests produced four times a year, and this has a very large circulation. That's actually an attempt to try to have German banks succeed internationally. They include the banks in the discussions on how to set the test--for instance, how would you know whether you're doing customer satisfaction well or not--and they set up the test. They share it with the banks. The idea is that German banks will learn from the testing process. You'll learn that your bank is, say, third of three and improve your practices. There are a lot of differences there.

    I don't see any broad support in the Canadian government for assisting consumers in Canada to try to get that high level of testing that would be somewhat of an offset to the giant power of even the five we have now.

    The Chair: Ms. Brisebois, followed by Ms. Lott.

    Mrs. Diane Brisebois: Madam Chair, I'd like to respond to the question with regard to what are the dimensions of the review to assess if the merger is going to have a positive or negative impact on a community.

    I'd like to also add to Mr. Murphy's comments. When he was referring to consultation, he was saying regional consultation or regional banking services. I think it's more appropriate to talk about branch banking services, which is different from just saying regional banking services. That was just a comment of clarification.

    With regard to Mr. Wilfert's question, in our submission we make it very clear that there are four dimensions to local financial services that must be examined within the context of a merger. One is breadth of coverage, meaning that the customers in the communities must have access to the services they need. That does not require consultations in every community, by the way. Another is depth of coverage; customers must have access to all the services they need. Then there's quality of coverage; the services offered must be competitively priced and of high quality, and must be accessible. And finally there's choice of coverage, meaning competition so that they are not, from a consumer perspective, specifically from a small merchant perspective, in a position where they cannot shop around or try to develop a relationship with more than just one financial institution.

    I don't think our submission is saying that consultation has to occur in every community. The submission says that what's important is to set the parameters for the consultation and the parameters for how we judge if indeed those mergers will be beneficial to the communities or not.

  (1225)  

    The Chair: Go ahead, Ms. Lott.

    Mrs. Sue Lott: If I can respond, I am glad to hear you agree with me that this very much is a public policy issue, that bank mergers and bank services are not just economic issues.

    But you also raised the issue of the underlying promise that I think the banks are making in this whole merger issue, that somehow the market will work, that competition will somehow come into play because we'll have other groups, other entities, that will enter the market. But that's a promise. The question mark is how do we ensure this happens, given that we've decided that financial services are market driven and, as I said, we have stepped back from regulating financial services. That's the question I raise.

    I'm not sure I have the answer to that, but I'm here to raise the question about what we've seen in the past. When we saw the Canada Trust-TD merger, we saw divestitures, but we haven't seen more branch banking as a result of that. I look at the Competition Tribunal's decision about the ATM machines where we have lots more competitors, but we have higher prices. I look at what the original promise was that banks made to customers when they went into electronic banking. It was their initiative, and certainly there have been phenomenal benefits of convenience and easy access, but the promise they made was that this would reduce administrative costs and therefore it would be less costly for consumers. We haven't seen that.

    So I'm wary of promises that banks make without some sense of whether we will see that competition and whether we will see a competitive marketplace.

    Mr. Bryon Wilfert: Thank you.

    In terms of the comments about Australia, I don't know, Mr. Kerton, if there is any literature readily available, but I would certainly think it might be helpful. There are so many things about Australia that I have noticed are very similar in terms of some of their issues and policies that I think it might be of some assistance to this committee to look at it and see what the impact has been and what kind of outcomes they're dealing with, if we can get that.

    The Chair: If you have something, Dr. Kerton, please--

    Dr. Robert Kerton: I supervised one of the studies for the MacKay task force, which was on Australia, so that's very easy to make available.

    The Chair: It's probably the same one I've read. So I will get the researchers to circulate to all committee members the one I have in my possession.

    Now we will move to Mr. Discepola, followed by Mr. Cullen, for 10 minutes.

    Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you.

    Thank you to our guests for what I feel is very valid input, very tremendous input; however, very subjective at times, because it's very difficult for us to quantify an awful lot of your concerns and translate that into legislation.

    Ms. Lott, the banks aren't making any promises right now. I find that it's a very different scenario this year versus 1998.

    In 1998 the banks were coming here asking for a merger. They've been able to merge since 1998 and they haven't, and in 1998 they did make promises. I remember very distinctly some of their presidents making promises to set up small-business banks, and so on.

    No bank is going to make a promise that they want more competition. It's against natural evolution of companies, I would guess. What they have said is that they are not afraid of competition, which then begs the question, why aren't they afraid? Obviously they do not fear people entering into the market, because I think the costs of entry are very high.

