- Member of Parliament
- Member of Parliament
- Bloc Québécois
- Joliette
- Quebec
- Voting Attendance: 68%
- Expenses Last Quarter: $132,165.46
- Government Page
Madam Speaker, I thank the hon. member for her very interesting speech. She raised some important issues.
I sit with other colleagues on the Standing Committee on Finance. Introducing mammoth bills, budget implementation bills that affect a whole bunch of different acts, seems to be the government's way of doing things at the moment. It is positioning itself above the provinces, above other jurisdictions, above other governments and telling them how things are going to be done.
The latest example is Bill C-69, in which the government legislates on the whole issue of open banking. Institutions under provincial jurisdiction must ask the province for permission to opt in to federal regulation if they want to be able to compete with federally regulated banks. That always seems to be the way. This government does not seem to understand that the compromise of the federation was to create separate governments, each of which is sovereign in its own areas of jurisdiction. In the House, the government always says that it conducted consultations, but when we talk to the governments, we find out that it did not, or that the consultations were too little, too late and always conducted with a paternalistic approach. Ottawa knows best and decides what the naughty little children should do.
Is that acceptable?
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Madam Speaker, I would like to thank the member for Bay of Quinte for introducing Bill C-365. As surprising as it may be, this is the first time we have had the opportunity to debate open finance in the House. Even the Standing Committee on Finance has never addressed this issue. So far, the discussion has been largely left to the experts and industry representatives. All the fine people at the Department of Finance, the Office of the Superintendent of Financial Institutions and the Financial Transactions and Reports Analysis Centre of Canada are currently examining the issue. The Autorité des marchés financiers, or AMF, and Quebec's ministry of finance are also looking into it. It is important to remember that the technology companies that would interface with customers in an open financial system are not banks. They do not necessarily fall under federal jurisdiction, just as not all financial institutions fall under federal jurisdiction.
I have been closely following the work of the Advisory Committee on Open Banking, which is referenced extensively in the preamble of the bill. This work is very enlightening. The committee heard from a wide range of stakeholders, including banks, credit unions, insurance companies, trusts, brokers and technology companies. However, no consumer advocacy groups, privacy advocates or provincial regulators were consulted. It is past time to broaden the conversation. For that reason alone, the member is making a huge contribution and I sincerely thank him for it.
Implementing an open financial system would be a huge change with many implications. In the long term, we can envisage a system in which financial institutions would essentially manufacture financial products. Customer relations would be handled by technology companies that would not offer the financial products themselves but would act as intermediaries and data aggregators. That is quite a change. The bill's preamble lists the benefits of such an open financial system. I will not repeat them here, as the sponsor did a fine job outlining them. I support them. They are real. I would even say that moving toward an open system is probably inevitable.
Since this is the first time we are discussing this subject, I will use my time today to broaden the debate a bit. It is our job as legislators to talk about the benefits, but also the challenges and risks, since we are working toward the common good.
Our financial system's greatest asset is its stability and the confidence that comes with that stability. It is stable because it is subject to strict legal obligations. Ultimately, if something goes wrong, for example if there is fraud, data theft, failure to report a suspicious transaction that would assist in tracking money laundering or terrorist financing, then the financial institution is the one that is legally and financially responsible. Financial institutions are subject to strict prudential obligations so as to ensure they have the means of dealing with the risks in question. Since the financial institutions are ultimately responsible, they guard their members' and customers' personal and financial information very jealously. However, this is where the system's greatest asset, its stability, also becomes a weakness, because it can lead to compartmentalization and a lack of flexibility.
The world has changed. The development of information technologies has given rise to the data economy, which can only grow if data circulates freely. It is unclear whether our financial architecture is adapted to this new environment. A financial institution cannot be expected to take responsibility for the use of data it no longer has custody of. Prudential standards and regulations will have to be adapted. It is far from certain that a technology company has the wherewithal to take on those financial risks. A financial start-up can be born and die in no time at all. If that happens, there will be no one left to shoulder the consequences of fraud, data leakage, incorrect information or poor financial choices. We need to be cautious.
