FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 18, 2000

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I will call the meeting to order and welcome everyone here this evening.

As everyone knows, the order of the day is Bill C-38, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

We have the pleasure to have with us two witnesses: from the Canadian Payments Association, Mr. Robert Hammond, general manager; and the Canadian Banking Ombudsman, Michael Lauber.

As you probably know, as you've appeared in front of us before, you have five to seven minutes to make your presentation. Thereafter we'll engage in a question and answer session. We usually begin with Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): I guess you're putting me on notice to stay awake.

The Chair: Mr. Hammond.

Mr. Robert Hammond (General Manager, Canadian Payments Association): Mr. Chairman, I want to thank you and the members of the committee, first of all, for inviting the CPA and its some 125 members, which currently consist of banks, trust and loan companies, credit unions, and caisses populaires, to provide comments this summer on Bill C-38, and for inviting us here tonight to speak to those comments.

During the government's review and consultation process we submitted a number of recommendations for amendments to the Canadian Payments Association Act, to the Department of Finance, to the Payments System Advisory Committee, to the MacKay task force, and to the parliamentary committees, including this one. We're very pleased that most of our recommendations are reflected in part I of the Canadian Payments Act, which is going to replace the Canadian Payments Association Act.

Under part I of that act, a number of important matters have been left to regulation, such as the criteria for CPA membership and the allocation of director positions among the various classes of our members. Without knowing the content of those regulations, it's difficult for us to comment on those aspects of the legislation; however, we do have some general observations on the Canadian Payments Act.

First and foremost, I want to say that the CPA supports the government's policy to expand access to the payments system to the life insurance companies, to the money market mutual funds, and to the securities dealers. We were very pleased to note in the press release that accompanied Bill C-38 that the government proposed to expand access to these new types of institutions, subject to their meeting certain criteria with respect to regulatory oversight and access to liquidity. This pleases us, because we think it's going to continue to ensure the safety and soundness of Canada's payments system.

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We assume that the criteria for regulatory oversight and for liquidity are going to be set out in the regulations that the Governor in Council can make with respect to the requirements for CPA memberships, so we're looking forward to seeing those regulations.

In terms of consultation with the users of the payments system, we were delighted to see that the legislation enshrines the existence of the stakeholder advisory council, which was set up four years ago by the CPA, and we're very happy with the objects that are set out for the council in the legislation. We agree with those completely.

On matters of governance, again the association is very pleased with the proposal to expand the CPA board of directors to include three independent directors. We haven't had independent directors up until now; the statute hasn't provided for independent directors. So we're pleased with that.

Since the process for determining the number of directors that will be elected by each class of member is going to be done by regulations, we can't comment on that. That's quite a sensitive area. We'll be interested to see how that works out.

There are also other aspects of the governance structure that are going to be in regulations, so we can't comment on those, but I do want to say we have been pleased that the Department of Finance, which is currently working on the development of those regulations, has been in consultation with us. In other words, they haven't told us what the regulations are going to say, but they've been asking us questions and talking to us about them. So we're pleased with that process.

With respect to oversight, the association does support the power of the minister to issue directives. This is a new power. The minister will have the power to issue directives to the CPA to change or amend any of our bylaws, rules, or principles that the minister thinks are contrary to the public interest. We're not concerned about this, because there is a provision in the legislation that indicates that the minister must consult with the board before he or she issues a directive. We think that will work fine.

However, in the small chance that there are opposing views—and again, we don't think that's likely to happen—we would appreciate an opportunity to pursue an effective means of recourse. In this respect we have some discomfort that the legislation does not permit a stay of the minister's directive pending the final disposition of an application for a judicial review of the directive. It's a small discomfort. We just mention that. That's the one thing we're going to mention about the legislation.

To sum up, we're very pleased with the legislation, and we're looking forward to welcoming new members and to implementing the provisions in the legislation as soon as it's passed. But I will say that to be in a position to do this quickly, we need to bring our bylaws and rules and some of our administrative practices into line with the new legislation, and as I mentioned, some of the important aspects of the legislation, for example, the criteria for membership.

