NAFTA Financial Services NAFTA Financial Services CommitteeCommittee

Wakefield, October 4, 2005Wakefield, October 4, 2005

Government of Canada’s AgendaGovernment of Canada’s Agenda

• Heightened profile of financial sectorHeightened profile of financial sector• Budget 2005 Budget 2005 • Recognized as key contributor to Recognized as key contributor to

Canadian economyCanadian economy

““A well functioning and innovative financial A well functioning and innovative financial services sector is essential for the Canadian services sector is essential for the Canadian economy to achieve its full potential.”economy to achieve its full potential.”

Budget 2005Budget 2005

Major Elements for 2005/06Major Elements for 2005/06

• Corporate GovernanceCorporate Governance

• Securities RegulationSecurities Regulation

• AML/ATFAML/ATF

• 2006 Legislative Review2006 Legislative Review

• PensionsPensions

Corporate GovernanceCorporate Governance

• Government made changes to corporate Government made changes to corporate governance provisions of CBCA in 2001governance provisions of CBCA in 2001

• Consultation paper in January 2003 on Consultation paper in January 2003 on FI frameworkFI framework

• Budget 2005 Budget 2005 commitmentcommitment::– bring the governance standards for financial bring the governance standards for financial

institutions up to the levels adopted in 2001 institutions up to the levels adopted in 2001 – update certain governance standards unique to update certain governance standards unique to

financial institutions.financial institutions.

• Legislation tabled June 6, 2005 (C-57)Legislation tabled June 6, 2005 (C-57)

Corporate GovernanceCorporate Governance

• Bill C-57 is proceeding with: Bill C-57 is proceeding with: – Clarifying the role of directors Clarifying the role of directors – Enhancing the right of shareholdersEnhancing the right of shareholders– Modernizing governance practicesModernizing governance practices – Strengthening the governance elements of Strengthening the governance elements of

the regulatory frameworkthe regulatory framework– Increasing disclosure in respect of Increasing disclosure in respect of

participating and adjustable life insurance participating and adjustable life insurance policiespolicies

Securities RegulationSecurities Regulation

• Securities regulation crucial to efficient Securities regulation crucial to efficient and well-functioning capital marketsand well-functioning capital markets

• Widespread consensus that our Widespread consensus that our securities regulatory system needs to be securities regulatory system needs to be improvedimproved

• WPC provided analysis and proposal for WPC provided analysis and proposal for single securities regulatorsingle securities regulator

• Currently working with the provinces and Currently working with the provinces and territoriesterritories

Proceeds of Crime (Money Laundering) Proceeds of Crime (Money Laundering) and Terrorist Financing Act - PCMLTFAand Terrorist Financing Act - PCMLTFA

• Core elements of Canada’s AML/ATF regime Core elements of Canada’s AML/ATF regime originally set out in the Proceeds of Crime originally set out in the Proceeds of Crime (Money Laundering) Act (2000)(Money Laundering) Act (2000)

• Re-named the Proceeds of Crime (Money Re-named the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in Laundering) and Terrorist Financing Act in 20012001

• The Act and domestic AML/ATF program are The Act and domestic AML/ATF program are designed to meet international standards and designed to meet international standards and provide law enforcement with the necessary provide law enforcement with the necessary tools to combat organized crimetools to combat organized crime

AML/ATF - International StandardsAML/ATF - International Standards

• Canada is a member of the Financial Canada is a member of the Financial Action Task Force (FATF)Action Task Force (FATF)– Canada also participates in FATF-style Canada also participates in FATF-style

regional bodies, CFATF and APGregional bodies, CFATF and APG

• Canada will undergo a FATF Mutual Canada will undergo a FATF Mutual Evaluation beginning in April 2006Evaluation beginning in April 2006

AML/ATF - Enhancing Canada’s RegimeAML/ATF - Enhancing Canada’s Regime

• The government issued a Consultation The government issued a Consultation Paper to outline policy proposals for Paper to outline policy proposals for enhancing Canada’s regime. The enhancing Canada’s regime. The proposals aim to:proposals aim to:– Comply with revised FATF standards and Comply with revised FATF standards and

prepare for 2006 Mutual Evaluationprepare for 2006 Mutual Evaluation– Respond to recommendations from various Respond to recommendations from various

evaluationsevaluations– Prepare for the Parliamentary review of the Prepare for the Parliamentary review of the

Act (to begin in 2005)Act (to begin in 2005)

AML/ATF - Policy ProposalsAML/ATF - Policy Proposals

Five key objectives:Five key objectives:1)1) Strengthen ‘know your client’ standardsStrengthen ‘know your client’ standards

2)2) Close existing gaps in Canada’s regimeClose existing gaps in Canada’s regime

3)3) Increase compliance, monitoring and Increase compliance, monitoring and enforcement enforcement

4)4) Strengthen FINTRAC’s intelligence functionStrengthen FINTRAC’s intelligence function

