Mr. FRASER (Northumberland):
Mr. Chairman, this afternoon and this evening we have heard a great deal about two sections which have been held over, namely sections 59 and 75, in connection with this renewal of the Bank Act. There were about forty-five sessions of the banking and commerce committee. The pros and cons of arguments, back and forth, have been set out by different members of that committee, by representatives of the banks, by the retail merchants' association and by other organizations which appeared before the banking and commerce committee.
This afternoon and this evening we have heard two speeches by two eminent Canadian lawyers. I want at this juncture to say a word about the eloquence of the hon. member for Vancouver-Burrard and to refer to several statements by the hon. member for Parry Sound as being simply unadulterated shadowboxing. I can vouch that the hon. member for Parry Sound could with his eloquence and his experience argue the case for the renewal of these bank charters with just as much merit as he has the ideas which he has accepted and which in my opinion are absolutely unsound.
I should like to deal with this matter from two or three matter of fact points of view, but I will adhere as strictly as possible to the two sections under discussion. Before proceeding, may I say that this matter should be analysed in a cool, businesslike way without using words like "dark secrets" and "hush, hush" or applying to the business of banking inferences that are absolutely unfounded and without reason.
In the first place the banking business of this country is a highly scientific business. It is no different from many other businesses because all the corporations in this country are the children of government. Companies operate under charters issued either by the provinces or by the dominion. They are permitted to conduct certain types of business, not only for ten years but perpetually as long as they comply with the taxing laws of the country and the articles of their incorporation. I submit that no business is subjected to such close scrutiny year in and year out, particularly every ten years, as the business of commercial banking. The business of banking is scrutinized not only by government officials and by the inspector general; it is subjected to the closest scrutiny by the Minister of Finance and his officials.
Bank Act Arhendment
The question of inner reserves has been mentioned; and I submit that an endeavour has been made to create a bogey, to arouse suspicion in the minds of the Canadian people that there is something hidden, something uncanny, something the people of this country should know in connection with hidden reserves. In analyzing this matter of the renewal of these bank charters we must consider whether the banking business of Canada is being properly conducted or whether it is not; whether the banking business of Canada is making undue profits or whether it is not; whether the banking business of Canada is serving the purpose that commercial banks should serve in the interests of the people of this country, both depositors and borrowers, or whether it is not. I submit that the banking system of this country is being conducted in a highly efficient manner, consistent with the best banking experience and brains not only in Canada, but in the great republic to the south, or even, as some hon. members have said, in the Scotch banking system.
Let me deal for a minute or two with the matter of incorporation and also with the question of whether the chartered banks are making excess profits. As was set out in the evidence submitted to the banking and commerce committee, the profits of the Canadian banks average only 6-2 per cent. Not only do they not compare favourably with many other financial, industrial and commercial enterprises, but they represent an extremely modest profit. It happened to be my good fortune to sit in the banking and commerce committee of 1934 when the bank charters were renewed, and I have endeavoured as much as possible to absorb the discussions that took place in the many meetings of the committee during the last three months.
Let us look for a minute at the position of Canada's chartered banks. The word "monopoly" has been used time and time again in the committee and in this house. It is said that we are being asked to renew the charters of what has been termed a monopoly. I submit that the position of the Canadian chartered banks is not an enviable one in comparison with that of Other industries. I have in my hand the statement of Lake Shore mines. With a capital of $2,000,000, this company showed a profit of 134-8 per cent in 1936. They do not have to have their charter renewed every ten years or to make reports to the Minister of Finance, the Minister of National Revenue and the inspector general. Not only is this corporation a child of the government, but under its incorporation it can develop the natural resources of Canada. Therefore let
us not call the banks a monopoly. Let us not point to the banks as making immeasurable profits. If we are going to discuss the profit motive, let us take the picture as a whole and stop pointing just at the Canadian chartered banks.
I wish to say a few words in connection with the hidden reserves of the banks. It was in reference to the hidden reserves that the hon. members who preceded me used the language I quoted a moment ago. As I say, that language has been used not only in this house but repeatedly in the banking and commerce committee. It has been broadcast throughout the length and breadth of Canada that there is something sinister, something we should be suspicious about in connection with these hidden reserves. There is nothing mysterious about the hidden reserves.
It is not a question of hidden reserves; it is a question of the method of accounting that is used not only in the banking business but in industrial and commercial businesses throughout Canada. We had as a witness before the banking and commerce committee Mr. Clarkson, one of the leading accountants in Canada. His evidence corroborated what I say, that this -method of accounting is quite common. I am going to read from one bank statement and compare it with the statements of some commercial companies. The banks carry on exactly as do the commercial companies. They take in their inventories which are composed of loans, portfolios, assets and the like, with reserves to protect themselves against loss in any one year. That is all they do. There is nothing secret about it. There is nothing funny about it. It is a system followed by every company in the Dominion of Canada. Let me compare for a moment the financial statement of Canada Steamships Limited and its subsidiary companies with a bank statement. I am reading from the 1943 consolidated balance sheet of the Canada Steamships company, and this is what it says:
Accounts receivable, less reserve.
That is exactly what the banks do. There is nothing funny about it. They simply take in their accounts receivable and their other assets, less reserves.
Topic: BANK ACT AMENDMENT
Subtopic: CONDITIONS GOVERNING TEN-YEAR EXTENSION OF BANK CHARTERS