Richard Bedford Bennett (Leader of the Official Opposition)
He did it this afternoon.
He did it this afternoon.
The bill, as presented to the house by my hon. friend provides, first, for an amendment to give publicity to lapsed policies. This is already provided for in the act, and I venture to say that my hon. friend gathered the information that he has presented to this house from the published returns of the insurance department. These returns give these lapses for a number of yeans.
The bill also provides certain conditions regarding the reinstatement of policies. There is provision now in the act covering this, and the only material difference between my hon. friend's bill and the act as it now exists is that the act provides that six per cent shall be paid and my hon. friend has reduced it to five.
Is there not a limitation as to time? Is it not after three years?
I think it is two years.
It used to be three. Is it two years now?
This bill places no limitation as to the time.
That is the only material difference. I repeat we are quite willing that the bill should go to the banking and commerce committee and that there be the fullest inquiry into these life insurance policies.
Motion agreed to, bill read the second time and referred to the select standing committee on banking and commerce.
Mr. T. L. CHURCH (Toronto Northwest) moved the second reading of Bill No. 11, to amend the Bank Act. He said: This bill provides that the consent of parliament shall be obtained before any agreements for bank mergers shall take place. Under the present law all that is necessary is that the governor in council, through the Minister of Finance, give consent. That law is not in the interests of the banking system of this country. I have here a statement showing the mergers which have taken place since confederation, as follows: 63.-Bank absorptions (mergers) in Canada since 1867.1 Purchasing Bank. Bank Absorbed. Date.2 Aug. 13, 1903 People's Bank of Halifax, N.S June 27, 1905 Ontario bank Oct. 13, 1906 People's Bank of New Brunswick April 15, 1907 Bank of British North America Oct. 12, 1918 Merchants bank Mar. 20, 1922 Molsons bank Jan. 20, 1925 May 19, 1870 Bank of British Columbia Dec. 31, 1900 Halifax Banking Co May 30, 1903 Merchants Bank of P.E.I May 31, 1906 Eastern Townships bank Feb. 29, 1912 Bank of Hamilton Dec. 31, 1923 Oct. 1, 1883 Bank of New Brunswick Feb. 15; 1913 The Metropolitan bank Nov. 14, 1914 The Bank of Ottawa April 30, 1919 Nov. 1, 1910 Traders Bank of Canada Sept. 3, 1912 Quebec bank Jan. 2, 1917 Northern Crown bank July 2, 1918 Union Bank of Canada Aug. 31, 1925 *The purchasing banks named in the latter part of the table are no longer in business. !Dates given since 1900 are of the Orders in Council authorizing the absorption. Bank Act-Mr. Church
63.-Bank absorptions (mergers) in Canada since 1867.-Concluded Purchasing Bank. Bank Absorbed. Date. June 21, 1875 Feb. 13, 1909 Dec. 31, 1924 April 30, 1924 Sept. 12, 1901 Feb. 22, 1868 June 1, 1868 Oct. 31, 1902 July 2, 1908 July 2, 1908 Mar. 31, 1911 April 15, 1913 Sterling Bank of Canada Commercial Bank of Canada Crown Bank of Canada Home Bank of Canada La Banque Internationale du Canada 3The Banque d'Hochelaga after absorbing the Banque Nationale adopted the name Banque Canadienne Nationale. . Section 1 of this bill provides that no agreement by a bank to sell the whole or any portion of its assets to another bank shall be of any force or effect until parliament approves and confirms the agreement. Section 102 of the present act provides that if the agreement is approved by the shareholders, the agreement may be executed under the seals of the banks, parties thereto, " and application may be made to the governor in council, through the minister, for approval thereof." This bill provides that these last words be stricken from the section. The proposal is to substitute these words: No agreement by a bank to sell the whole or any portion of its assets to another bank shall be of any force or effect until parliament approves and confirms the agreement. Last session this particular matter came up and I asked for a return bringing down any correspondence as to proposed mergers. The report was placed on the table within the last two or three days of the session stating that the department had no information; but within six weeks after parliament closed we read in the daily papers that an agreement had been entered into and approved by both banks for the merger of the Standard bank and the Canadian Bank of Commerce. That was done over the head of parliament. What is parliament for? Are we to sit here like a lot of dummies and have nothing to say about such things? Are we back to the days of the family compact? What have the farmers to say about this? I understand there is a feeling in the west against any more mergers. Just the day before yesterday Sir James Aikins, the president of the Canadian Bar Association, an Imperial bank director and former Lieutenant-governor of Manitoba, came out strongly in this regard and gave an interview in opposition to these mergers. He said: The people are fearful that the banks of the country, if further amalgamation is