FINA Committee Report

Pat Steenberg

Marion Wrobel

has the honour to present its

In accordance with its mandate under Standing Order 108(2), your Committee has studied Report of the Task Force on the Future of the Canadian Financial Services Sector (Final Report) and has agreed to report the following:

In compliance with the statement made by the Chief Government Whip in the House of Commons on October 2, 1998, reflecting an agreement reached by the whips of all parties, the Standing Committee on Finance received submissions and held further hearings in 1999 on the Report of the Task Force on the Future of the Canadian Financial Services Sector.

On March 2, 1999, the Committee heard from the Coalition québécoise pour le maintien des services bancaires personnalisés. This coalition, whose primary concern is with access to basic financial services, represents just over 20 groups in the province of Québec.

The Coalition argued that the barriers to access to financial services faced by disadvantaged groups have not been eliminated and are manifesting themselves in new ways. Although the MacKay Task Force Report concentrated on the barriers created by excessive identification requirements, it did address the issue of holding periods on government cheques and the provision of basic service packages. According to the Coalition, a variety of other banking practices are emerging that also have the effect of limiting access to basic services. These include credit checks on new customers, and the general reduction in personalized banking services as full service branches are closed, or their hours of operation reduced, and greater reliance is placed on automated teller machines.

The testimony also presented evidence on the complexity of service packages offered by banks, the lack of available information on low-cost service packages and the higher fees charged for personalized, as opposed to automated, services.

The Committee is grateful for this additional information. The Committee supports the concept of access to basic financial services at reasonable cost and terms. It endorses a co-operative solution to this problem, with legislation to be used only as a last resort. This is why we supported, with one exception, recommendations 88 to 92 of the MacKay Task Force report, all of which dealt with the issue of access to basic financial services. These recommendations addressed the issues of cheque holding periods, the direct deposit of government benefit payments, the establishment of indemnification agreements between governments and financial institutions, basic service packages and identification requirements. The recommendations also suggested that the federal government undertake a study to determine the extent and causes of the barriers that prevent certain groups of Canadians from accessing basic services.

It is for these same reasons that the Committee supported recommendation 93 dealing with access to branch services. That recommendation suggested a minimum four months of notice prior to the closing of any branch, and greater co-operation between institutions and communities when branches are closed.

The Committee believes that these recommendations are sufficient to address the practices cited by the Coalition in their presentation to the Committee. In December, we recommended that the government move quickly to implement those parts of the MacKay report with which we were in agreement. We stand by this and believe that an expeditious response by the government would address the concerns of the Coalition.

The Committee also received a submission from Mr. Gaétan Gagné, President and CEO of l'Entraide Mutual Life Insurance Company. That submission criticized the provisions in the federal Insurance Companies Act that prohibit the transfer of insurance portfolios from federally chartered life insurance companies to provincially chartered companies, unless the latter are regulated by the Office of the Superintendent of Financial Institutions (OSFI).

Similar criticisms have been heard by the Committee in the past. This is a specific example of a broader problem, namely regulatory overlap and duplication. The Task Force recommendations 115 and 116 dealing with regulatory overlap were endorsed by the Committee. We believe that the delegation of regulatory authority to OSFI would solve this problem. In the meantime, greater regulatory harmonization and the recognition of home-jurisdiction regulation would address the concerns of Mr. Gagné. Again, the Committee believes the government should respond to the Task Force recommendations in a timely fashion.

Having reviewed this additional evidence, it is our opinion that the recommendations made in the 12th report of the Committee continue to be appropriate. Consequently, the Committee recommends to the House of Commons that the evidence, analysis and recommendations of "The Future Starts Now: A Study on the Financial Services Sector in Canada" be deemed to be the final report of the Committee.

A copy of the relevant Minutes of Proceedings (Meeting No. 173) is tabled.

Respectfully submitted,

Maurizio Bevilacqua, MP

Chair

The BQ disagrees with the statement that the recommendations contained in the MacKay report respond to the concerns by the Coalition québécoise pour le maintien des services bancaires personnalisés. In particular, in our opinion, community reinvestment by banks will remain nothing more than a good intention unless appropriate legislative provisions are passed and a clearer mandate to this end given to the Superintendent of Financial Institutions. This report contains no such recommendations.

Concerning the problem facing provincially regulated insurance companies, Mr. Gagné's brief is eloquent and illustrates a situation the BQ has long denounced. In fact more than two years ago, we actively supported Mr Gagné's efforts without, however managing to make the Finance Minister bend in the matter of this injustice that affects mainly Quebec alone.

The Committee nevertheless draws the wrong conclusions in proposing to delegate regulatory powers to the Office of the Superintendent of Financial Institutions. The solution to this problem, as set out in recommendation N^o 1 contained in the brief presented by l'Entraide assurance-vie, is that the federal government amend the insurance companies legislation in order to allow federally regulated insurance companies to sell all or part of their policies in Canada to a provincially chartered insurance company, subject to approval by the Finance Minister.

In addition, given the know-how Quebec has developed and the advance it has gained in regulation and in consumer protection, the BQ proposes that the federal government recognize provincial jurisdiction and begin government-to-government negotiations in order to delegate regulatory powers to the appropriate provincial institutions.

Meeting No. 173

Wednesday, March 17, 1999

The Standing Committee on Finance met in camera at 3:36 p.m. this day, in Room 208, West Block, the Chair, Maurizio Bevilacqua, presiding.

Members of the Committee present: Carolyn Bennett, Maurizio Bevilacqua, Scott Brison, Nick Discepola, Ken Epp, Sophia Leung, Karen Redman, Nelson Riis, Monte Solberg, Paul Szabo and Tony Valeri.

