Finance Committee on Nov. 14th, 2023

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Mr. Ciappara, I'd like to come back to you, if I may.

Just for background, I spent some time working for the Bank of Nova Scotia as a commercial banker. I used to be a management consultant with PCG and did a lot of consulting in the financial services sector. I heard your earlier point about sector-specific taxation and your concern about that. The challenge I have is the following one.

The Canadian banking sector is, to a great degree, in my view—for a bunch of reasons—relatively protected, from foreign competition especially. I believe there is inadequate competition in a number of sectors in this country. Banking is one of them. Telecoms and airlines are others. The consequence of that, for me, is that consumers pay higher prices than they would otherwise, the quality of service is less than it would be otherwise and the array of financial products available to businesses and consumers is less than it would be otherwise.

Therefore, there's a cost to be borne by our economy and our society for that lack of competition. When I think about the financing that a lot of companies need at the early stages of development, it's tougher to get it from the Canadian financial sector. There are a bunch of reasons, but I think competition would probably help alleviate some of that problem.

I guess my question to you is this: If your argument is that we shouldn't have sector-specific taxation, are you in favour of greater competition in the banking sector in Canada?

[Alex Ciappara]

Absolutely. We have 80 banks in this country, and they compete against credit unions, financing companies, government-owned entities, venture capital...but you need to step away. You could look at the banking system, but you need to look beyond the banking system and look at other financial service providers to see the amount of competition that takes place in this country.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

Next is MP Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Ciappara, given all the mortgage renewals and rising interest rates, the Office of the Superintendent of Financial Institutions has seen fit to take a prudential approach and tighten up certain rules. In particular, it's concerned about the sharp rise in loan-to-value ratios that may exceed 100%, and it's focusing specifically on rising instances of negative amortization.

I'd like to hear your comments on what's happening in that area.

[Alex Ciappara]

Yes, I think you're referring to variable-rate fixed-payment mortgages and, I think, to the renewal of mortgages in general. The banks are reaching out to their customers proactively to help those customers who are feeling impacted by the interest rate shock. There are a number of things that banks can do to help out their customers: moving into a fixed-rate mortgage, increasing the payments and helping them with lump-sum payments.

In the end, Canadian banks don't want to own a home. They'll do everything they can to help their customers stay in their homes. You only have to look back to the early days of the COVID crisis, when the industry negotiated I think 800,000 mortgage deferrals.

This is something they do on a regular basis in terms of helping out their customers, and they intend to do so in this period of high interest rates.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie

MP Green, you'll be the final questioner for the second panel and for our session here today.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

There was $750 billion in liquidity supports that went out over COVID. You listed that $17 million was paid out in taxes. Is that correct?

[Alex Ciappara]

It was $18 billion.

[Matthew Green, NDP, Hamilton Centre, ON]

Okay, $18 billion was paid out, and there was $750 billion in liquidity supports. You would have gotten CEWS as well and rental subsidies as well, yet you paid out $40 billion in dividends. Is that correct?

[Alex Ciappara]

There was $22 billion in dividends in 2022.

[Matthew Green, NDP, Hamilton Centre, ON]

In 2022, there was $22 billion in dividends on top of the government subsidies. The government collected $17 billion in taxes. Are you saying with a straight face that the taxes are the problem here, not the capital gains loopholes?

[Alex Ciappara]

I'm saying that there were a number of factors impacting the banking industry. It has to manage capital requirements and liquidity requirements with taxes included. These are all things that the banks have to manage.

[The Chair, Liberal, Peter Fonseca]

We have to conclude there. Thank you very much.

Thank you, MP Green.

We also thank our witnesses for their testimony and for all the information that they provided to us here in this pre-budget consultation. We're delighted to be here in Toronto, Ontario's capital, as we make our way across the country. We hope you have an excellent afternoon. Thank you very much for your testimony.

Thank you.