5)5) Coordinate and assess overall AML/ATF Coordinate and assess overall AML/ATF effortsefforts

AML/ATF - ConsultationsAML/ATF - Consultations

• Submissions received until September 30, Submissions received until September 30, 20052005

• Targeted consultations with stakeholders to Targeted consultations with stakeholders to take place over the Falltake place over the Fall

• Administration and operation of the Administration and operation of the PCMLTFA will be reviewed by a PCMLTFA will be reviewed by a Parliamentary Committee in 2005Parliamentary Committee in 2005

• Amendments to be tabled following public Amendments to be tabled following public consultations and Parliamentary reviewconsultations and Parliamentary review

2006 Legislative Review2006 Legislative Review

• FI statutes will sunset in October 2006FI statutes will sunset in October 2006• Consultation paper released with BudgetConsultation paper released with Budget• Set out proposals aiming to achieve 3 key Set out proposals aiming to achieve 3 key

objectives:objectives:– Enhancing interests of consumersEnhancing interests of consumers– Increasing legislative and regulatory efficiencyIncreasing legislative and regulatory efficiency– Adapting the 2001 framework to new Adapting the 2001 framework to new

developmentsdevelopments

2006 Legislative Review2006 Legislative Review

– DisclosureDisclosure– Electronic Electronic

transactionstransactions– 75% LTV mortgages75% LTV mortgages– Cheque hold periodsCheque hold periods– Foreign bank entryForeign bank entry– Streamlining Streamlining

approvalsapprovals

– Consolidation BA & Consolidation BA & TLCATLCA

– Credit unions Credit unions – Marine insuranceMarine insurance– Cheque imagingCheque imaging– Commercial Commercial

investment powersinvestment powers– Bank ActBank Act special special

security regimesecurity regime

• Consultation paper asked for views onConsultation paper asked for views on:

2006 Legislative Review2006 Legislative Review

• Over 50 submissions received from various Over 50 submissions received from various stakeholders (industry associations, stakeholders (industry associations, consumer groups, FIs, individuals, others)consumer groups, FIs, individuals, others)

• Stakeholders concentrated on consultation Stakeholders concentrated on consultation paper proposals and group-specific technical paper proposals and group-specific technical issuesissues

• Issues generally reflected those raised in the Issues generally reflected those raised in the budget paper, apart from insurance retailingbudget paper, apart from insurance retailing

2006 Legislative Review2006 Legislative Review

• Stakeholders’ views on key issues:Stakeholders’ views on key issues:– Consumers interested in: Consumers interested in:

• Improved disclosureImproved disclosure• Clear rules for electronic transactionsClear rules for electronic transactions• Reduced check hold periodsReduced check hold periods

– Unanimous support for cheque imagingUnanimous support for cheque imaging– Support for streamlining approvalsSupport for streamlining approvals– Mixed views on:Mixed views on:

• 75% LTV mortgages75% LTV mortgages• Bank ActBank Act special security regime special security regime• Commercial investment powers for FIsCommercial investment powers for FIs

2006 Legislative Review2006 Legislative Review

• ChronologyChronology

Royal Assent

End of consultations

White Paper

Committees’ review

Tabling

Fall 2004

Winter 2005

Spring 2005

Summ

er 2005

Fall 2005

Winter 2006

Spring 2006

Summ

er 2006

Fall 2006

Consultation Paper

PensionsPensions

• A number of provinces and A number of provinces and organizations are consulting on these organizations are consulting on these challengeschallenges

• Department consultation paper released Department consultation paper released May 2005May 2005

• Aimed at balancing the interests of Aimed at balancing the interests of private pension plan sponsors and plan private pension plan sponsors and plan membersmembers

PensionsPensions

• Broad range of challenges facing Broad range of challenges facing defined benefit pension plandefined benefit pension plan– adverse market conditions adverse market conditions – funding deficitsfunding deficits– surplus ownership uncertainty surplus ownership uncertainty – treatment of pensions under insolvencytreatment of pensions under insolvency

• Concern of viability of defined benefit Concern of viability of defined benefit pension planspension plans

PensionsPensions

• The paper identified a number of key The paper identified a number of key issues for discussion:issues for discussion:– surplussurplus– funding funding – void amendmentsvoid amendments– full funding on plan terminationfull funding on plan termination– pension benefit guarantee fund pension benefit guarantee fund

• Consultation period ended September Consultation period ended September 1515thth

PensionsPensions

• Currently analyzing submissions and Currently analyzing submissions and potential policy responsespotential policy responses– 120+ submissions120+ submissions– Employers, Labour, Retirees, Actuaries, Employers, Labour, Retirees, Actuaries,

Lawyers, general publicLawyers, general public

• Plan to be in a position to bring forward Plan to be in a position to bring forward legislative and/or regulatory changes in legislative and/or regulatory changes in the coming monthsthe coming months

NAFTA Financial Services NAFTA Financial Services CommitteeCommittee

Wakefield, October 4, 2005Wakefield, October 4, 2005