permitted, [Mr. Church.3 may have too great control over the distribution of the country's money and thus hamper the merchants and the general public in their financial organization. He favours a decentralized Canadian banking system with large head offices and multitudinous small branches scattered all over the country, thus facilitating depositing and distribution of money. It has many advantages over the banking system in the United States with large head offices and very few branch offices for the collection and distribution of the people's money, he said. He spoke very strongly against mergers, saying further: "The judgment of the people is pretty sound. The people constitute a fair jury, I think, and it is clearly to be seen that the public is fearful of too great centralization in the Dominion's banking world," said he. "The people are afraid that the banks of the country, if further amalgamations should come to pass, may have too great control over the distribution of the country's money and thus hamper the merchants, dealers and the general public in their financial organization. "It would not be wise to flout the opinion of the people, and the people are afraid of further amalgamations." Outlining in detail the advantages of the Canadian banking system, with its large head offices and multitudinous small branches scattered all over the country, thus facilitating more decentralized depositing and distribution of money, as compared with the United States banking system, with large head offices and no or very few branch offices for the collection and disbursement of the people's money, Sir James stressed the importance of the public sentiment "that further amalgamation might not be fair, as it would endanger a fair collection of surplus money as well as a fair distribution." I believe those remarks represent the views of the mass of the people of Canada. This matter was discussed a few years ago in this house. Why should parliament have no control over such large institutions as the Canadian Bank of Commerce and the Standard bank in connection with an agreement for a merger like that? The parliament of Canada is a board of directors representing the people of all the provinces and surely Bank Act-Mr. Robb they should have something to say as to whether such mergers are in the public interest or not. It may be that some few are in the public interest. Why did the Canadian Bankers' Association not come to the support of the Home bank and keep the doors of that bank open, thus preventing the suffering which exists to-day amongst widows and orphans in Ontario and some of the other provinces? If parliament had asserted its rights, functions and prerogatives long ago, this failure could not have taken place; but parliament did not and is content until some bank closes its doors, with the result that thousands of suffering widows and orphans are left without money and afterwards have a hard time to get a few dollars back. The time has come now for no more bank mergers in this country. There are only ten or eleven banks left now. The trusts and combines are ruling Canada to-day; they are flourishing like a green bay tree here. In the United States they have a Sherman anti-trust law and we should have one in Canada and make some effort to put on the brakes. Parliamentary institutions in this country are in danger on account of the way in which the banks, combines and trusts are t-o-day in control of affairs, and the time has come for this parliament to assert its rights, prerogatives and functions. The trouble is that there is too much rigidity of the party system in these matters in parliament and the big corporations of the country are using that rigidity to accomplish their raids and to get legislation passed which should never be passed by any free parliament. Amongst those who have suffered through the failure of the Home bank are widows and orphans by the dozen in my constituency, people who put their all into the Home bank and who got very little out except pin money by way of a contribution by this parliament. I asked in the house about the merger of the Standard bank and the Canadian Bank of Commerce and I was told that there were no papers and that the department knew of no merger. The minister may be able to justify in some way this particular merger. This bill does not deal with mergers that are past and gone; it speaks of the future, providing that, as regards any mergers that are contemplated, parliament should reassert its rights and prerogatives and that, if it is a free parliament, it should be given control over the banking trusts of the country. The banks to-day consist of the Bank of Montreal, the Bank of Nova Scotia, the Bank of Toronto, the Provincial bank, the Canadian Bank of Commerce, the Royal bank, the Dominion bank, the Imperial bank, the Wey-bum Security bank. The financial papers now say there are going to be some more mergere between the smaller banks. We have an opportunity in that case of asserting the rights of parliament to vote for what is in the public interest, namely, that any more agreements between one bank and another shall have the approval of the high court of parliament.
