- Consulting with Canadians -

CLHIA's Submission in Response to Finance Canada's�Large Bank Mergers in Canada:

December 31, 2003

Gerry Salembier
Director, Financial Institutions Division
Financial Sector Policy Branch
Department of Finance
140 O'Connor Street
Ottawa, Ontario
K1A 0G5

Dear Mr. Salembier:

Full Functionality of ATMs

I am writing on this occasion to provide comments on an issue raised in the June 23, 2003 Response of the Government to reports from the Commons Finance Committee and Senate Banking Committee on large bank mergers in Canada.

The issue is full functionality of ATMs. On page 23 of its Response, the government asks: Would the introduction of ATM full functionality permit smaller regional banking operations and new entrants to expand their reach and be stronger competitive forces in Canada?

Commencing in the mid-90s, the industry undertook sustained efforts to become eligible to provide its policyholders with access to their funds through the extensive Interac network of ATMs and point-of-sale terminals. Those efforts involved, among other things, policy proposals to Finance, participation in various consultive processes, as well as Parliamentary submissions and testimony.

A major milestone in that process was attained in the most recent overhaul of federal financial services legislation (i.e. Bill C-8 and accompanying regulations). With its coming-into-force in 2001, Canada's life and health insurers became the world's first to be eligible to participate directly in their national payments system as members of the Canadian Payments Association (CPA).

However, eligibility for CPA membership was not itself sufficient to enable life insurers to issue payment cards which would be operational in the Interac network. As a private association, Interac has eligibility requirements which include CPA membership as well as other conditions. After C-8 came into force, those eligibility requirements continued to include several provisions which precluded life insurers from being Interac members.

In December 2002, Interac modified its eligibility requirements in a manner which now makes life and health insurers eligible for Interac membership. Those modifications were contained in recent amendments to an agreement between Interac and the Competition Bureau.

In conjunction with the eligibility for CPA membership, these changes to Interac's membership conditions completed the process of seeking to enable life and health insurers to issue payment cards to their policyholders which would permit them to use the extensive Interac network to access funds available through their life and health policies. Expanding the functionality of ATMs would expand life and health insurers' ability to further serve Canadian consumers.

My colleagues and I remain at your disposal should you wish to discuss these matters further.

Yours very truly,

J-P Bernier
Vice President and General Counsel