Does that mean we should do nothing? Far from it. People want the flexibility of an open financial system. They want aggregators that put all their information in one place, facilitate transactions and give individuals an accurate picture of their financial situation. That is invaluable when money is tight at the end of the month. People also have a hard time understanding why they are not being allowed to do this. After all, our personal information belongs to us.
That is why fintech companies have already started coming on line despite the legal limbo. They are responding to an obvious demand. At this point, however, because they are not officially part of a cohesive financial system, they exist in a grey area and find alternative ways to evolve. Users currently provide their personal information themselves, and when the app gets into an account, it extracts data from the screen and stores it.
Financial institutions' secure networks get regular visits from actors outside the financial sector, and that makes them vulnerable. The more advanced these strategies get, the greater the risk. As I was saying, the status quo is not sustainable. It would be pointless for legislators to bury their heads in the sand. There is no going back to 1990.
In some cases, the risks are minimal. An aggregator that scans public data to show us mortgage rates at all financial institutions in one click is convenient and low-risk. When it collects our personal data to give us a detailed picture of our financial situation, that is also convenient, but carries more risk. Financial information is very sensitive, so it is vital to protect it. If the app can be used to perform transactions, which implies that it places orders, that opens up a whole new level of risk, the risk of fraud.
What about the principle of needing to know the customer? That principle is the foundation of our anti-money laundering and anti-terrorist financing laws. How can a financial institution apply this principle when it is communicating via an app? Lastly, an important part of risk is the financial capacity to take on risk. Without that, the consumer could lose everything. Fintechs currently operate in a grey area, which is a problem. What we need is a clear framework with clear obligations and responsibilities, as well as oversight mechanisms and institutions to enforce compliance.
The Advisory Committee on Open Banking recognized all of these difficulties, but it felt that it was important to move quickly so that Canada would not be lagging behind and so as not to hamper the sector's development. Companies continue to operate in a grey area, which is not serving anyone well. That is why the advisory committee recommended giving clear direction but introduce minimal regulations so that things can move faster. Then, industry stakeholders can determine for themselves how to operationalize that and resolve technical issues. In short, the committee is recommending a sort of self-regulation.
The committee recognized that the financial soundness of technology companies is an issue, but it did not propose any institutional mechanism for dealing with it. There would not be any equivalent for deposit insurance, at least not in the beginning. At best, the committee mentions getting their own insurance. The committee also recognized the constitutional issue, but it proposed circumventing it. It proposes integrating the federal financial institutions. As for the others, they can join if they want to, but as second‑class institutions.
I am a Quebecker whose main financial institution is a co‑operative, not a bank. Understandably, a two‑tier financial system leaves much to be desired. Barring a constitutional amendment, the federal government cannot regulate them. Also, in order for the financial system to be truly open, governments will have to coordinate. I really like the first clause of Bill C‑365. It requires the government to present directions and an action plan in a timely manner so that the public can take ownership of it and we can debate it. That is good. I am not so sure about the second clause. Setting a deadline for introducing legislation without ensuring that we are ready and that any potential problems have been resolved seems a bit rash to me.
As we consider the implementation of open banking, let us heed the Emperor Augustus and make haste slowly. That is essentially the message I am getting from the Speaker, who wants me to wrap up. Let us get to work right away because the status quo is no longer tenable, but let us take the time to do things right, because the stakes are high.
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Madam Speaker, accountability is already enshrined in the Bank of Canada Act. This act requires that once a year, two independent firms are to audit the affairs of the bank simultaneously. The bank is the only federal Crown corporation subject to this requirement. The act also gives the Minister of Finance the authority to enlarge or extend the scope of the audit and to request special audits and reports.
Contrary to what the bill might suggest, the auditor general already has the authority to exercise an oversight role in certain areas of the bank's business functions. Specifically, she can review and audit the bank's operations and records related to its roles as the government's fiscal agent, advisor on public debt management, and manager of the exchange fund account.
The Bank of Canada Act also makes it clear that in the event that there is a difference of opinion between the Minister of Finance and the Governor of the Bank of Canada on monetary policy, the minister may, after consultation with the governor and with the approval of the Governor in Council, give to the governor a written directive that shall be laid before Parliament.
