Public Accounts Committee on Feb. 17th, 2011

[Diane Lafleur]

One thing I would point to—it's been alluded to through the discussion today—is the regular five-year review of the financial institution statutes. It's quite unique. We've never come across any other jurisdiction in the world that has this kind of mechanism that forces a regular look at the statutes and the regulatory framework to ensure that it remains current. A sunset is something that certainly motivates everyone to act before the date comes up, and it certainly forces the regulatory agencies and ourselves and the private sector, as well as consumer groups and other stakeholders, to have a dialogue on a regular basis, to talk about the issues, to talk about the problems that different stakeholders may have had identified over time, and to address them on a regular basis, to not let issues fester for a long period of time. And I know that we're the envy of the world in many respects. There are a lot of international colleagues who we talk to who only wish they could have this kind of system to regularly look at their framework.

[Andrew Saxton, Conservative, North Vancouver, BC]

Are there enough forums that exist to share best practices with our international counterparts?

[Diane Lafleur]

I would say yes, because they certainly have multiplied over recent years. So on the demands on us to participate in different international fora, different working groups, standing committees, etc., whether it be in the G-20, the Financial Stability Board, at the IMF, etc., there's certainly a lot of interaction with international stakeholders. And a lot of them are very interested in the Canadian experience and what we have to share with them in terms of our strengths.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Mr. Chair.

[The Chair, Liberal, Joe Volpe]

Well done. Thank you.

We'll go now to Mr. Pacetti. I understand you're splitting your time? Maybe?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Maybe. We'll see how it goes. I think I have only one quick question.

[The Chair, Liberal, Joe Volpe]

This is a five-minute round.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Yes. Thank you, Mr. Chairman.

Thank you to the committee for allowing me to be here.

I have just a quick question, Mr. Wiersema.

At the height of the financial crisis, did your office look at how much risk there was with all the money the finance department put out? Some of it was in the budget, as you indicated, or I think Mr. Horgan indicated. But then there were additional moneys put out as well for BDC, and then there was some money put out to lend to the car manufacturers, and then there were some other moneys for some other reasons. If we added up all the different moneys that were put out, was there ever a risk assessment evaluated?

[John Wiersema]

I think the short answer to that, Mr. Chairman, is that as part of this audit, no, we did not. We have done some work on the government's economic action plan. I think this committee is aware of that. We issued an initial report on the initial stages of the rollout of the economic action plan last fall. We are in the process of doing a second audit on the economic action plan presently that has looked at and will continue to look at selected programs that were involved. And some of the funding that you are referring to may be tied to the economic action plan.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Not necessarily. What I'm looking at is that there was a lot of money put out for the banks to sell their mortgages, so there was some money at risk from CMHC. BDC had put some money out, and I think it came to close to a billion dollars at one point—I don't remember the exact numbers; this was months ago. And then there was money put for financing the automobile dealers; then there was some other money put into other industries. I'm not sure if anybody ever made an actual total and said this is the level of risk, and if we go past this point, it's the point of no return. I think that would have been something you would have done.

I could ask Finance and they'll give me their answer.

[John Wiersema]

Very quickly, Mr. Chairman, did we do a performance audit on the assistance to the auto sector or CMHC's work or the BDC? The answer is no, we did not. We are, however, the financial auditor of CMHC. The assistance provided to the auto sector is recorded in the accounts of Canada. That is subject to OAG audit as part of those financial audits, so it would have been looked at from that perspective.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

A lot of the money wasn't used, but there was a lot of money that was put out, right, Mr. Horgan?

Ms. Lafleur.

[Diane Lafleur]

There were a number of programs that were put in place to make financing available. As you say, some of them weren't used, especially the guarantee facilities. The lender's assurance facility and the one for the insurance companies as well were never used. Some of the other measures, like the insured mortgage purchase program, were used, although not to the maximum. But those were the kinds of facilities I referred to earlier that were provided on commercial terms. In the case of the IMPP, what the government was doing essentially was buying mortgages that were already insured, so they were very high quality assets, and it was done on commercial terms.

The money for the additional money for BDC, for example, was to help financing where certain markets had sort of dried up, especially because of—

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Was there ever an audit done to make sure those were high-quality assets?

[Diane Lafleur]

They were already government-insured mortgages, so they're already backed by the full government guarantee, so there was essentially no risk.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

How much time do I have left, Mr. Chair?

[The Chair, Liberal, Joe Volpe]

A minute and a half.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Tax evasion is a hot topic at the moment. The federal government is trying to recover as much money as possible so that it can be put it into programs, but the fact remains that taxes do not evade themselves. It often needs financial advisors, bankers and their clients.

Is there a mechanism for preventing tax evasion that involves bankers, financial advisors and clients? Perhaps the assistant superintendent can answer the question.

[Gary Walker]

That question might be better answered by my colleagues, because the mandate of OSFI is to protect the solvency—

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Okay. Then let me ask the Department of Finance representatives.

[Michael Horgan]

Well, I think the short answer is that at the Department of Finance we do the tax legislation and the regulations, but the actual enforcement of that is with the Canada Revenue Agency. They have mechanisms in place to ensure the enforcement and auditing to ensure that tax evasion is kept to a minimum.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

So, as I understand it, Mr. Horgan, you are saying that it is up to the Canada Revenue Agency to make sure that financial institutions do things correctly…

[Michael Horgan]

They're responsible—

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

…I mean by making sure that they are not involved in tax evasion, directly or indirectly, by helping their clients in that way. Is that correct?