Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tax.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Ted Cook  Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
  • Sean Keenan  Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
  • Brian McCauley  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
  • Pierre Mercille  Senior Legislative Chief, Sales Tax Division, GST Legislation, Tax Policy Branch, Department of Finance
  • Lucia Di Primio  Chief, Excise Policy, Sales Tax Division, Excise Act, Tax Policy Branch, Department of Finance
  • Gordon Boissonneault  Senior Advisor, Economic Analysis and Forecasting Division, Demand and Labour Analysis, Economic and Fiscal Policy Branch, Department of Finance
  • Jane Pearse  Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
  • Annie Hardy  Chief, Financial Institutions Division, Structural Issues, Financial Sector Policy Branch, Department of Finance
  • Ling Wang  Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance

8:30 p.m.

NDP

Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC

The briefing notes provided to us by the Library of Parliament indicate that, “eligible agents would be allowed to use the voting rights attached to any share purchased in a financial institution.”

I can understand why, in the context of what is being presented to us, that the eligible agents could use their vote within the imposed guidelines on a foreign property by the Banking Act, for example.

My question is the following. Why are there two different rules for the eligible agents and for the other government organizations, which could also invest but not use their right to vote?

May 16th, 2012 / 8:30 p.m.

Annie Hardy Chief, Financial Institutions Division, Structural Issues, Financial Sector Policy Branch, Department of Finance

Indeed, the eligible agents have the right to vote here given that they have the right to hold shares. This privilege comes with a right to vote. Likewise, other agencies that would have the right to hold shares would have exactly the same privilege to hold a right to vote. This is consistent with other principles of the legislation.

8:30 p.m.

NDP

Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC

Okay.

8:30 p.m.

Conservative

The Chair James Rajotte

Okay.

I have Mr. Mai and Mr. Marston on the list.

Mr. Mai, go ahead.

8:30 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

Thank you, Mr. Chair.

It was mentioned that sovereign wealth funds can acquire Canadian banks. There is therefore some openness. Are there limits on the number of shares that can be acquired? Does this mean that a foreign agency could acquire a Canadian bank tomorrow morning?

8:30 p.m.

Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Jane Pearse

Not unless the bill passes tonight.

There are existing limits for small, medium, and large financial institutions in Canada. For a small financial institution, any investor or owner can own up to 100% of that institution. Medium-sized institutions, anything over $2 billion in assets, have to be 35% widely held. In other words, any individual owner can only own a maximum of 65% of that institution. The intent there is to move the institution toward greater disclosure of their financial statements and business plans. Currently, any institution above $8 billion is required to be widely held. No individual owner can have more than 10%, or 20% with the approval of the Minister of Finance, of voting common shares. That regime does not change with these amendments.

8:30 p.m.

NDP

Hoang Mai Brossard—La Prairie, QC

I understand. Thank you.

8:30 p.m.

Conservative

The Chair James Rajotte

Mr. Marston, go ahead.

8:30 p.m.

NDP

Wayne Marston Hamilton East—Stoney Creek, ON

The good news is that Mr. Caron asked one of my questions, so that will cut it down a bit.

In terms of your presentation, and talking about the ministerial tests that they applied, I read here that part of his consideration will be the financial resources and the business record of the purchaser. If I understand this correctly, the purchaser will put up a certain amount of cash value to buy equity in a firm. You would think that there would be something that said what the status of the place is they're buying into, as part of that test, you know, the viability of a given bank, just for an example.

On that side of the equation, is there any ministerial test they would look at? I'm thinking of let's say a privately held pension fund that wants to buy into a bank. Our banks are in good shape—we have a good reputation for that—but it seems to me that they're looking at the purchaser, as opposed to where they're putting the investment. Is there a counter to that anywhere?

8:35 p.m.

Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Jane Pearse

All of our federal financial institutions are supervised by the Superintendent of Financial Institutions. From that perspective, they're under review or oversight by the government.

Each investor in a financial institution is responsible for assessing the solvency or the capability of that individual firm to continue with its business plan and assess the ability of that firm to make a return on income or a return on investment that is consistent with that investor's requirements.

The approval by the Minister of Finance is looking more specifically at the criteria or the characteristic of the investor into the financial sector.

8:35 p.m.

NDP

Wayne Marston Hamilton East—Stoney Creek, ON

I gathered that. I realize that part of the due diligence of the purchaser is to look for themselves. I was curious if there was a ministerial test at all, but that's fine. You've answered the question, and I appreciate that.

8:35 p.m.

Conservative

The Chair James Rajotte

Thank you.

Mr. Brison.

8:35 p.m.

Liberal

Scott Brison Kings—Hants, NS

Under the widely held rule, no one can take more than 10% of one of the big banks. ADIA, the Abu Dhabi Investment Authority, manages about $627 billion. CIC, China Investment Corporation, manages about $350 billion. The Japanese government pension fund I think manages $1.3 trillion or $1.4 trillion, as an example. These are big players. In Canada, the CPP Investment Board manages about $160 billion, or something like that, maybe a little less this week. These are very significant players.

Besides the ministerial discretion, if the Abu Dhabi Investment Authority wanted to take 10% of a Canadian bank, and CIC wanted 10%, and the Japanese government pension fund wanted to buy 10%, and there were a couple more of these sovereign wealth funds, is there any legislative or regulatory barrier to one of the big Canadian banks effectively having more than 50% of its shares owned by a consortium of foreign sovereign wealth funds after this change? Is there any specific regulatory barrier?

8:35 p.m.

Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Jane Pearse

As I said, the minister will be able to assess using a variety of criteria in the process of looking at an approval.

8:35 p.m.

Liberal

Scott Brison Kings—Hants, NS

So it's purely ministerial discretion at that point--there is not an equivalent foreign ownership limitation?