The legislation says the members, all members, must meet the criteria set out in the regulations. They must also meet the criteria as set out in the CPA bylaws. So for us to be able to do those bylaws, we need to see the regulations first. We're looking forward to seeing those regulations, because it's difficult for us to make the progress we would like to make in getting ready to implement the legislation without seeing those regulations in draft form. We hope they'll be available in the not-too-distant future.

That concludes my comments.

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

We'll now hear from the Canadian Banking Ombudsman, Mr. Lauber. Welcome.

Mr. Michael Lauber (Canadian Banking Ombudsman): Thank you very much, Mr. Chairman.

I'm Mike Lauber, the Canadian Banking Ombudsman, and I've been in that role for the four and a half years the office has existed. I want to thank the committee for inviting me to speak to you about Bill C-38 today.

I want to talk to you about the proposal for the creation of the Canadian Financial Services Ombudsman, referred to as the CFSO, and the need for a comprehensive redress system. I also want to say a few words about the relationship between the redress provider, such as the CFSO, and regulators, such as the proposed Financial Consumer Agency of Canada. Before delving into these issues, I want to take a moment to remind you about the Canadian Banking Ombudsman and its mandate, structure, and review process.

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The CBO, the Canadian Banking Ombudsman, was established in 1996 to help small businesses resolve disputes with their bank or its subsidiaries that they have not been able to settle directly. Shortly thereafter, our mandate was expanded to include disputes involving individual customers.

The scope of the CBO includes all customers of the bank financial groups. Accordingly, we investigate complaints relating to banking services, insurance, securities, mutual funds, trusts and estates, and any other products the banks service.

The CBO does not deal with systemic issues such as the general pricing of products, credit-granting policies of the banks, and branch closures. We do not address matters that have been or are currently before the courts.

Disputes come to the CBO only after the bank's internal complaint resolution processes, including a review by its ombudsman, have been exhausted. There is no limit to the amount of redress the CBO can award to complainants.

The CBO is a completely independent organization, managed by a board of directors at arm's length from the member banks and financial institutions. The board of directors includes six independent directors, who make up the majority of the board, and five directors who are senior executives of the member banks.

The board sets the budget of the CBO. However, it plays absolutely no role in reviewing or advising on complaints. Full responsibility rests with the ombudsman, and there's no appeal to the board of directors and no board input on recommendations. Another indication of the independence of the ombudsman position is that he or she cannot be dismissed without the unanimous consent of the independent directors.

Regarding the proposed CFSO, in the June 1999 white paper the Minister of Finance indicated that the federal government would work with financial institutions to establish an ombudsman independent of government and industry called the CFSO. Much like the CBO, the CFSO would be a non-profit corporation with a majority of directors independent of the industry. The board of directors would appoint the ombudsman and approve the CFSO's budget.

Under Bill C-38 banks and their designated affiliates will be required to be members of the CFSO once established, while other federally regulated financial institutions may join the CFSO but would be required to join a third-party dispute resolution system.

The CBO supports the CFSO initiative in that it is to be independent of both industry and government and designed to provide a quick and cost-effective alternative to the courts. However, we believe the primary goal must continue to be the establishment of a comprehensive dispute resolution system.

The board of directors of the CBO and I have consistently supported the idea of a single independent ombudsman providing seamless coverage for all consumers of financial services. We made that recommendation to the MacKay task force in 1997 and have taken that position consistently since then.

Considering the convergence taking place in the financial sector, the need for this kind of one-stop service has never been greater. Following the passage of this bill, it will be increasingly hard to distinguish between the services provided by a life insurance company, a bank, a credit union, or an investment dealer. They will all look somewhat the same.

Consumers would find it confusing if they had to choose between a variety of slightly different dispute resolution processes or if they had to use more than one process in a dispute crossing jurisdictional lines. That is a real nightmare. It's a mutual fund sold by a bank. You're across lines.

The idea of a comprehensive ombudsman dealing with all financial services sector consumers has been endorsed by the MacKay task force, the Senate committee on banking and trade, the members of this committee, and Secretary of State Peterson when he appeared before this committee a few weeks ago. Consumer groups also support the concept of a single ombudsman that would provide a single avenue of dealing with all complaints. This option would be easy to use for consumers and less costly and confusing for the industry.

