Mr. LAPOINTE:

No. None of these funds were collected through canteen funds. They were all assigned pay and public subscriptions.

Insurance Companies Act

Resolution reported, read the second time and concurred in. Mr. Lapointe thereupon moved to introduce Bill No. 394, to amend the Department of National Defence Act.

Motion agreed to and bill read the first time.

Mr. ABBOTT:

Not only throughout

Ontario. The main purpose is to facilitate greater investment by insurance companies in mortgages on real estate. The section, to which I made special reference, to implement the new act passed in Ontario, enables them to invest in mortgages beyond the present 60 per cent limit if these mortgages are guaranteed by the province, the state or other governmental authority.

Insurance Companies Act

Mr. FRASER:

This will not affect in any way the security of the policyholder?

Mr. ABBOTT:

Not a bit. I think it improves the policyholder's position.

Mr. HACKETT:

Is the guarantee for the whole of the mortgage, or only for the excess over 60 per cent of the appraised value?

Mr. ABBOTT:

I can get that information later.

Mr. HACKETT:

I am satisfied.

Mr. GILLIS:

When he was making his statement the minister said that this would prevent Canadian companies investing beyond three per cent of their capital or assets, and he pointed out that the British insurance companies had one hundred per cent latitude in any field in which they might wish to invest. Will this section limit the investment of British insurance companies in Canada to the same extent that Canadian companies are limited?

Mr. ABBOTT:

No. This does not affect the investment powers of British insurance companies. British insurance companies doing business in Canada must conform to our requirements with respect to investments, and must deposit with the Receiver General of Canada sufficient approved securities to guarantee their underwritings in Canada. The purpose of section 3 is merely to give the minister, with the approval of treasury board, the right to approve such assets as may be placed in the trust account to secure these underwriting liabilities in Canada.

Of course we have no jurisdiction to affect the investment powers of British or foreign insurance companies. We can say what they have to put up to secure underwriting obligations in Canada. We do in fact do that, and they have to deposit in trust sufficient approved securities to guarantee their obligations here. In section 3 I am adding the words, ''or such other assets as the minister, with the approval of the treasury board, may permit". It has always been the practice that the treasury board should be the body to approve the type of assets, provided they come within the limits in the act. There has been some complaint that under the restrictive provisions of section 3, as it stands, they could not even put up cash to secure their obligations here.

Mr. FRASER:

Will the parliamentary assistant make a statement?

Mr. BELZILE:

Perhaps a brief statement would be in order so as to give the committee some information on the subject.

This bill was introduced in the senate, and it pertains to the Quebec savings banks. The Quebec savings banks are institutions operating under special charters. There are two of them, both operating in that province.

In 1846 the Montreal City and District Savings Bank was founded. Its charter was granted by the Dominion of Canada in 1871. This savings bank operates only in the city and district of Montreal, where it has its head office and twenty-five branches. It has some

300,000 depositors.

The Quebec Savings Bank, or La Basque d'Economie de Quebec, was founded in 1848. It was incorporated in 1855 by an act of the Canadian legislature, and given a dominion charter by 34 Victoria, chapter 7. The Quebec Savings Bank operates only in the city and district of Quebec where it has fourteen branches.

These two banks are real savings banks; that is, they were established for the promotion of thrift and to encourage the regular saving of small amounts. The scope of their operations is limited to receiving deposits, investing them in gilt-edged securities, and granting loans guaranteed by the same kind of securities. They do not cater to the ordinary commercial risks. A clause in their charters stipulates that they must confine their operations to the accommodation of the non-business class of depositors.

There is no service charge of any kind for the granting of loans or for the opening and maintenance of accounts, and clients may issue cheques against their accounts.

For the convenience of their clients, the offices or branches of these banks are kept open to business on week-day evenings. It has been found that the great majority of the clients of

Quebec Savings Banks Act

these banks are of the working class particularly, and that they deposit small weekly or monthly amounts out of their pay cheques. It has been established that they seldom use their savings for ordinary purposes, but that, on the contrary, they will use them only in emergencies such as death, illness, or in special circumstances such as the purchase of a house, outlays for education of children, and the like.

The provisions of their charters and of the act place severe restrictions on the investments which these banks are allowed to make. Section 35, as it now stands, provides that these banks may invest moneys only in bonds, debentures, or other securities of or guaranteed by the government of Canada, or by provincial governments of Canada; in municipal bonds or debentures of school corporations in Canada, or bonds and debentures guaranteed by the United Kingdom, and so on. There is even a provision which makes it an offence and imposes a heavy penalty if the banks place money in unauthorized investments.

Section 37 provides that the banks may not lend any money upon the personal security of individuals, or to corporate bodies without collateral securities up to the amount of the loan, and these collaterals must be only certain kinds of bonds. Furthermore, the provisions of section 39 prohibit the making of a loan upon the security of real or immovable property.

The result has been that these restrictions are so great that the banks cannot actually meet the desires of their clients as to personal or mortgage loans. This bill would remedy this situation and permit the banks to make unsecured personal loans to a client, not exceeding at any time the amount of $1,000, and the aggregate amount of these loans made by the banks are not, at any time, to exceed five per cent of their deposit liabilities. It will further enable the banks to grant such loans on first mortgage on improved property, provided that such loans do not exceed sixty per cent of the value of the mortgaged property; and here again the aggregate amount of these loans shall not exceed five per cent of the deposit liabilities of the lending bank.

These powers to be conferred on these banks are not unlimited, as will be seen by the short explanation which has been given. They would be, in fact, similar to the powers of the trust companies and conform with the provisions of the civil code of the province of Quebec, section 981 o, as to the administration of funds by a trustee, tutor or curator.

It has been deemed necessary to permit the enlargement of the powers of the banks in

order to give them an opportunity to get their funds into more profitable circulation. These banks are well-managed institutions. Their losses have been few and far between, because they make only loans containing a minimum of risk.

The bill contains some minor amendments to bring the act into line with the Income Tax Act and with the Bank Act, and certain provisions relating to income and investment reports to be made to the Minister of Finance. But the main purpose of the bill is to empower these banks to render additional services to the public in general.