    So if I take a look at some of the concerns--and I think Ms. Brisebois was very accurate--when you use the terms “breadth of services”, “depth of services”, “quality of service”, “choice of access”, they're very valid. I've had both a retail business as well as a high-tech business, so I know the kinds of services that are required, but I don't know how you can translate those concerns into legislation.

    How do you decide on what quality level and measure those quality levels, and then put that in the form of a bill or regulation and adopt that? It's very difficult. That is why I come back to Mr. Murphy's question, because I may be of the minority few, maybe the only one on the committee, who feel that the politics of the ultimate merger process should be taken out totally.

    I understand from maybe misinterpreting some of your comments that most of you favour that the committee on banking and industry in the Senate, for example, and also our committee have public hearings, that the Minister of Finance finally intervene.

    If you take a look, we have to allow two to three months for public hearings at our committee. You might argue that it may be one or two, but anyway, if you take two to three months for our hearings, two to three months for the Senate, two to three months for the Minister of Finance to come back and study our report, four to six months for OSFI to do their analysis, and maybe anywhere from six to nine months for the Competition Bureau to do their analysis, granted, some of them can overlap, but still, probably the best case scenario would be that the banks would expose not only their inner workings but every single detail--level of competition, market share, price structures, and so on. They would be very, very vulnerable to a very long process that, in the ultimate, a member of Parliament or a Senate committee or any committee could then simply reject. I argue that this is probably why none of the banks have come forth since 1998 with merger proposals.

    So I would like to know exactly from you.... Nobody has brought up OSFI, but obviously, from a soundness issue, I think everybody feels that they are the best qualified to make sure that if we go from five banks down to three, our financial services sector, and particularly the banks, remain the most sound in the international market, probably.

    Ms. Brisebois, you've alluded to the Competition Bureau. You seem to have enough confidence, but you would still like them to have public hearings. I'm not sure if they are able to have the types of public hearings that we have. So how do you instill enough confidence, or have enough confidence in those two organizations, and do you agree that we should probably take the ultimate decision out of the political realm so that we can give the security to the banks that do want to merge?

  (1230)  

    The Chair: Go ahead, please.

    Mrs. Diane Brisebois: Thank you.

    I agree with most of your points. I'd like to clarify that we are not trying to legislate the dimensions by which we decide if the mergers will have a positive or negative impact on the community. In fact that's not what we're proposing. What we're proposing, however, is that there need to be parameters and guidelines regarding how we judge the kind of impact those mergers would have on the community.

    We are not suggesting broad consultations in the sense of holding them in every community. But there is no question that the Competition Bureau or the Office of the Superintendent of Financial Institutions will need some parameters and to discuss the major issues with groups that can provide the information. For example, if one of the issues is how merchants will be served following a merger, you would have to assume there would be consultations with merchant associations and groups. This is what we mean by consultation.

    The Competition Bureau has been involved in consultations through third parties in the past. In fact we are involved in these consultations with them on other issues. So I think there's a bit of confusion when we're talking about consultations. And there's certainly some confusion about our presenting the dimensions for those consultations. We do not mean them to be legislated. We are suggesting that we need to set some parameters so we can in fact judge whether those mergers will be negative or positive.

  (1235)  

    Mr. Nick Discepola: What the banks and the minister are asking for are clear-cut guidelines on what the public interest criteria should be. I think the reason he's asking for this is probably that he wants to take the political process out of it, and probably even more so for the banks, so that they know under what criteria they could merge.

    Having said this, as a government we are in favour of mergers. But right now it's very subjective, because they can go through all of the exercise and get approval from the OSFI and the Competition Bureau, yet at the end of the day it's still subjective. In doing our job as a committee, what we should be working hard for today is to give clear-cut guidelines on the public interest aspect of it. Then we should leave this aspect out of the equation, so there is no more involvement by parliamentary committees, or even the Minister of Finance or the Prime Minister's Office, for example. I think this is where we're vulnerable in this process, because the banks are going to be exposed.

    We were very concerned in 1998 about access to capital for small businesses. At that time, the banks also wanted to get into car leasing and over-the-counter insurance sales. Tied selling also came into the equation. One thing we ensued at that point was to create the office of independent ombudsmen. The banks quickly feared this proposal and decided to have an ombudsman's office in each of their own major banks. I think these might exist in some of the banks, but they don't have very much work to do.

    If I take a look at some of the concerns that Option Consommateurs has expressed in terms of service levels, guaranteed access to some of the basic banking services and, in terms of complaints, for example, whether they be from the small business sector or not, what do you think of the idea of creating an independent ombudsman's office to be mandated to look at these conditions and criteria, as a condition for merger?

[Translation]

    Do you have an opinion on that, Mr. St-Amant? You probably do.