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The communiqué issued by Finance Canada at the time of the introduction of Bill C-38 states in part as follows:

There are potential advantages for consumers in having a single point of contact for dispute resolution. The federal government will continue to work with the provinces and non-bank financial institutions to achieve a means to this end.

I urge the committee to encourage the government to continue their efforts with the industry and the provinces on a priority basis. Support for a single-window ombudsman process is widespread. It would avoid a patchwork and confusing system of different ombudsman schemes throughout the country. It is also the direction being pursued in other jurisdictions, such as the U.K. and Australia, both of which are currently in the process of working toward a single-window ombudsman for the financial services sector.

I'd just like to mention briefly an issue that will have to be resolved as time goes on. That is the relationship between a redress provider, which is an ombudsman process, and a regulator. Bill C-38 also mandates the creation of a regulator, the Financial Consumer Agency, to enforce consumer-oriented rules for financial institutions and monitors the industry's self-regulation.

The ombudsman can be put in a very difficult situation if he finds that the institution has violated the law or regulation and he must blow the whistle on it, because if the ombudsman is put in that position, he then is compromising his relationship with the institution, and the information provided to them will be more guarded. It will be more difficult to deal with customer complaints. If that happens, the loser will be the customer, because the ombudsman cannot fully do his job. So it's a very delicate balance there.

We've prepared a paper that's some 15 pages long, which we've given selectively to some regulators in the country, where we address that issue. Some of the provincial regulators have expressed an interest. I think, most importantly, we provide a great many alternative ways to deal with that problem to avoid either the ombudsman or the regulator being put into a difficult position where neither one could do their job. We'll provide that later to the committee. We'll provide it to the agency and other bodies as well so that they understand the position as the policy is developed.

So there are the major things.

In conclusion, I'd just like to leave you with the following recommendation: that the federal government, either through the CFSO or on its own, should continue to work with the industry and the provinces toward creating a national financial services ombudsman for the customers of all financial institutions.

Bill C-38 will change the way Canadians deal with their financial institutions. Canadians will need a single, strong, independent ombudsman to help settle any disputes that may arise.

Once again, thank you for inviting me here this evening. I'd be pleased to answer your questions.

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

We'll have a ten-minute round, beginning with Mr. Epp.

Mr. Ken Epp: Thank you.

Thank you to you both for being here this evening and giving us some of your insights.

I would like to begin with Mr. Hammond, if I may. You indicate that you have—at least the way I read it—complete confidence in the minister to make regulations and to change the rules and bylaws of the association. I'm amazed at that. I would think you would think there should be at least some way of appealing that decision. What if he does something that really is bad and maybe is for political reasons with an election coming up or something that isn't good for your association? How can you just come out carte blanche and say that you support all this power for the minister?

Mr. Robert Hammond: First of all, the minister has to demonstrate that any change he would direct the CPA to do has to be in the public interest.

Quite sincerely, we believe that we at the CPA are acting in the public interest. First of all, we're expanding our membership. Secondly, the legislation provides for a stakeholder advisory council. This is a council consisting of about twenty representatives of users of the payments system. That council already exists. Interestingly enough, we have the members of that council serving on a number of our working groups. Most of our important working groups now have members of the council participating in the decisions and the recommendations that come forward to the board.

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Given that the users of the payments system represent organizations such as Option consommateurs, the Canadian Consumers' Association, ITAC, the Retail Council of Canada, the gas associations, all these organizations, if they're involved in making recommendations about our rules and how we should operate, I think it would be pretty hard to indicate or demonstrate that they're not in the public interest. That's why we're not concerned, because we're very conscious of the public interest now.

Mr. Ken Epp: But what if the minister doesn't agree that the thing you're proposing is in the public interest and he would reverse your decision?

Mr. Robert Hammond: If the minister doesn't agree, we can appeal to a court. There's no question. The legislation does provide a process whereby we can appeal to a court. But the point I made in my opening statement was that during that appeal process, there isn't necessarily a stay of the minister's directive, which is what we would be more comfortable with, although again, as I say, the minister has to discuss this with our board of directors, which encompasses a wide range of institutions. It will include independent directors.

