NAFTA Financial Services Committee Wakefield, October 4, 2005

Government of Canada’s Agenda Heightened profile of financial sectorHeightened profile of financial sector Budget 2005Budget 2005 Recognized as key contributor to Canadian economyRecognized as key contributor to Canadian economy “A well functioning and innovative financial services sector is essential for the Canadian economy to achieve its full potential.” Budget 2005

Major Elements for 2005/06 Corporate GovernanceCorporate Governance Securities RegulationSecurities Regulation AML/ATFAML/ATF 2006 Legislative Review2006 Legislative Review PensionsPensions

Corporate Governance Government made changes to corporate governance provisions of CBCA in 2001Government made changes to corporate governance provisions of CBCA in 2001 Consultation paper in January 2003 on FI frameworkConsultation paper in January 2003 on FI framework Budget 2005 commitment:Budget 2005 commitment: –bring the governance standards for financial institutions up to the levels adopted in 2001 –update certain governance standards unique to financial institutions. Legislation tabled June 6, 2005 (C-57)Legislation tabled June 6, 2005 (C-57)

Corporate Governance Bill C-57 is proceeding with:Bill C-57 is proceeding with: –Clarifying the role of directors –Enhancing the right of shareholders –Modernizing governance practices –Strengthening the governance elements of the regulatory framework –Increasing disclosure in respect of participating and adjustable life insurance policies

Securities Regulation Securities regulation crucial to efficient and well-functioning capital marketsSecurities regulation crucial to efficient and well-functioning capital markets Widespread consensus that our securities regulatory system needs to be improvedWidespread consensus that our securities regulatory system needs to be improved WPC provided analysis and proposal for single securities regulatorWPC provided analysis and proposal for single securities regulator Currently working with the provinces and territoriesCurrently working with the provinces and territories

Proceeds of Crime (Money Laundering) and Terrorist Financing Act - PCMLTFA Core elements of Canada’s AML/ATF regime originally set out in the Proceeds of Crime (Money Laundering) Act (2000)Core elements of Canada’s AML/ATF regime originally set out in the Proceeds of Crime (Money Laundering) Act (2000) Re-named the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in 2001Re-named the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in 2001 The Act and domestic AML/ATF program are designed to meet international standards and provide law enforcement with the necessary tools to combat organized crimeThe Act and domestic AML/ATF program are designed to meet international standards and provide law enforcement with the necessary tools to combat organized crime

AML/ATF - International Standards Canada is a member of the Financial Action Task Force (FATF)Canada is a member of the Financial Action Task Force (FATF) –Canada also participates in FATF-style regional bodies, CFATF and APG Canada will undergo a FATF Mutual Evaluation beginning in April 2006Canada will undergo a FATF Mutual Evaluation beginning in April 2006

AML/ATF - Enhancing Canada’s Regime The government issued a Consultation Paper to outline policy proposals for enhancing Canada’s regime. The proposals aim to:The government issued a Consultation Paper to outline policy proposals for enhancing Canada’s regime. The proposals aim to: –Comply with revised FATF standards and prepare for 2006 Mutual Evaluation –Respond to recommendations from various evaluations –Prepare for the Parliamentary review of the Act (to begin in 2005)

AML/ATF - Policy Proposals Five key objectives: 1)Strengthen ‘know your client’ standards 2)Close existing gaps in Canada’s regime 3)Increase compliance, monitoring and enforcement 4)Strengthen FINTRAC’s intelligence function 5)Coordinate and assess overall AML/ATF efforts

AML/ATF - Consultations Submissions received until September 30, 2005Submissions received until September 30, 2005 Targeted consultations with stakeholders to take place over the FallTargeted consultations with stakeholders to take place over the Fall Administration and operation of the PCMLTFA will be reviewed by a Parliamentary Committee in 2005Administration and operation of the PCMLTFA will be reviewed by a Parliamentary Committee in 2005 Amendments to be tabled following public consultations and Parliamentary reviewAmendments to be tabled following public consultations and Parliamentary review

2006 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 objectives:Set out proposals aiming to achieve 3 key objectives: –Enhancing interests of consumers –Increasing legislative and regulatory efficiency –Adapting the 2001 framework to new developments

2006 Legislative Review –Disclosure –Electronic transactions –75% LTV mortgages –Cheque hold periods –Foreign bank entry –Streamlining approvals –Consolidation BA & TLCA –Credit unions –Marine insurance –Cheque imaging –Commercial investment powers –Bank Act special security regime Consultation paper asked for views on Consultation paper asked for views on:

2006 Legislative Review Over 50 submissions received from various stakeholders (industry associations, consumer groups, FIs, individuals, others)Over 50 submissions received from various stakeholders (industry associations, consumer groups, FIs, individuals, others) Stakeholders concentrated on consultation paper proposals and group-specific technical issues Stakeholders concentrated on consultation paper proposals and group-specific technical issues Issues generally reflected those raised in the budget paper, apart from insurance retailing Issues generally reflected those raised in the budget paper, apart from insurance retailing

2006 Legislative Review Stakeholders’ views on key issues:Stakeholders’ views on key issues: –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 imaging –Support for streamlining approvals –Mixed views on: 75% LTV mortgages75% LTV mortgages Bank Act special security regimeBank Act special security regime Commercial investment powers for FIsCommercial investment powers for FIs

2006 Legislative Review ChronologyChronology Royal Assent End of consultations White Paper Committees’ review Tabling Fall 2004 Winter 2005Spring 2005 Summer 2005 Fall 2005 Winter 2006Spring 2006 Summer 2006 Fall 2006 Consultation Paper

Pensions A number of provinces and organizations are consulting on these challengesA number of provinces and organizations are consulting on these challenges Department consultation paper released May 2005Department consultation paper released May 2005 Aimed at balancing the interests of private pension plan sponsors and plan membersAimed at balancing the interests of private pension plan sponsors and plan members

Pensions Broad range of challenges facing defined benefit pension planBroad range of challenges facing defined benefit pension plan – adverse market conditions – funding deficits – surplus ownership uncertainty – treatment of pensions under insolvency Concern of viability of defined benefit pension plansConcern of viability of defined benefit pension plans

Pensions The paper identified a number of key issues for discussion:The paper identified a number of key issues for discussion: – surplus – funding – void amendments – full funding on plan termination – pension benefit guarantee fund Consultation period ended September 15 th Consultation period ended September 15 th

Pensions Currently analyzing submissions and potential policy responsesCurrently analyzing submissions and potential policy responses –120+ submissions –Employers, Labour, Retirees, Actuaries, Lawyers, general public Plan to be in a position to bring forward legislative and/or regulatory changes in the coming monthsPlan to be in a position to bring forward legislative and/or regulatory changes in the coming months

NAFTA Financial Services Committee Wakefield, October 4, 2005