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Chairman's Foreword

Financial institutions, be they banks, insurance companies, trust or loan companies, co-operatives or investment dealers, provide an ever expanding range of services that are important to every Canadian. The quality, cost and availability of such services are understandably the major concerns heard by both regulators and elected representatives. Our financial institutions have, however, a vital role other than that of service providers. They are part of an industry that is global in scope, competing with foreign institutions for the supply of services and exports, earning profits for shareholders, employing Canadians and generating tax revenue for Canada. Each of us has a stake in both the service to consumers and the industry roles played by our financial institutions and striking the right balance between these two, often seemingly competing roles, is the difficult and continually evolving task of public officials and legislators.

Much of the recent public debate in Canada regarding financial institutions has centered around the issue of powers, including whether banks should be able to sell insurance through their branches or enter into auto leasing, and whether insurance companies and mutual funds should have direct access to the payments system. While these undoubtedly important questions will be resolved after further study, the debate is somewhat sterile. It centers far too much on how the small but rich Canadian market of only thirty million people is to be divided up among the major players and far too little on how Canadian institutions might better reach out to the millions upon millions of potential new customers around the globe who will increasingly need the financial sophistication, know-how and products that the industry can offer. It is to be hoped that future debates on the question of powers will be more outwardly focussed and globally directed. The strength of our institutions will help ensure better services to Canadians.

During our hearings and studies, it became apparent that Canadian financial institutions have made considerable achievements both domestically and globally. Measures in place to protect depositors and policyholders appear to be working reasonably well. Measures advocated in this report will help expand competition in the provision of services, and provide greater protection to consumers. Nevertheless, Canada's overall regulatory framework still needs vast overhauling. The Canadian regulatory system is far too burdened with overlap, duplication and the lack of harmonization. This comes from having territorial, provincial and federal governments regulating on many of the same issues. This results in unnecessary costs to consumers, institutions and taxpayers in general. Jurisdictional turf wars among regulators and politicians work to the detriment of everyone.

As this report indicates, some modest steps to end overlap and duplication and to harmonize regulations are underway. They should be vigorously pursued, but future efforts must be much more far-reaching. Bickering among ourselves when we should be cooperating and consolidating to fight global challenges together may be the "Canadian way", but it is costly, short-sighted, and self-defeating. The potential return from "getting our act together" is enormous and simply requires political will. Canadians should expect no less from their politicians.

Members of the Committee from all parties are most grateful to those who have made our studies and this report possible within the short time available. We thank all those who appeared before us and submitted briefs. We owe a great deal to the staff of the House of Commons who have always responded with alacrity to sometimes almost impossible demands, and particularly to our Clerk, Martine Bresson and those who worked with her, including Bev Isles and Caroline Martin. We thank as well our Researchers Marion Wrobel and Richard Domingue. Liz Yong-Lafléche of my office and my Legislative Assistant, Lou Riccoboni deserve special thanks. I also wish to thank the Members of our Committee from all parties for their constructive assistance.

Members recognize that this report does not mean the end of our responsibility in seeking to reform the legislation governing federal financial institutions. Rather, we look forward to receiving continuing input on the contents of this report and to working with interested parties in the days ahead to help ensure that the 1997 legislation better meets the needs of both consumers and our financial institutions in the twenty-first century.


Jim Peterson
Chair

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