We think we have intelligent people here and there will be a meeting of the minds. But in the event there were opposing views, as I said in my opening statement, I think we'd be more comfortable if there could be a stay of the minister's directive pending a decision by the court as to whether or not it's appropriate. That was the one thing I mentioned. But there definitely is an appeal process. We can go to court and say that for these reasons we don't think the minister has acted properly.

Mr. Ken Epp: Are you not concerned about the fact that these members at large are appointed by the minister, and then the minister comes in, and there he would have three members at least? If I'm not mistaken, the others are also appointed by the minister, on the recommendation of other members. Basically, the minister controls the whole membership.

Mr. Robert Hammond: I wouldn't go quite that far. The independent directors are appointed by the minister, but under corporate law, of course, they have a duty to the corporation. They have a duty to the CPA. That's their legal obligation, to act in the best interests of the CPA. We don't know who the independent directors are yet, but we assume they'll be people of stature, and they do have a fiduciary responsibility to the corporation. It's their legal obligation as a director to take account of the interests of the CPA.

Mr. Ken Epp: I should probably tell you that it's my view that if this bill is passed and implemented, and if you have troubles, I'm sure you would not feel any hesitation to come back to this committee and report that.

Mr. Robert Hammond: We would.

Mr. Ken Epp: You would do that.

Mr. Robert Hammond: We would.

As I say, we prefer this sort of regulatory structure to one of the regulatory structures that was being talked about earlier in the process, where they were talking about putting another board of directors on top of our board of directors, which we thought just didn't make sense.

Mr. Ken Epp: Okay.

Another question I have for you has to do with membership. I read the presentation you sent in earlier. According to your presentation and my interpretation of it, in regard to individual organizations that participate in the payments association, I picked up that you would like to see there be a compulsory membership in the association if they're going to use the services of it. Am I right there?

Mr. Robert Hammond: Yes, we did suggest that. Now, under the existing legislation, essentially all banks, except some of the foreign branches that don't accept deposits, the lending branches, have to be members of the CPA. They're required to be CPA members. The trust and loan companies or the caisses populaires and the credit unions have the choice to be a member. In other words, if they meet the requirements, they can be a member; if they choose not to be a member, they don't have to be a member.

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Mr. Ken Epp: They can still participate, though.

Mr. Robert Hammond: They can participate, although they're not members. They can participate in the clearing and settlement system, but they're not members of the CPA.

As it turns out, there are, I would say, only about a dozen or so very small institutions that do participate in the clearing and settlement system, that make use of the clearing and settlement system, that are not members of the CPA. It's not in the legislation, but we have suggested in discussions with the Department of Finance that we think it's appropriate that if somebody is going to participate in the clearing and settlement system, they be a member of—

Mr. Ken Epp: Required to be a member.

Mr. Robert Hammond: —the CPA. This is something we could probably accomplish through our bylaws, given the structure of the legislation, but those bylaws would have to be approved by the Governor in Council. In other words, there would be government oversight as to whether or not that would be appropriate. We are having discussions with the Department of Finance about that issue now.

We just think if somebody is going to use the clearing and settlement system, first of all, if they're members, they can participate in the governance of the system, they can have a say in the rules, but also, if they're going to use the clearing and settlement system, maybe they should help pay the costs.

I can say that at the current time—I guess we have 125 members—our membership dues are minimal in the sense that they are about $3,000 for most of those members. The major costs are borne by the big institutions. That doesn't mean our minimum charge may not increase; we're talking maybe $10,000 at some point in time. But most of our members pay that charge. It's not an exorbitant charge. Most of the cost is borne by the bigger members, because the costs are based on the volume of the items they put through the clearing and settlement system.

Mr. Ken Epp: You have your own sort of Tobin tax.

Mr. Robert Hammond: I'm not sure what you mean by that, sir.

Mr. Ken Epp: The Tobin tax has nothing to do with Brian Tobin. This is another Tobin tax that was proposed as a transaction cost on all transfers of money.

Mr. Robert Hammond: That's right. Yes, I realize that, on the foreign transactions.

But it's set out in the bylaws. They pay costs based on the number of items they put through the system.

