Despite heavy lobbying by the big banks, the federal Conservatives are proposing that no change be made in the rules that prevent the institutions from selling insurance in their branches.

A federal government review of banking laws makes no mention of the banks' long-standing demand that they be allowed to promote and sell insurance through their extensive branch network.

One of the proposed changes would free homeowners from having to buy mortgage insurance if they make a down payment of 20 per cent of the purchase price, instead the 25 per cent needed now.
One of the proposed changes would free homeowners from having to buy mortgage insurance if they make a down payment of 20 per cent of the purchase price, instead the 25 per cent needed now.

The white paper contains about 80 proposals, including one that would let homebuyers put less money down before having to buy mortgage insurance.

Lower threshold for mortgage insurance

Currently, a homebuyer must come up with a down payment of at least 25 per cent of the purchase price to get a conventional mortgage. Otherwise, they must buy mortgage insurance.

Ottawa is proposing to lower that threshold to 20 per cent.

Other proposed changes include:

  • Providing better disclosure to consumers about deposit investment products, fees, charges, and complaint-handling procedures.
  • Adopting a voluntary consumer protection program covering electronic transactions like internet banking and telephone banking.
  • Reducing the time when a financial institution can hold cheques to a maximum of seven days and eventually four days once electronic cheque imaging is commonplace.
  • Making it easier for credit unions to set up co-operative credit associations.

Proposals would cut 'red tape': finance minister

"The proposed recommendations will go a long way towards eliminating red tape, improving disclosure to consumers and fostering a strong and dynamic financial sector," Finance Minister Jim Flaherty said in a statement.

The white paper makes no mention of the contentious issue of bank mergers.

Laws governing banks and other federally-related financial institutions are reviewed every five years.

The government's proposals are open for public comment until July 21. 

Legislation to implement the proposals is being drafted now, the Finance Department said, and will be sent to the House of Commons in the fall.