Acting Members present: Jason Kenney for Richard Harris, Paul Steckle for Tony Valeri, Serge Cardin for Yvan Loubier.

In attendance: From the Library of Parliament: Marion Wrobel, Senior Analyst.

The Chair presented the Sixth Report of the Sub-Committee on Agenda and Procedure, which was concurred in and reads as follows:

It was agreed, - That the Committee will consider a draft final report on the Report on the Future of the Canadian Financial Services Sector (MacKay Report) on Wednesday, March 17, 1999; and

That opposition parties wishing to submit a dissenting opinion may do so provided that such opinions are delivered to the clerk of the Committee, in both official languages, no later than Tuesday, March 23, 1999.

It was agreed: - That the Committee host a dinner on the evening of Monday, April 19, 1999 during which it will meet with five representatives of the Brazilian House of Representatives Finance Committee to discuss Canada’s credit union system.

It was agreed: - That the Committee strike a sub-committee to consider the implications of the income tax structure on Canadian families; and

That the Research Officer from the Library of Parliament be instructed to draft terms of reference for the study to be considered by the Committee at its next meeting.

In accordance with its mandate under Standing Order 108(2), the Committee resumed its examination of the Report of the Task Force on the Future of the Canadian Financial Services Sector (see Minutes of Proceedings dated Monday, September 21, 1998, Meeting No. 106).

The Committee proceeded to consider a draft report.

Moved, - That the draft Report be adopted as the Committee’s Fifteenth Report to the House and that the Chair be instructed to present it to the House.

After debate, the question was put on the motion and it was agreed to, on division.

It was agreed, - That the title of the Fifteenth Report be The Future Starts Now: A Study on the Financial Services Sector in Canada.

It was agreed, - That the Committee authorize the printing of dissenting opinions from the opposition parties, provided they be no more than two pages in length and be submitted to the Clerk in both official languages no later than 4:30, o’clock, p.m., on March 24, 1999.

It was agreed, - That the Chair, researchers and Clerk be authorized to make such typographical and editorial changes as may be necessary without changing the substance of the report.

At 3:50 o’clock, p.m., the Committee proceeded to consider its future business.

It was agreed, - That the Committee authorise the payment of expenses incurred for extending hospitality to a Brazilian congressional delegation, for a dinner meeting held in the Parliamentary Restaurant on Monday, April 19, 1999, and that these expenses be paid out of the Committee's approved budget for the fiscal year ending March 31, 2000.

It was agreed, - That, pursuant to Standing Order 108(1), a Sub-Committee of the Standing Committee on Finance be established to consider the implications of the income tax structure on Canadian families and to report thereon to the Standing Committee.

Moved, - That the Sub-Committee be composed of 2 members of the Reform Party, one member from each of the three other opposition parties and six government members.

After debate, the question being put on the motion, it was, by a show of hands, negatived: YEAS: 2; NAYS: 9.

Moved, - That the Sub-Committee be composed of one member from each of the four opposition parties and five government members and that the Sub-Committee members be named after the usual consultations.

The question being put on the motion, it was agreed to, on division.

It was agreed, - That Nick Discepola would chair the Sub-Committee.

It was agreed, - That the Sub-Committee would report back to the main Committee on or before June 15, 1999.

The Committee proceeded to consider draft terms of reference for the Sub-Committee’s examination of the implications of the income tax structure on Canadian families, which were presented as follows:

"The House of Commons Standing Committee on Finance will establish a Sub-Committee to study the tax and transfer system as it applies to families with dependent children. This investigation is to examine the impact of federal policies and determine if they meet the goals of the Government of Canada, to provide support to families with dependent children in an equitable manner.

The Sub-Committee is to consider the situation of different family configurations (single parent, dual parent-single earner, dual parent-dual earner) at various income levels to establish if the above-noted goals are being consistently met.

In this respect, the Sub-Committee will hear from expert witnesses and other interested parties, and report its findings to the Standing Committee on Finance by June 15, 1999. The Sub-Committee Report should include estimates of the financial impact on families and the fiscal consequences to the government of any recommendations it might make."

Moved, - That the words "meet the goals of the Government of Canada, to provide support to" in the second sentence of the first paragraph be deleted and be replaced by the word "treat".

After debate, the question being put on the motion it was agreed to.

Consequently, paragraph two is also modified to read "goal is" in place of "goals are".

The amended terms of reference were approved and read as follows:

The House of Commons Standing Committee on Finance will establish a Sub-Committee to study the tax and transfer system as it applies to families with dependent children. This investigation is to examine the impact of federal policies and determine if they treat families with dependent children in an equitable manner.

The Sub-Committee is to consider the situation of different family configurations (single parent, dual parent-single earner, dual parent-dual earner) at various income levels to establish if the above-noted goal is being consistently met.

In this respect, the Sub-Committee will hear from expert witnesses and other interested parties, and report its findings to the Standing Committee on Finance by June 15, 1999. The Sub-Committee Report should include estimates of the financial impact on families and the fiscal consequences to the government of any recommendations it might make.

It was agreed, - That the main Committee would support a decision by the Sub-Committee to travel, should the Sub-Committee so decide.

At 4:25 o’clock, p.m., the Committee proceeded to consider a draft proposal for briefing sessions and Pre-Budget Consultations.

It was agreed, - That the Clerk and the Research Officer prepare a program for a briefing session or sessions on the general theme of productivity to be held during the last two weeks of April and/or the first week of May. It was also agreed, that the issue of self-employment be addressed.

It was agreed, - That the draft proposal for the 1999-2000 Pre-Budget Consultations be discussed at the Committee’s next meeting.

At 4:30 p.m., the Committee adjourned to the call of the Chair.

Pat Steenberg

Clerk of the Committee