Mr. Ken Epp: Okay.

I'm quickly running out of time, but I want to ask Mr. Lauber a question or two.

First of all, as an ombudsman for the banks, do you deal with ordinary folk who have trouble with a financial institution in Canada, or are you an ombudsman between different institutions? What is your role?

Mr. Michael Lauber: My role is to deal with complaints from your constituent, for example.

Mr. Ken Epp: So if I have a guy come to my office and say he has a big problem with a bank, because they're really messing him up—

Mr. Michael Lauber: Absolutely. There's a process. The bank has a dispute resolution process internally. They have an internal bank ombudsman, who has the same mandate I have, to review the complaint and resolve it based on fairness, and then I'm an appeal level.

Mr. Ken Epp: My constituent has to deal first with the bank—

Mr. Michael Lauber: That's correct.

Mr. Ken Epp: —deal with the bank's ombudsman, and then if he or she still has no satisfaction—

Mr. Michael Lauber: They call me.

Mr. Ken Epp: —they come to you.

Mr. Michael Lauber: That's right, and we deal directly with your constituent.

Mr. Ken Epp: That's interesting.

We had a case recently where somebody e-mailed every member of Parliament because they—

Mr. Michael Lauber: I know the man.

Mr. Ken Epp: I forget the guy's name. It just happened in the last couple of days. You probably know the case.

Mr. Michael Lauber: His name escapes me.

Mr. Ken Epp: I think it escapes everyone.

Mr. Michael Lauber: Is that the same one that Mr...? Yes.

I would not acknowledge that. You will be on his favourite list if you acknowledge that.

Mr. Ken Epp: Okay, but I'm asking, though, in general, would you look at a complaint like his, and then how do you deal with it? That's my question. Do you have any mechanism, or do you have the legal authority to go back to that particular bank or credit union, or whatever it is that's involved with the dispute, and say you shall do this, or you must do that—or do you recommend only?

Mr. Michael Lauber: Let's leave that particular gentleman aside.

Very simply, if a person comes and they've had a problem.... Let's take a normal consumer issue type of thing. We've been dealing with a few. Let's say it's a mistake in the selling of life insurance on mortgages. There should have been insurance, but there wasn't. On the balance of evidence when we review it, we agree that there should have been insurance on the person's life attached to that mortgage. We have the power to make a recommendation to the bank that they resolve that in some appropriate way. If the person has died, it may be paying off on a policy. If the person is still alive, it's putting a policy in place.

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It is a recommendation that we make. But in four and a half years, all of our recommendations have been followed by the bank. If they did not follow my recommendation, the bylaws require me to make that public. So in this particular case, if they didn't follow my recommendation, I'd put it in my annual report or something. I don't know how to do it because we've never had to make it public. It's a very powerful weapon. We've not had to use it. All complaints have been resolved.

Mr. Ken Epp: Mr. Chairman, I know my time is up. Can I just carry on for about another minute or so?

The Chair: Yes.

Mr. Ken Epp: Thank you.

What does Bill C-38 do to your position? Does it strengthen it? Does it put you out of a job? Does it leave things the same? How do you see Bill C-38?

Mr. Michael Lauber: Any one of the above. I'm not quite sure.

Mr. Ken Epp: You're not sure.

Mr. Michael Lauber: Bill C-38 permits the minister to create something. It doesn't require him. But assuming the minister were to designate a body, the CFSO, you would have a new entity. The existing Canadian Banking Ombudsman would wind up, roll into, or any one of a number of scenarios. The CFSO would have a board of directors. Under the legislation the minister has the right initially to appoint all of the independent directors. He doesn't have to, but he has that ability. That board of directors would hire the ombudsman, who could be me or somebody else.

Mr. Ken Epp: Thank you, Mr. Chairman.

The Chair: Mr. Epp, do you have any further questions?

Mr. Ken Epp: I was ready to give the floor to Mr. Cullen. He's always full of questions.

The Chair: Please go ahead, Mr. Cullen.

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

Thank you, gentlemen, for coming here tonight. I appreciate it.

You probably realize that we may have to go through this again another time.

The Chair: Not necessarily.