    Me Jacques St-Amant: Yes, but I'm afraid the chair will cut me off and tell me it's a bit off topic. I will tell you that we are highly dissatisfied with the way financial institutions currently handle complaints. We sincerely hoped the Secretary of State would make use of the provisions Parliament added to the Bank Act to create a more independent complaint management mechanism. Unfortunately, that is not the choice that was made.

    I would like to come back to your main point, which I believe was that in the review process of mergers, any subjectivity should be removed and the process should be sped up. The Bank Act gives the Finance minister the final say. Section 228(4) sets out a series of criteria for him to take into account. The Act is very specific. The minister may take into account any matter he considers relevant. He has that discretion, and you included it in the Act. The question now is how it should be exercised. Should it be exercised behind closed doors, or should Canadians have a say in such an important decision?

    A merger between two major Canadian banks is not the same thing as a merger between two glass manufacturers, for example. Banking is a strategic, highly concentrated industry. A merger will inevitably have direct implications on millions of clients of merged banks and indirect repercussions on the entire population. As parliamentarians, do you feel that officials and a minister on the 20^th floor should make that decision alone, or would you like to be involved in the process too and let Canadians also have their say?

  (1240)  

    Mr. Nick Discepola: No politician should be involved. The ground rules should be set, and if the banks that want to merge comply with those rules and conditions, they should be allowed to merge, provided they pass the tests of the Office of the Superintendent of Financial Institutions and the Competition Bureau.

    Me Jacques St-Amant: But that raises a whole other question, which is how to determine what exactly those tests should be. Just going back to the issue of access to banking services, for example, what evidence or matter for consideration should a banker provide so that the appropriate officials can make a decision and protect the public interest? Bankers won't want to spend a lot of energy on providing that evidence, but officials might want a lot of information.

    But if in the process all of the matters already set out in the guidelines, for example, are taken into account, and if an attempt is made to compile a detailed inventory of everything that should be done and all of the matters for consideration, that's a huge job. If you want stakeholders like ourselves, in cooperation with the industry, to sit down at the table and go through this process, we would be pleased to undertake the exercise, especially if you give us the resources we need to do so. But be aware that it's a huge job.

[English]

    The Chair: Dr. Kerton, even though the time has expired, I know you wish to make a comment, which I will allow.

    Dr. Robert Kerton: There might be a few items we could remove from the list. We could remove basic banking, for example, and make an arrangement for it. If a bank gets a charter with a certain right amount of monopoly privilege from the state, then it must meet these terms for basic banking as part of the agreement. Maybe you could take this out of the discussion. So with a little intelligent foresight, there may be a few items you can do this with.

    The Competition Act never really included the idea that there should be any public benefit. They're based on efficiency. I believe the address they make on efficiency would prevent the mergers that are coming up every month. You say these haven't happened since 1998, but I don't think there was ever any stop to the pressure for mergers.

    So the Competition Act may work on the efficiency side. Are there economies of scale or not? If the banks are hypothesizing there are economies of scale and there are not, they may be able to stop it. But the Competition Bureau was never asked to discuss sharing the benefits. Are these to be wholly for the shareholders of the monopoly banks at the expense of all local businesses and consumers or what? This isn't handled anywhere. This is what your committee could do. There's nowhere else that talks about the concentration of power.

    There are some factors you raised quite well, actually, concerning innovation and quality of service, which aren't addressed by OSFI or the Competition Act. One of their rules talks about innovation, but it doesn't push it through to the point of view of the benefit of Canadians in general.

    The last issue was the “too big to fail” argument.

    So there are some issues that haven't been handled by those other two institutions. This is why we have to rely on a committee like this.

    The Chair: With that, we'll go to Mr. Cullen.

    Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair.

    Thank you to all the presenters.

    Mr. Discepola, I don't know if I'm in the minority either, but I believe there is a role for parliamentarians to get involved in the public interest discussion on bank mergers. They're significant public interest questions, in my view. I think we need to clarify what they are as much as possible.

    I think we are deluding ourselves if we think we could ever say that the public interest tests will be from A to M, and that it'll be crystal clear. There'll be always some subjectivity. I think this is where parliamentarians can play a role—after we have defined as best we can what the criteria should be. I think we need to make this clear.

    While I have a question for Mr. Kerton and Ms. Brisebois, I'd like to come back just momentarily to Mr. St-Amant's remark. I remember you appeared in Montreal, or perhaps it was Ottawa, when we did the restructuring of the financial services sector. You expressed some concerns then about the lack of recourse for the failure in terms of financial services in your constituency. If I recall correctly, I think you talked about the low-cost account and a few other things.

