Advocis claims victory as feds table Bank Act

The government of Canada has announced the changes it plans to make to the Bank Act as part of the now overdue five-year review of the legislation. The review’s deadline, originally the end of October, was extended to April 24, 2007, in order to give the House enough time to consider the proposed changes. Those […]

By Mark Brown | November 29, 2006 | Last updated on November 29, 2006
3 min read
  • Providing timelier disclosure to consumers about things such as deposit-type investment products, and improving complaint-handling procedures;
  • Streamlining ministerial transaction approvals to make the process more efficient; and
  • Making it easier for credit unions to establish cooperative credit associations as a means of expanding their business.

As was mentioned in the finance minister’s recent economic update, the government also proposes to allow Canadian financial institutions to add more foreign experts to their boards, as long as the majority of directors remain Canadian residents.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(11/28/06)

Mark Brown

The government of Canada has announced the changes it plans to make to the Bank Act as part of the now overdue five-year review of the legislation.

The review’s deadline, originally the end of October, was extended to April 24, 2007, in order to give the House enough time to consider the proposed changes. Those revisions largely duplicate the ones outlined in a June policy paper, 2006 Financial Institutions Legislation Review: Proposals for an Effective Financial Services Framework.

In the review’s current form, the government outlines six main proposals for its legislation. Noticeably absent from the legislation, entitled Strengthen Canada’s Financial System, is any reference to bank mergers or changes to current regulations around the marketing or selling of life insurance by chartered banks — much to the delight of Advocis.

Advocis is claiming victory in the government’s inaction on the topic. In an open letter to Prime Minister Steven Harper and Finance Minister Jim Flaherty, Advocis chair Roger McMillan congratulated the government for maintaining “the current regulations governing insurance marketing by the chartered banks.”

Although the Canadian Bankers Association was disappointed that the issue of banks promoting insurance in branches was left out of the legislation, Maura Drew-Lytle, the CBA’s manager of media relations, says the organization wasn’t surprised. The government had already said it wasn’t a priority when it issued the white paper in June, she says, “so we weren’t expecting it.”

Advocis has been intensely campaigning around this issue since the start of the year. In keeping with Advocis’ stated position against the notion of banks marketing insurance through its branches, McMillan reminds the government of his reservations.

“If banks were given the power to distribute or market life and health insurance through their branches, serious concerns about privacy and tied selling would arise,” he writes. “The nature of life and health insurance is simply too personal, and the nature of the lender/borrower relationship too imbalanced for the two to be combined under a single roof.”

The letter comes out at a time when insurance companies like Manulife Financial are pushing into the bank channel. Manulife is already starting to look increasingly like a bank as it offers several services including mortgages and lines of credit up to $50,000, plus it operates some 2,000 automated bank machines across the country.

As Steve Howard, Advocis’ president and CEO, says, Manulife is not in the banking business today, asserting that it is operating under a different regime. Although, Howard suggested that could change if Manulife was involved in tied selling, noting that Advocis’ concern around the issue would still apply.

If the legislation passes as is, this will mark the third time the government has stood firm on this issue. Still, the debate won’t end there. Advocis has no intention of turning down the pressure.

You can count on the CBA to do the same.

Among some of the changes, the government is proposing to raise the loan-to-value ratio requiring mortgage insurance to 80%, up from 75%. This would reduce the cost of mortgages for some borrowers since it would lower the down payment consumers are required to make before the law requires mortgage insurance.

The legislation also calls for the establishment of a framework to bring in electronic cheque imaging, a new technology that would decrease the time consumers and small businesses have to wait for their cheques to clear.

Other changes include

  • Providing timelier disclosure to consumers about things such as deposit-type investment products, and improving complaint-handling procedures;
  • Streamlining ministerial transaction approvals to make the process more efficient; and
  • Making it easier for credit unions to establish cooperative credit associations as a means of expanding their business.

As was mentioned in the finance minister’s recent economic update, the government also proposes to allow Canadian financial institutions to add more foreign experts to their boards, as long as the majority of directors remain Canadian residents.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(11/28/06)

The government of Canada has announced the changes it plans to make to the Bank Act as part of the now overdue five-year review of the legislation.

The review’s deadline, originally the end of October, was extended to April 24, 2007, in order to give the House enough time to consider the proposed changes. Those revisions largely duplicate the ones outlined in a June policy paper, 2006 Financial Institutions Legislation Review: Proposals for an Effective Financial Services Framework.

In the review’s current form, the government outlines six main proposals for its legislation. Noticeably absent from the legislation, entitled Strengthen Canada’s Financial System, is any reference to bank mergers or changes to current regulations around the marketing or selling of life insurance by chartered banks — much to the delight of Advocis.

Advocis is claiming victory in the government’s inaction on the topic. In an open letter to Prime Minister Steven Harper and Finance Minister Jim Flaherty, Advocis chair Roger McMillan congratulated the government for maintaining “the current regulations governing insurance marketing by the chartered banks.”

Although the Canadian Bankers Association was disappointed that the issue of banks promoting insurance in branches was left out of the legislation, Maura Drew-Lytle, the CBA’s manager of media relations, says the organization wasn’t surprised. The government had already said it wasn’t a priority when it issued the white paper in June, she says, “so we weren’t expecting it.”

Advocis has been intensely campaigning around this issue since the start of the year. In keeping with Advocis’ stated position against the notion of banks marketing insurance through its branches, McMillan reminds the government of his reservations.

“If banks were given the power to distribute or market life and health insurance through their branches, serious concerns about privacy and tied selling would arise,” he writes. “The nature of life and health insurance is simply too personal, and the nature of the lender/borrower relationship too imbalanced for the two to be combined under a single roof.”

The letter comes out at a time when insurance companies like Manulife Financial are pushing into the bank channel. Manulife is already starting to look increasingly like a bank as it offers several services including mortgages and lines of credit up to $50,000, plus it operates some 2,000 automated bank machines across the country.

As Steve Howard, Advocis’ president and CEO, says, Manulife is not in the banking business today, asserting that it is operating under a different regime. Although, Howard suggested that could change if Manulife was involved in tied selling, noting that Advocis’ concern around the issue would still apply.

If the legislation passes as is, this will mark the third time the government has stood firm on this issue. Still, the debate won’t end there. Advocis has no intention of turning down the pressure.

You can count on the CBA to do the same.

Among some of the changes, the government is proposing to raise the loan-to-value ratio requiring mortgage insurance to 80%, up from 75%. This would reduce the cost of mortgages for some borrowers since it would lower the down payment consumers are required to make before the law requires mortgage insurance.

The legislation also calls for the establishment of a framework to bring in electronic cheque imaging, a new technology that would decrease the time consumers and small businesses have to wait for their cheques to clear.

Other changes include

  • Providing timelier disclosure to consumers about things such as deposit-type investment products, and improving complaint-handling procedures;
  • Streamlining ministerial transaction approvals to make the process more efficient; and
  • Making it easier for credit unions to establish cooperative credit associations as a means of expanding their business.

As was mentioned in the finance minister’s recent economic update, the government also proposes to allow Canadian financial institutions to add more foreign experts to their boards, as long as the majority of directors remain Canadian residents.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(11/28/06)