Mr. Roy Cullen: Not necessarily, that's true.

A witness: We won't throw our notes away.

Mr. Roy Cullen: Mr. Hammond, you said that you had some uneasiness—I forget the exact word—

Mr. Robert Hammond: Discomfort.

Mr. Roy Cullen: Discomfort, yes. Let's say the minister does issue a directive and the Canadian payments authority decides to appeal it. That would be a normal court process. How long might that take?

Mr. Robert Hammond: It's difficult to say. I'm not a lawyer, but I've been advised that it could be a considerable period of time.

Mr. Roy Cullen: That could be a concern, of course, if there were some concern that the minister had raised it in the context of the public interest and there were some debate around that. But it could take some time to go through the courts.

Could you give me an example of the kind of circumstance under which this could arise, just hypothetically, a generic kind of—

Mr. Robert Hammond: I find it difficult to think of a situation where it will arise, and that's why we haven't been concerned about this type of power. I think there has been some suggestion that the CPA has operated as a closed shop, that it hasn't taken into account the public interest, etc. We think we've made changes to try to do that by establishing the stakeholder advisory council, getting them involved in the work, etc. So we're not concerned. It's difficult for us to envisage a situation where we would get into a dispute with the minister. Under the legislation the minister has to meet with the board. There would be an exchange of views there. So it's hard for me to envisage a situation. I'd have to give an example where somebody would do something silly, and I don't think that necessarily would happen.

Mr. Roy Cullen: Generically speaking, would it be in the context possibly of the security or stability of the payment system, consumer protection issues, or...?

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Mr. Robert Hammond: I can't imagine. The minister is responsible for the stability of the financial system, so I would find it very surprising that the minister would expect the payment system to do something that would damage the stability of the financial system, contrary to the minister's responsibility.

Mr. Roy Cullen: I'm sorry, I meant that if the minister saw a need to issue a directive because there was some threat to the security or stability of the payment system or some concern about consumers.

Mr. Robert Hammond: Again, it's hard to envisage. We now have two consumer representatives on our stakeholder advisory council. It's hard to envisage what might happen.

Mr. Roy Cullen: I'm curious about the situation with the addition of insurance companies, stock brokers, and mutual fund companies into the payment system. Right now the kinds of instruments that are being cleared and settled through your organization must be changing quite rapidly. When you have these new bodies that are going to be using the payment system, paint me a picture of how that's going to change the kinds of instruments that are being cleared and settled through your organization, how that's going to evolve over time and perhaps change your role in the....

Mr. Robert Hammond: I think the big evolution in the payment system is the move to electronic payments. I've been with the CPA for about eight years now, and if you look back to those days when I joined the CPA, about 85% of the payments that were being cleared and settled by the CPA were paper cheques. Now we're down to about 40%. The rest are electronic payments. We continue to see this movement toward electronic payments.

One thing that we envisage happening as we build the appropriate security measures are payments over the Internet. This is something we're working on now. We're working on the development of a public key infrastructure that would enable payments to be made securely over the Internet. We don't have any proposals about a payment system yet, but we're trying to build the PKI that would facilitate this once there's a business case for doing it. So that's the way I see things evolving.

Some of these new members may want to provide chequing privileges, but I would see that they'd be more interested in doing electronic payments, letting their customers use a debit card or transfer funds, this sort of thing, as opposed to chequing accounts. But if they wanted to issue chequing accounts, they'd be able to do it.

Mr. Roy Cullen: For insurance companies or mutual funds, do you see a time coming when they would actually clear or settle various other monetary instruments, such as a life policy or a...?

Mr. Robert Hammond: No, I don't.

Mr. Roy Cullen: We're just talking about cash—

Mr. Robert Hammond: Some day that may come, but I don't see that in the near future. I think they'll be dealing in dollars just as the other—

Mr. Roy Cullen: It will be more like cash or cash accounts.

Mr. Robert Hammond: For example, on life insurance policies, when somebody dies and leaves their money to a beneficiary, the life insurance company always offers the beneficiary the option of leaving the money there, because they can offer attractive interest rates. But at the moment it's difficult for them to accept that money and say you can use it to make payments as well. So by having that additional feature, it probably will make it more attractive for people to leave their money with life insurance companies if they can use it to make payments as they wish, as opposed to having to take it out and put it in another deposit-taking institution to make a payment.

