Canadian Bank Act Revision to Target Transparency

Canada's federal Bank Act is under review, with an eye towards greater consumer protection, and guidelines for interpreting upcoming changes are to be published by the end of 2006. The last revision—passed in 2001 as Bill C-8—is still criticized for lacking the transparency needed for consumers to make sound investment decisions.

Ottawa has solicited public comments. The Canadian Bankers Association (CBA) wrote, in its proposal, "While the 2001 reforms were far-reaching, there are some key areas of unfinished business that need to be resolved to further enhance the interest of Canadian consumers."

The CBA sees the 2001 legislative changes as being a good step forward, but still lacking full transparency. "The Bank Act continues to impose unnecessary and frustrating restrictions on consumers' ability to access information about insurance and retirement planning products and services," the CBA wrote in its 2006 Financial Services Legislation Review: Improving the Legislative Framework for Canadian Consumers .

The Canadian Community Reinvestment Coalition, a non-profit, non-partisan coalition of one hundred consumer-oriented groups that is active in bank transparency issues, suggested in one of its position papers that C-8 "should be as broad and as detailed as required under the U.S. Community Reinvestment Act (CRA)." The CRA requires a detailed branch lending and investment record, while C-8 requires only a consolidated annual statement of the bank and its affiliates.

"Federal and provincial governments share jurisdiction over the financial services sector," writes Canada's Ministry of Finance on its website. "Under the Constitution, the Government of Canada is solely responsible for the prudential and market conduct regulation of banks in Canada."

Diverse Financial Services Sector

Canada's financial service sector consists of banks, caisses populaires, credit unions, life and health insurance companies, property and casualty insurance companies, mutual funds, finance and leasing companies, and so on. Both banks and non-bank financial institutions provide financial services.

Provincially regulated institutions include credit unions and caisses populaires. They are cooperative financial service providers with deposit-taking authority. Caisses exist mainly in French-speaking regions. These institutions are owned and controlled by the members and governed by cooperative principles. Members own shares in the cooperative, generally ranging from C$5–150; caisses are generally small institutions operating within a province.

Credit Union Central, the central finance facility of Canadian credit unions, announced on its website that there are presently 533 credit unions and affiliated caisses populaires in Canada, serving close to 5 million members. They have C$84 billion in combined assets.

Trust and loan companies (T&Ls) are deposit-taking institutions that may also provide personal and mortgage loans. T&Ls may also manage pension plans, trusts, and estates, which banks cannot deal with directly. But, a T&L may operate as a legally separate subsidiary of a bank, allowing banks to enter financial service sectors they otherwise could not.

Canada's first bank, owned by a few Montreal merchants, opened its doors in 1817. Today, Canada's banking sector has developed into a sophisticated system, adjusting itself periodically, as necessary.