Hon. Céline Hervieux-Payette:

Honourable senators, I would like to make a few comments about Bill S-5. Last week, we received information about this bill, but there was also mention of consultations with financial sector associations and consumer groups.

I do not necessarily deplore this bill, but I deplore the fact that no report was submitted to the Standing Senate Committee on Banking, Trade and Commerce and that we were never consulted. We do not know the terms of reference.

This is the second time since I have been a member of the Senate banking and commerce committee that, when new rules are established, I have seen us denied the privilege of carefully examining the situation with all stakeholders in the financial sector, including, obviously, Canadian society and the people responsible for protecting consumers.

I remind senators that since the famous 1995 Bank Act was established under a Liberal government, our banking system has been considered one of the best in the world. Mr. Speaker was there when we revised that. We crossed Canada and we heard from all the interest groups for a year. We also heard from the public. Average citizens could come at the end of our meetings to share their ideas and concerns. The review was done and it was detailed.

When the 1995 bill passed, we had a majority, like the current government, but this bill still reflected the work of a committee. The study was done in accordance with accepted practices. Parliamentarians receive opinions from the public, report on them and then the government can draft its bill.

Today, and for the second time, given that the same thing happened with the previous bill, Bill C-37, the Minister of Finance has come before us with a fait accompli, thereby undermining the role of our committee.

I am not saying that these are bad measures; I am simply saying that we are taking a piecemeal approach. Today we are studying yet another bill that has come to us at the last minute and that must pass by April 20, 2012, because it includes a deadline.

I think it is unfortunate that we are not taking this matter seriously enough and that we are not placing our trust in Canadians and in our institutions, and inviting them to join us in a public forum to discuss these basic matters.

If anyone currently believes that the whole question of financial institutions — the best system in the world, we are told — has been resolved, they have not read the report released last week by Moody's, which states that if we were to face a sudden increase in interest rates, a recession or a general shift in the Canadian government's financial framework, this could have a very serious impact on Canadians, whose debt-to-income ratio is 148 per cent. Canadians would obviously find themselves in a very difficult situation.

Today, we can look at other countries and say that we are lucky because we made changes in 1995. That was a few years ago, but the time has now come to start thinking about taking a comprehensive view of trends in the global economy to determine what instruments we will need.

We made some very important changes that allowed banks to acquire investment banks. Last week, representatives of the Canadian Banking Association only spoke about the banking system and the fact that they were not affected by the crisis. We obviously did not talk much about investment banks or insurance companies.

Insurance companies were practically saved from bankruptcy at the eleventh hour by our financial system. But we are also forgetting that we gave ourselves some tools. I have been a member of the Standing Senate Committee on Banking, Trade and Commerce for a long time and, to my great surprise, when we gave the Governor of the Bank of Canada more power it was to allow him to advance $75 billion through the CMHC to buy thousands of mortgages from our banks and put them on a solid financial footing.

The Bank of Canada intervened and injected billions of dollars into our Canadian banks. Yes, on the one hand, we had the tools; however, on the other hand, our banks had invested heavily in mortgages because the rules were copied from the American rules. It was possible to buy a house with practically no down payment and the repayment term was extended to 30 years.

The government eventually closed that door. However, it was the government opposite that opened the door to this excess by putting a national institution at risk and requiring intervention.

We also put a few billion dollars into the automotive sector and a few billion into BDC to help people who had trouble financing their inventory. BDC played an admirable role. However, we should not put our heads in the sand and claim that we have all the solutions and that the state did not intervene.

We need to revisit and rethink the future because there is still enormous pressure to allow banks to sell insurance. We see this situation in provincial financial institutions in Quebec: having a financial institution that can issue shares, lend money and provide insurance. They cannot insure you because there are impermeable barriers between the sectors. They cannot insure the owners of small and medium-sized businesses who are so well served by this system, even though I think they might disagree.

We must give business people the option of choosing the institution that will offer them more, and I think that competition demands it.

Although the committee spent several months examining the issue of credit cards, the only result was a wish list. I regret to inform you that, yesterday, my credit card was renewed at an interest rate of 29.9 per cent. I hope I have the money to pay the balance at the end of the month because, if I do not pay it each month, by the end of the year, I will have paid 100 per cent interest on the money I used to buy goods and services.

What I want to say is that Bill S-5 could have addressed this issue because it creates measures stipulating that banks and financial institutions cannot charge fees for cashing government cheques of less than $1,500. Thus there was a little concern shown for consumers, but I doubt that they were consulted about credit card interest rates.

Let us also remember that, as we speak, limits on credit card interest rates have been set by the American government. Legislation was passed there, and yet we are still sitting on the sidelines and allowing astronomical interest rates to be charged on credit cards in Canada.

I would like to point out certain aspects of the bill that still cause me some concern. The minister will likely have the opportunity to explain why he now has authority that used to be held by the Office of the Superintendent of Financial Institutions.

On one hand, the government is saying that it has a fantastic, solid financial system but now, in this bill, the government is shifting responsibility in one of the sectors — the superintendent's responsibility to approve certain transactions is being given to the minister, particularly in the area of international banking matters.

Here is the issue: either our system is stable and we do not necessarily need to change who is in charge because things have worked well for years now, or there are flaws that we are unaware of. We would like to know why the minister is interested in taking this responsibility instead of leaving it to the professionals and I mean the representatives of the Office of the Superintendent of Financial Institutions, who do extraordinary work. Those representatives have made regular appearances in our committee and they illustrate the harmony that exists between the various players who control the financial sector.

The other measure that still bothers me is the one whereby a foreign government can own shares and have voting rights in a Canadian bank. We have to remember that there are a maximum number of bank shares that any shareholder can acquire. That is why our banks remain Canadian, otherwise some would no longer be, but 20 per cent is a lot. If we are talking about controlling shares, for many years the standard was 10 per cent, but now it is 20 per cent. The minister needs to tell us what Canadian interests he is defending by allowing a foreign government to vote on these shares. It should also be noted that every taxpayer here probably owns shares in a bank through their pension funds and could never vote directly. We need an answer on that.

The other issue I want to cover, which was the subject of a press release issued by the Bankers Association, concerns the increase in consumer protection fines from $200,000 to $500,000. If no one does anything wrong, it costs nothing and they have nothing to worry about.

The officials said that it was harmonized with other laws. If the penalty were increased in other laws, the amount would be $500,000. I suppose in this case, it would be up to the judge to determine whether the amount would be $200,000 or $500,000. Since this is the financial sector, there is no minimum penalty, as there is the case in another sector in particular. The government should be commended for giving judges the latitude to determine the fines that will be imposed on anyone who breaks the law.

I will conclude my overview of the bill with the following comments. We know that we must study this bill. However, we have very little time to do so, since the holiday break is approaching. We will study the bill carefully. The minister will be asked questions about the need to review the act. We have no choice; the law forces us to do so. Nevertheless, I encourage the government to think seriously about conducting a review of the financial sector in 2012 to assess the strength of our financial institutions. In light of the situation with pension funds, insurance companies and the poor performance of our institutions, we have to wonder what the future will be like for Canadians when they retire. We must ensure that all the pillars of our financial sector are secure.

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