Evidence of meeting #32 for Finance in the 39th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was risk.
A recording is available from Parliament.
President and Chief Executive Officer, Business Development Bank of Canada
Yes, we do. Last year I believe the number was $21.5 million.
President and Chief Executive Officer, Business Development Bank of Canada
We have both common and preferred shares, and if you pick a round number it's about a 15% payout ratio.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
In terms of what is going to happen in terms of risk, we see the market.... I'm not sure how the financial institutions are going to handle what's going on there, and whether some of them will survive. I'm talking more, perhaps, about the American side, but the Canadian banks are definitely exposed to it.
How can that not affect you? You're going to have to pick up a larger portion of that risk that's out there. The banks are going to ask for more return on their money, they're going to lower their risk, and that's going to mean that you're going to have to pick up the slack. I can't see any scenario other than that.
President and Chief Executive Officer, Business Development Bank of Canada
It's a possibility.
Liberal
President and Chief Executive Officer, Business Development Bank of Canada
I hate to be black and white on any of those future predictions. You know, we look at it case by case for every entrepreneur. As I said to you in the fall, we did have an increase in files coming our way—
President and Chief Executive Officer, Business Development Bank of Canada
—and if it happens in 2008, we'll be there to help them. We're there to help SMEs.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I understand that, but you can't tell me that the bank is not looking forward and saying “If it happens...”. You know that it's going to happen. You must have some type of projection, looking at what your exposure is going to be, and I'm just wondering....
President and Chief Executive Officer, Business Development Bank of Canada
We have the balance sheet, and the viability of the bank is such that if there's a need to support more SMEs, BDC can do that.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
That's the answer. So you can fulfill the requirements that the market will request of you.
President and Chief Executive Officer, Business Development Bank of Canada
Within a reasonable amount, the answer is clearly yes.
Chair of the Board of Directors, Business Development Bank of Canada
I would just add, if I could, that all financial institutions are in the business of taking risk, and the challenge is in correctly assessing the risk and getting appropriately paid for it.
As a relative newcomer to the Business Development Bank I've been quite impressed with the depth and sophistication of the risk-management capability within the bank to assess risk and properly price for it. Also, because of the importance of getting this right, we encouraged the appointment of a director who had a strong risk-management background, so we've recently had appointed to our board a recently retired vice-chairman of risk management for the Toronto Dominion Bank.
So this is an important area, both as an opportunity and as a business technique.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Thank you, Mr. Chair.
Good afternoon. You said earlier that 35% of your loans go to the manufacturing sector. You also said that you have undertaken quite a large study to determine China's influence on the manufacturing sector. On page 11 of the BDC Corporate Plan Summary, we read the following: "(This study) revealed the concern that Canadian manufacturers perceive themselves to be "ready" for globalization when, in fact, they are not."
Why do you say "they are not"?
President and Chief Executive Officer, Business Development Bank of Canada
We have had working sessions with a number of our clients. Last fall, for example, we brought together clients from 17 cities either in person or by satellite link. That morning, we gave presentations on China. At the beginning of the meeting, we asked our clients to what extent they were comfortable with their situation.
Three hours later, we asked them the same question. After hearing presentations from other business people and talks on the development of emerging economies, a number of them told us quite candidly that they had not realized or understood some of the factors, and perhaps they were less prepared than they thought.
So I think that one of our roles is to help companies wake up to globalization and get ready for it.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
You say "one of our roles". Do you consider that it is also the role of the Business Development Bank of Canada to lead companies to become aware of their strengths and weaknesses in that regard?
President and Chief Executive Officer, Business Development Bank of Canada
I do. We are a development bank and so our goal is to help entrepreneurs get better results. To that end, they need to have a better understanding of their environment. Hence our consulting services group, for example. We have 2,400 consulting arrangements annually, which is a lot, in order to help them make their company or their plant more efficient. Our role goes beyond a simple business transaction.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Of those 17 cities, was there a normal proportion in Quebec?
President and Chief Executive Officer, Business Development Bank of Canada
There was.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Do you have to change your assessment based on the loan applications that some companies submit? When you feel that a company has miscalculated its position or its ability to react to globalization, do you tell them that you cannot provide a loan for that reason?
President and Chief Executive Officer, Business Development Bank of Canada
Perhaps some people are not quite up to speed, but if they clearly understand what they have to do and if they have a management team with the will to meet the challenge, we support them. That is our role.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
It would be interesting to have a look at that study. Could you send it to us?