Hon. J. A. ROBB (Minister of Finance):
Mr. Speaker, lif bank mergers were brought about for the sole benefit of the shareholders, there would not be much objection to the procedure suggested by the bill which my hon. friend has introduced, but in bank failures it is the depositors who suffer. That is the long and rather painful experience that we have had in this country. It may be observed that the government of the day and parliament have some responsibilities towards the depositors who place their deposits in the various chartered banks of Canada. My hon. friend would take away from the Minister of Finance and the treasury board the right which they now have to supervise these banks carefully and to look after the interests of the depositors as well as of the shareholders, and he would give that to parliament. My hon. friend has not cited any country that follows that procedure. In the mother country the consent of the treasury department must be obtained, and in the United States the consent of the comptroller of the currency is required.
My hon. friend has referred at considerable length to the case of the Home bank. Looking back over the bank mergers that we have had in Canada during the last eight or ten years, we find that some of them have been necessitated by reason of conditions arising out of the Home bank failure. Depositors became alarmed; they withdrew their deposits with certain banks and placed them in other banks which they thought were stronger, and the banks from which the deposits were withdrawn either had to wind up altogether or do the best they could for their depositors and shareholders by merging with some other bank. Just imagine what might have happened if in the case of these mergers we had followed the procedure suggested by my hon. friend! Take the case of La Banque Nationale, for instance, a splendid old bank in the province of Quebec. Suppose that when it went wrong and they were not able to meet their payments, it had been advertised for some months in advance that this bank was in bad shape and had to merge with
Bank Act-Mr. Robb
some other bank, and that it was coming to parliament for permission to do so, there would have been such a run on that bank that it would have become bankrupt before it ever got to parliament.
And the shareholders
would have paid double liability.
Yes, if they were able to,
but if they had not been able to, there would have been a demand made on the national treasury to meet the losses on the ground that parliament had delayed a merger that might have saved the depositors.
Take the case of Molson's bank, a splendid old bank. I have had a few rather sad experiences with splendid men who were interested in some of these banks. I referred a day or two ago to a friend, a gentleman who was recently laid to rest in the Mount Royal cemetery, a splendid man, a strong man, who came to me with tears in his eyes, and told me the real position of his bank, one of the great banks of the country. Because of the position into which his bank had got, in order to save his depositors-he was not much interested in the shareholders; it was the depositors he was thinking of-his bank had to merge with another.
I recall another instance, that of the Union bank. An attempt was made to have the head office of the bank moved to western Canada, and the headquarters of the bank were moved from the city of Quebec to Winnipeg. The Union bank was a great bank, and a useful bank to western Canada during the time the management stood by their legitimate business, but there came a time in its history when it got into a position where it could not carry on. I recall the gentleman who was then at the head of that bank, a dear old man, who had lost his wife a few months before, coming to see me, with tears in his eyes. He knew his bank was in bad shape. He had close associations with some other banks, but his bank was in such bad shape that some of his old friends would not take it over, and I had to go down to the different banks in Montreal. I represented to Mr. Neill, of the Royal bank, "This is an opportunity for you to get a connection in western Canada." He said, "Robb, they have nothing to sell that is worth anything to us except their branches and connections. I will let you know in the afternoon." They decided to take the risk, not because of anything that was left in the Union bank, but because of the connection that it gave them.
Have all mergers come
about through the weakness of one of the banks concerned?
Most of the mergers that I
have had any experience with have been brought about because the bank got into a position where, in order to take care of its depositors, it had to merge with some other bank, and that is the position with which the government were confronted.