    As a result of your interventions and many others, the government set up the Financial Consumer Agency of Canada. Now I guess what I'm hearing from you, which I'm sure you know about, is that it's not working, or that nothing has improved.

    Me Jacques St-Amant: I certainly wouldn't say the agency is not working. They're doing a fine job on a number of issues. In my view, the problem with the agency is that its mandate and power are much too limited. This is not something they can easily change.

    I suppose this is another debate, which I'd be happy to have with you.

  (1245)  

    Mr. Roy Cullen: Okay, thank you. I would be interested in doing that.

    I'd like to move now to Mr. Kerton. You commented about a number of these mergers failing, particularly bank mergers. That came up in testimony yesterday and is on the public record. I think it's a valid point. I don't know if you meant to imply that because they failed they didn't achieve, de facto, the economies of scale they might have been seeking. Now we hear from the banks. We talk about economy of scale and scope.

    Some of the failures, as we heard yesterday, were due to cultural issues, technology issues, etc. But assuming a perfect world, in the sense that cultural issues are dealt with and technology is integrated without much difficulty, are there any logical areas where there should be economies of scale in a good bank merger? We've heard about credit cards. We've also heard about information technology. Are there any areas that make sense to you?

    Dr. Robert Kerton: I think the market can be relied upon for those things. When we see the back-shop operations combining, that's a good outcome of market pressures. But we haven't seen any examples that would convince us that the current legislation against bank mergers is preventing something from happening--they can't be done some other way. We should try to facilitate that other way as far as we can.

    If we had very easy entry to the Canadian market--if you didn't even need a bank charter, just a rubber-stamp charter--there might be enough entries to alleviate all of our concerns. But that would mean the market rate of return to the existing banks would drop significantly and they wouldn't necessarily be interested in mergers. Part of the drive for mergers is because you'll have a highly concentrated Canadian market, and there are very rich returns to the participants from that. They can survive quite nicely the way they are.

    On the other thrust, you must have seen people here from the merger makers. They can make huge fees. In fact, the Canadian banks wanted to collect the money in Canada in the 1990s to be able to expand in New York and do some of those merger deals--which turned out so badly. But that was one of the forces at play there.

    You are hearing from people who have an immediate and incredibly high rate of return in putting mergers together. I think you have to take that with a grain of salt, because they also get paid for taking them apart.

    Mr. Roy Cullen: It's interesting that you mention other ways. I've had certain sympathy with the scale argument with respect to credit cards. In some of my informal discussions with the banks, I've said, “Why don't you just hive off your credit card operations and merge till the cows come home?”

    I'd like to come back to the question of information technologies. I don't know if you've been exposed to this in your work, but I find it a little confusing that when you look at information technologies and pooling resources, there's a certain generic type of basic research or work in systems, but there are many proprietary elements of information technology development and implementation.

    Have you done any work in this area? Can you see where there are synergies or economies of scale in the information technology systems? When do they stop and when do they end?

    Dr. Robert Kerton: Madam Brisebois related a point where the local banker actually understood something about the borrowers. That information is valuable for making intelligent loans. If you generalize that because you think there are going to be savings from having a technological decision in Toronto, the Toronto decision is going to be a generic one-size-fits-all one. You'll lose the extra information you had from that branch. So I think the returns haven't been even higher because there's been an information loss, along with some obvious gains.

    Mr. Roy Cullen: I was thinking of it in the context of mergers. The Bank of Montreal and the Royal Bank have their information technology shops. They'd pool them and do a lot of joint development work. The part I don't fully understand--and I'll be asking the bankers about it--is where does the proprietary stuff...? You're not going to reveal your trade secrets by working with a bunch of systems analysts and programmers who are all working on the same stuff, if you see what I mean. Where are the synergies and scale there?

  (1250)  

    Dr. Robert Kerton: I just wanted to make the point that I think it's been over-estimated. I don't want to oppose it; a lot of those things were quite successful.

    I live in a part of the world where Canada Trust was a really vigorous competitor. I had an account there for 30 years. When they were taken over, we were told there would be economies of scale and efficiencies. I make it a practice, whenever I go to a teller, to ask how things are working after the merger, and I hear over and over that the technology Canada Trust had before was superior to what's available now, or even 10 years ago. This is what I hear. It is a little unscientific, just talking to tellers.

    If you talk to customers, they're not so happy about it. When you talk to the company...the combined company must have information on customer satisfaction that they're not telling us. That would be really useful evidence.

    I had to do some banking for my father, and I went to a branch that said TD Canada Trust. The damn thing was closed. You say, “What the heck, I've been going to these branches for six days straight and they're supposed to be open”. Well, I went to one that was a TD branch before, you see. The TD ones haven't changed; they're still open under the old banker's hours.

