Mr. David Kilgour (Edmonton Southeast):
Mr. Speaker, as someone who at one time, and this was quite some time ago, worked for three banks, including the Bank of Montreal, perhaps I may offer my comments on this bill.
I believe I am now considered a fairly good critic, at least I hope so, of the banking industry.
Any legislation that will serve to strengthen the confidence that all Canadians have in our financial institutions is obviously something that we in the Official Opposition would like to support.
The fact of the matter is that this government has done more to sabotage that confidence than to build it. Bill C-48 is an exception, as just indicated by the member for Moncton. It adequately addresses many of the problems that the Canada Deposit Insurance Corporation has been faced with when confronting financial institutions on the verge of failure. As my colleagues from Malpeque and Moncton have just indicated, our party will support this bill.
I would like to use my brief time this evening to speak of the absurd fiasco that has haunted the path to CDIC reform. In 1985, two banks in my own province of Alberta met a tragic and inglorious fate. The Northland Bank and the Canadian Commercial Bank suddenly collapsed under the weight of too many high risk liabilities and several bad investments. I might say the
collapse of real estate in my province was a major factor in both those banks' problems.
CDIC was on the hook for $417 million in insured deposits for those two banks alone. These were the only two financial institutions to fail, other than trust companies, since the Great Depression. That was in 1985, seven years ago. The Berlin wall has come down, the Soviet Union has dissolved, yet the government has just now woken up to the fact that the CDIC needed to have broader powers over financial institutions in trouble in order to avoid the problems, the misery and the suffering of people associated with the collapse of the CCB and the Northland Bank.
The minister responsible at the time, who is now the Secretary of State for External Affairs, was very concerned, as she ought to have been then. Unfortunately, she was not able to transform her concern into meaningful action. Perhaps her colleagues would not let her.
The renowned Justice Willard Estey, now a business person, was asked to investigate the failures. He stands today as one of the main authors of the bill before the House tonight. The problem is that it is now 1992 and the matter should have been taken care of years ago.
In December 1985, the Senate banking committee reported that the CDIC should be granted broader powers to assist financial institutions in difficulty.
In an article in The Globe and Mail published December 26, 1985, reporter Bruce Little wrote that the Senate committee: "said that the CDIC should not take over the role of primary regulator of banks and federally incorporated trust and loan companies, but should move in when institutions run into trouble". That is exactly, thankfully, what this bill attempts to do.
To use a somewhat macabre analogy, the CDIC will now be able to act as doctor in nursing a financial institution back to health, rather than as an undertaker.
Since this bill was introduced in the House last December it has been the subject of some tumultuous hearings of the House finance committee. A bill that could have been passed expeditiously, I believe with the co-operation of our party-I cannot speak for the other opposition members-was subjected to barbs from various industry groups who had not been given the opportunity to give their input on the bill in the drafting process. That was, I believe, a major error and one that demeans
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our legislative process. It was delayed, I might add, on the advice of such great consumer advocates as the Canadian Bankers' Association. This is the same Canadian Bankers' Association that wants now to reduce the maximum level of insurable deposits from $60,000 to $20,000. We know whose interests they are looking after. The people of Canada, especially small depositors who are most at risk, deserve better than that from a strong Canadian industry and the organization which speaks for it, the CBA.
I have been critical in the past of how the CDIC has dealt with certain failures only because those failures could have been prevented had this reform taken place at the right time long ago.
I would ask my colleagues to hearken back to the summer of October 22, 1985. That is when the former auditor of the Northland Bank appeared before the Senate banking committee investigating the failure of two banks.
In his testimony, Crawford Smith noted the following: "I personally think that had the public not lost confidence and begun withdrawing deposits, the bank would have survived".
This arises from the belief that the CDIC could only intervene in the operation of a financial institution if it had already failed. By virtue of its traditional role as an undertaker of financial institutions, once the CDIC appointed a curator to run the Northland Bank, it was by all accounts clinically dead.
At what cost did this occur? The CDIC was forced to compensate insured depositors to the tune of $161 million and it threw about 200 Albertans, many of them residents of Edmonton, out of work.
What other results has the outdated mandate of the CDIC wrought on our financial institutions across Canada? In 1983 the collapse of the Alberta based Fidelity Trust Company cost taxpayers $359 million to repay depositors. The 1987 rehabilitation of the North-West Trust cost the CDIC $275 million. More recently, the Standard Trust Company, the Standard Loan Company, the Bank of Credit and Commerce Canada and the Saskatchewan Trust Company will all need assistance from public sources to satisfy depositors and investors.
Central Guaranty and First City Thist are currently in dire straits. Hopefully the passage of this legislation will allow those two firms to pull out of the fire that they now find themselves in.
This bill will transform the CDIC into a body that will build confidence in financial institutions rather than take away the respirator. As most Canadians know, if there is anything that is desperately needed in Canada's economic environment, it is confidence, the more confidence the better.
Why are we on this side concerned about the sluggishness of this initiative? It is kind of like molasses flowing up a very steep hill in Alberta, in January.
If anybody has had the chance to look at the financial condition of the CDIC lately, the answer is clear. In calendar year 1990 the corporation borrowed $1.28 billion from the federal government in order to compensate depositors. Last year, in 1991, $1.9 billion was needed. CDIC debts stood at around $600 million at the end of 1991. Obviously any new action that would help the corporation aid institutions without decapitating them, without killing them, would have a positive effect on the deficit, a deficit which members know has been virtually more than doubled since this group opposite took office in 1984.
I would conclude by reminding the House that we certainly welcome this legislation on this side. But dilly-dallying around with important measures like this for years and years and years has to stop. The failures I mentioned earlier could have been prevented had the lessons of the failure of Northland and the CCB been acted upon right away with due diligence, with responsibility and with concern for the people of Canada.
Just a couple of days ago I spoke on Bill C-78 dealing with amendments to several pieces of legislation to enhance the rights of Canada's 3.3 million disabled fellow citizens. It is another bill that has been delayed, studied, toyed with and eventually watered down by a terribly discredited government. Indeed, the polls will show it is the most unpopular government in Canadian history, at least since they started taking polls, and they call the Liberal opposition obstructionist.
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Finally, I hope the government has learned a lesson from this bill. Consumer confidence in our financial institutions of all sorts is not something that any government worthy of the name should trifle with. I do not know why the government would want to treat this matter lightly either. I think we will all stand a little taller when this bill becomes the law of the land.
Subtopic: CANADA DEPOSIT INSURANCE CORPORATION ACT
Sub-subtopic: MEASURE TO AMEND