Finance Committee on April 2nd, 2008

[Dean Del Mastro, Conservative, Peterborough, ON]

Would it be reasonable to assume that if you're getting more favourable rates and more access to capital, that assists you in passing those savings or capital on to investors and businesses in Canada?

[Jean-René Halde]

I think we have to be careful with that statement. Because we had the Government of Canada guarantee in the past, we were borrowing at quite favourable rates in international markets anyway. But it does simplify life to be able to borrow centrally from Ottawa.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

I understand it's in your mandate to be complementary to the private sector and not directly compete with it. How do you ensure that? Is there a test you apply to make sure that as a government entity you're not competing with the private sector?

[Jean-René Halde]

That's obviously something quite complex. Our small and medium-sized businesses live in a complex world where they need help. Remember, not only do we provide financial help, but we also provide consulting help.

On the financial side, as I said during the presentation, we only do project financing, and they have another institution they deal with at all times for their other needs.

We tend to focus on the more difficult segments, whether they be innovative firms that tend to have a hard time getting financing, or fast-growth firms, or manufacturers and so on, and venture capital where we're focusing on the very early stage. We take the initial risk. I think earlier someone said de-risk. That's exactly right. That's what we do, de-risk the transaction.

We don't ever exclude industries. We stay the course in tough environmental or economic cycles. We're a very patient lender if we believe in the business plan and the management team.

And by the way, we meet all the time with other financial institutions just to make sure the relationship is good and we're staying within our mandate. And I'm pleased to report that whenever we have these meetings they tend to be quite favourable. As a matter of fact, we get a lot of loans referred to us by other financial institutions that are quite happy to pass on some of the riskier projects.

[John MacNaughton]

If I might just supplement that as chair of the board, we feel that part of our responsibility is to ensure the Business Development Bank is conducting itself in accordance with its statutory mandate. So this is an area we question management on from time to time and are assured their operations are consistent with the legislation.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you both.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We'll move on to Mr. Pacetti. The floor is yours for five minutes.

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

Thank you, Mr. Chairman.

Thank you for appearing before us.

You say you report to the industry minister, but we seem to get the reports as well. How many times have you appeared before the industry committee?

[Jean-René Halde]

I've only been with the bank for three years, and in my three years I haven't. Having said that, maybe some of my colleagues would know the answer. I would be happy to provide you with the information.

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

Nobody has appeared from the bank before the industry committee.

[Jean-René Halde]

Not in the three years I've been CEO, no.

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

But I thought we were partlly responsible. So there is no communication between your bank and the Minister of Finance?

[Jean-René Halde]

Oh, no, there is a lot of communication between the finance department and us. The top three we deal with would be Industry Canada because they're the ministry we report to, the Department of Finance, and Treasury Board.

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

So what is the relationship between you and the finance department and Treasury Board?

[Jean-René Halde]

In terms of our borrowing, we borrow about $8 billion a year, or at any given time we've got about $8 billion in borrowing, and all that is controlled by the finance department. And Treasury Board has more to do with the governance of the bank.

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

In terms of the funding or appropriations, the BDC, from what I can see, is self-sufficient.

[Jean-René Halde]

It is.

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

But has there been no extra funding in the last three or five years? When was the last time the government had to give some money to the BDC--not lend money, but give money?

[Jean-René Halde]

BDC is self-funding, meaning we're profitable every year. We made $138 million, as noted in the annual report you've got in front of you. So we are self-funding. However, for particular projects where we believe we can add more value in the market, on occasion the government has put equity in the bank. The latest example would be the $75 million for the late-stage fund, where we expect sometime this summer--

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

But other than these programs, has any other money been allocated to the bank in the last five years? Are you saying no because it's been self-sufficient for the last--

[Jean-René Halde]

It's been self-sufficient. The last injection of capital would be....

[A voice]

The last appropriation was in 1997.

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

That's the answer.

[Jean-René Halde]

That's the answer. It was 1997 in terms of the last appropriation.

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

And how about the reverse? Do you pay any dividends to the government?