    So if you talk about gains that have been made, I think some of those claims are a little overstated. It's not even clear that this combination was to the advantage of Canadians.

    Mr. Roy Cullen: I think too that gets into the question of systems integration. I, too, have been to TD Canada Trust, and I was told that at the customer interface level...I can't remember which bank was better, the TD or Canada Trust, but in terms of the backroom analysis, one was better than the other. So they were trying to pick the best of both worlds and trying to integrate that.

    How much time do I have, Madam Chair?

    The Chair: Two minutes.

    Mr. Roy Cullen: Thank you.

    I'll go quickly to the Retail Council.

    You've done a very informative job of listing the kinds of activities in which retailers have to interface with branches. But one of the questions that bankers raise with us is that the whole role of banking is changing; we're getting into the computer-based banking. Right now one of the obstacles or barriers to competition is the bricks and mortar, the presence Canadian chartered banks now have in local communities.

    If that weren't the case, and we could go to virtual banks, then we could probably attract more competition. I'm just wondering, if you were to really try to think outside the box for a moment...and I read all these things and say, yes, you need a branch, but if we were going toward--we're probably not there yet--a chequeless society, can you envisage not needing branches ever? I know you're not saying that here, and I know your position is that you don't want to see the branches go, but let's say in a futuristic sense, can you see that at some time we won't need branches, that we'll just have virtual banks?

    Mrs. Diane Brisebois: With all due respect, I feel like saying, “Beam me up, Scotty”.

    Yes, if I want to dream, I can imagine that in 20 years there will be no brick and mortar financial institutions. Everyone will be using virtual money. You will be able to do currency exchange with voice activation. But does that serve the discussion today with regard to serving the public and setting some parameters by which to judge if the bank mergers will have a positive or negative impact? I'd have to say no. It would make an interesting information technology conversation at one point, but the reality is that it ain't going to happen in the near future.

    Mr. Roy Cullen: How much time do I have left?

    The Chair: I'm going to allow it.

    Mr. Roy Cullen: Could you name, let's say, the three top areas--Letterman's top three--where you feel it would be really tough to make progress in virtual banking? The ones that occur to me are making a deposit.... All this other stuff, for example, making a loan, I think you'll be doing on a terminal very soon. Some of it is happening now. But what are the real tough ones?

    Mrs. Diane Brisebois: I have to go on record to say that I disagree with the belief that loans or lines of credit will be done on a keyboard. I think the question this committee needs to ask itself is not what the financial institutions are going to force consumers to do, but what consumers and small businesses need, so the financial institutions can respond to them.

    I represent people who live in the real, real world--retailers. They are the storefront of the economy. They deal with consumers every day. I can assure you that if the retailer were to force a product or merchandise, a price, or a certain number of store hours on the consumer, the consumer would go somewhere else. So maybe the conversation here shouldn't be so much on what banks want to do. The kinds of technologies that would be useful to them may be the conversation here, and I thought that's what the conversation was about. What are the realities at the consumer level? Where are they at in acceptance of technology? What are their real needs and concerns? How do we marry that with bank mergers?

    I'm not sure I answered your question, but--

  (1255)  

    Mr. Roy Cullen: I know I've run out of time, but some of the technologies are real assets. I don't go to my branch anymore; I use the automatic banking machines. I thank whomever for implementing that kind of technology.

    If you say the banks would force those things, you're attributing something, to my thinking, that is not there. Some of these technologies will provide huge benefits to retail, I can promise you that.

    Thank you.

    Mrs. Diane Brisebois: I have to tell you that from a technology perspective, the example you gave is not appropriate. You say you just go to the bank machine. I'm hoping that if you have a Royal Bank debit card you're not going to a bank machine at Canada Trust or TD, because you won't be able to make a deposit. You can take out money, but you can't make a deposit.

    We need to be careful how we use technology as an example, and we have to use it in the right context. That is my only comment.

    The Chair: Mr. St-Amant wants to make a brief comment on that.

    Me Jacques St-Amant: We must remember that about 30% of Canadians are functionally illiterate. The Bank Act will be reviewed before those people make their bank transactions on the Internet.

    The Chair: Thank you very much.

    I will remind committee members that Monday we will be here with our bank executives. You should maybe check your notices. We have four of the six witnesses being added to the schedule, with two yet to be confirmed, but we will do it within the same envelope of days of hearings. So you will want to see that.

    On behalf of the committee members, to our very good witnesses today, I appreciate the time you've taken to prepare your briefs, to attend, and to answer our questions as we embark on this process.

    Thank you very much. Merci beaucoup.