I did not intend in the discussion on this bill to refer to the Canadian Bank of Commerce and the Standard bank, but my hon. friend has brought that question up, and I would just as soon discuss it now as at any other time. Having been through this experience with the Banque Nationale, the Home bank, Molson's bank, the Union bank, and the Bank of Hamilton, and having in mind the run that was brought about on one of the big banks in this country through a foolish rumour spread in the city of Toronto, which nearly created a panic-yes, did create a panic, but the two governments, provincial and Dominion, stepped in and steadied that bank up, or I do not know what would have happened; because the people of Canada were nervous over conditions following the failure of the Home bank-having had that experience, when the question of the Standard bank and the Bank of Commerce merger arose, we looked carefully into it. The Standard bank, so far as its shareholders were concerned, and so far as its depositors were concerned, was perfectly solvent, but it was dead so far as doing added business was concerned; it was not getting new business. It must be remembered that two or three years before that time, a big institution had to lend a man to go into that bank to take care of it and steady it up. A run might have been started on that bank at any time, and we had the choice of taking that risk or consenting to a merger which we were satisfied was very much more in the interests of the depositors. You can trust the shareholders to look after themselves; they are quite able to do it, but the government has some responsibility towards the depositors.
My hon. friend has referred to the poor widows and orphans. What would have happened to the widows and orphans who had their money in these different banks, if we had had to wait for parliament to approve of the different mergers to which we consented? The government of the day is of the opinion, rightly or wrongly, that it is in the interest of the depositors that the
Bank Act-Mr. Coote
government should have the right to determine, after careful examination, whether or not there should be a merger. It is not the policy of this government to encourage bank mergers; it is the policy of this government to discourage mergers, but it is not the policy of this government to stand idly by and allow conditions to grow up such as I have indicated in connection with these other banks.
I submit, in conclusion, that Canada cannot make very much of a mistake in following the procedure that has worked so well for so many years in Great Britain, as well as the procedure that has been followed in the United States. It is the procedure we have followed in this country, and for these reasons I must say to my hon. friend that much as I welcome anything that will improve our banking system in Canada, I cannot consent to the principle of this bill, and I shall have to vote against the motion.
Mr. G. G. COOTE (Macleod):
very much that the Finance Minister (Mr. Robb) has said that he will vote against the second reading of the bill. I had hoped that the bill would be given a second reading and be allowed to go to committee, because 1 think the question of bank mergers is one of the most important questions facing this country to-day.
In the short time that I have had at my disposal to look into the question, I find that previous to 1900 there was no provision in the Bank Act for the purchase of the assets of any bank by another bank. That is, no provision was made for mergers oi banks, and prior to that time very few mergers took place.
In 1900 the Canadian Bankers' Association was incorporated by special act of parliament. The Bank Act was revised the same year, and 'by sections 24 to 29 it was provided that the Canadian Bankers' Association should appoint a curator to take charge of any bank that suspended payment. At the same time provision was made for the validation of certain by-laws of the association, so far as the winding-up of any bank which suspended payment was concerned.
Immediately following this legislative action the merger of banks commenced in dead earnest. I have before me a list of the bank mergers which have taken place since that time. In 1900 there were thirty-six banks. In that same year, immediately after this new provision was inserted in the Bank Act, the Bank of British Columbia was taken over by the Bank of Commerce. Then we have bank 78594-9
mergers averaging one per annum up to last year. In 1901 there was another bank merge*, another in 1902, two in 1903, one in 1905, one in 1906, one in 1907, one in 1908, one in 1909, one in 1910, one in 1911, two in 1912, two in 1913, one in 1914, one in 1917, one in 1918. two in 1919, one in 1922, one in 1923, two in 1924, two in 1925, and last year we had the merger of the Standard and the Commerce, leaving us now with ten banks. Of these amalgamations or mergers, it appears that the Royal bank has swallowed eight other banks, the Bank of Montreal six, the Bank of Commerce six, the Bank of Nova Scotia four, and La Banque Nationale one. I suppose it might be said that Canada is now in the hands of a financial octopus having ten heads- some of these soon to disappear if the policy of the government as carried out in the past is continued.
I have here a copy of the Financial1 Post of July 20, 1928. This was issued soon after the intention of the Standard to merge with the Commerce was made public. Dealing with the proposed merger the Financial Post says:
It was inevitable that the Commerce-Standard merger should revive discussion of other mergers. The definite statements by the executives of both banks that the merger was in line with the tendency towards fewer and larger banks in Canada was in itself enough to start tongues wagging. Even though there are signs apparent that the public wants no more of bank mergers, that does not stop the gossips from projecting other banking combinations.
I pause, Mr. Speaker, to appeal to you for better order in the house.