The governor and deputy governor are regularly called to testify before committees of the House of Commons and the other place, including the Standing Committee on Finance, to be held accountable. I commend them for their willingness to appear and their transparency. I also thank them for systematically answering my questions in impeccable French.
In addition, there is also an Audit and Finance Committee, which has the mandate to review the bank's annual and interim financial statements; approve interim financial statements; make a recommendation to the board of directors with respect to the approval of the annual financial statements, as appropriate; oversee and ensure that the external and internal audit functions are carried out in an appropriate manner; review the adequacy of the bank’s risk management, internal control and governance framework with respect to financial reporting; and oversee the bank’s financial management, including the medium-term financial plan, the annual budget and expenditure reporting.
This bill is an expression of a philosophy and a strategy that should worry us, an attempt to cast doubt on the bank and undermine public confidence in this independent institution. That is exactly what we saw when the bill's sponsor was his party's leader and during the last election campaign. This strategy is still a factor in their leadership race.
The Bank of Canada is a complex institution, and it is difficult for the general public to understand. It just might be the perfect victim for politicians seeking a scapegoat for economic ups and downs. The current Conservative Party leadership hopeful openly attacks the Bank of Canada and has even promised to fire the bank's current governor. This same technique has already been used by none other than Donald Trump south of the border.
Firing the governor of the central bank just because the prime minister does not agree with the monetary policy could have a devastating impact on our economy, its stability and its attractiveness to investors. It would put us on par with banana republics where financial and monetary crises happen all the time.
It is of course perfectly appropriate and healthy to be able to criticize the work of a central bank and its governor. We are seeing this now. Economists have said that central bankers waited too long before raising interest rates. The governor has also been criticized for being slow to recognize that inflation was not transitory and that monetary policy tightening should have started well before 2022.
The Bank of Canada has recognized some of its own errors. In a speech given in Toronto on May 3, the deputy governor focused on the importance of maintaining public confidence in the central bank. She said the following:
So we are acutely aware that, with some of the extraordinary actions we have taken during the pandemic and with inflation well above our target, some people are questioning that trust.
To bring down inflation, the bank's current policy calls for a sharp rise in interest rates, followed by an end to the rollover of government bond assets held by the institution.
Once again, criticizing the central bank and its management of inflation is legitimate, but we must also take the time to explain the multiple causes of these price increases, which is a global phenomenon.
The rhetoric that tends to undermine public confidence in the Bank of Canada is beyond worrisome. It can have a real impact on the economy, and this bill seems to serve that rhetoric.
The Bank of Canada is a public entity separate from both the banking sector and the political process, let us not forget. Its fundamental responsibility is to guide the economy in the long-term best interests of the public.
The bank was created in 1934. The Bank of Canada Act established the bank as a Crown corporation with special status and considerable independence to conduct its business. The act sets out the bank's business and powers as they relate to its core responsibilities of monetary policy, the financial system, currency, funds management and, more recently, retail payments supervision. The act also provides for the operational independence the bank needs to carry out its activities and meet its responsibilities, free from political influence.
In other words, the act dictates what the bank does, but not how it does it.
Over the years, the bank has made major changes to how it achieves its mandate. The most significant was in 1991, when the government and the bank reached the country's first inflation-targeting agreement.
As its name indicates, it is a sort of contract between the bank and the government that establishes an inflation-control target but confers on the bank the authority to decide how it will achieve this target. The agreement has been renewed on a regular basis, most recently in 2021, following consultations.
From the signing of the first agreement 30 years ago to the most recent agreement, the inflation rate was kept to almost exactly 2% on average. The bank is working to return to that level of price increases while ensuring the economy's stability. I will repeat that it is facing disruptions at a global level, and we are confident it will succeed.
In closing, I would like to remind members that the bank has a board of directors composed of the governor, the senior deputy governor and 12 independent directors. The board of directors does not have a say in monetary policy decisions, which fall to the Governing Council, but it does have oversight of the bank's activities and finances. Its independent directors appoint the governor and the senior deputy governor, with the approval of the Governor in Council.
The bank also enjoys financial independence. The expenditures of the bank are financed by its own activities, and it therefore does not rely on public funding. Its budget is approved by the board of directors.
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