Thank you. I think it's a very important question.
To be clear to this committee, I don't think it is the case that it was a question of whether to do this intergovernmental agreement or nothing. It was a question of how this intergovernmental agreement would compare relative to the U.S. congressional act, or the higher act, and the provisions of FATCA within it.
FATCA itself would have required non-U.S. financial institutions, including Canadian financial institutions, to sign agreements with the Internal Revenue Service, under which they'd have to undertake due diligence on their own accounts—that is, to identify their U.S. account holders—and report on those directly to the Internal Revenue Service.
In some circumstances financial institutions would be required to withhold 30% of payments that were made to their account holders, or alternatively, potentially to close those accounts. Again, in possible conflict with Canadian law.
A financial institution that decided not to enter into such an agreement with the Internal Revenue Service would itself be subject to 30% withholding on payments going to it and to its clients from U.S. sources.
That raises, as we've already had a discussion about, concerns about privacy laws, the potential application of the 30% withholding tax, the impact on financial institutions and indeed the financial system, the possible requirement to close accounts, and really a grave compliance burden for everybody, affecting both financial institutions and of course their clients.
We think the intergovernmental agreement addresses a lot of that by eliminating the withholding tax issue, eliminating the risk of potential account closure, addressing the issue with the Privacy Act, and by virtue of some of the exemptions we've obtained for financial institutions not having to report on a large number of registered accounts not having to be reported on, the compliance burden is not eliminated but is much moderated.