Mr. Roy Cullen: It's the same, I suspect, with stock brokers. You won't be settling through a hundred Cominco shares for a—

Mr. Robert Hammond: No.

Mr. Roy Cullen: Nothing like that.

Mr. Robert Hammond: I think the securities dealers are interested in it from the perspective of their cash accounts. They have cash accounts. Depending on the activity in your account, you may sell shares, etc. So you have a cash balance. Again, they offer an attractive interest rate. So they would like their clients to be able to use those balances for payments. You'd have to ask them, but that's my perception.

Mr. Roy Cullen: Okay. Thank you.

Mr. Lauber, the idea of a single independent ombudsman providing coverage for all consumers and all financial services—I gather this committee has proposed that or accepted that recommendation.

Mr. Michael Lauber: That was the MacKay recommendation as well. It basically flowed from MacKay through this committee.

Mr. Roy Cullen: Okay. It sounds like a pretty reasonable proposition. What are the obstacles—apart from the Department of Finance, who might have a view on it? I don't know. If you're talking about going sort of across sectors, etc., would there be various interests or stakeholders that would have certain vested interests that might not align with that kind of view, or is it simply a process of people feeling more comfortable over time? What are the obstacles?

Mr. Michael Lauber: Partly it's a matter of being comfortable, but in this country, I read recently, we have 30 regulators in the financial services sector across the country. Banks are regulated, of course, by the federal government. Insurance companies, most trust companies, loan companies, credit unions, and so forth are really all regulated for market conduct at the provincial level. So you've got a jurisdictional issue there.

The provinces are interested in the concept. Through their joint forum they're considering the issue. The minister and Minister Peterson have both spoken in favour. The white paper endorsed the concept. The communications paper attached to the legislation that was presented back in June also speaks of that opportunity.

If there's some goodwill, I think there's a very, very strong chance that it can happen.

I think MacKay in his report in 1998 said it well. He said “To establish ombudsmen based on the former pillars would be a step backwards”. I think we've moved beyond that. We're probably, in the next few years, as a result of this legislation, looking at financial institutions that are, whether they were formally a bank or an insurance company.... Given different proportions in their emphasis of business, they're probably going to look more alike than different, and they're all selling the same product. The insurance companies are all focused on wealth management; the banks are all focused on wealth management.

This is what's happened in Australia: they're tending to bring them together. In the U.K., in their restructuring they have brought them all together on a legislative basis. Of course they're a unitary state; they don't have the same problems.

Mr. Roy Cullen: If the Government of Canada thought this was good idea, is there some action that could be taken to move this idea forward?

Mr. Michael Lauber: Communication and goodwill. This is a federal-provincial initiative. I don't know any other magic than that.

As far as the industry is concerned.... Well, to start from the consumers' side, whether it's a small business or an individual, it is going to be far more accessible and far easier for the consumer to deal with it. They won't have to figure out which one of potentially thirty ombudsmen they could end up that you should go to. From the industry perspective, it's certainly cost and efficiency. I think you've seen lots of comment on the fact that we have to become more efficient and effective in our regulation in the sector.

So we're looking at an opportunity of creating something that is truly national or letting it fracture down on a provincial basis and sector basis and so forth. There's an opportunity here that could be missed.

Mr. Roy Cullen: Thank you.

The Chair: Thank you.

Mr. Epp, any further questions?

Mr. Ken Epp: No.

The Chair: On behalf of the committee, I'd like to thank you very much. We're not sure if there's going to be an election, but if there is we'll be back, of course, seeking your insight. You're very helpful in making sure that we clearly understand the impact of this piece of legislation. We personally all think this is an extremely important piece of legislation, and if in fact an election is called, it certainly should be a priority item—

Mr. Ken Epp: For the next government.

The Chair: —for our government.

Ms. Carolyn Bennett (St. Paul's, Lib.): Our next government.

The Chair: Any further comments on that from the back there? I'm taking a quick poll here.

Thank you very much.

The meeting is adjourned.