Good morning.
First of all, l'd like to thank the members for the invitation and the opportunity for the Canadian Payments Association to speak on this important issue here today.
The Canadian Payments Association, or CPA, was created by an act of Parliament in 1980. Our membership currently stands at 136 financial institutions, including the Bank of Canada, the chartered banks, the trust and loan companies, credit union and caisse populaire centrals, cooperative credit associations, and other institutions.
Parliament has given us a very specific mandate to establish and operate the national clearing and settlement system; to facilitate the interaction of our system with others; and to facilitate the development of new payment methods and technologies. Parliament has further set out a clear public policy mandate for the CPA to promote the safety, soundness, and efficiency of our systems, taking into account the interests of all users. As such, the CPA plays a leadership role in providing safe and efficient clearing and settlement systems for Canadians.
Payments are the lifeblood of our economy. Every day, Canadians, businesses, and governments use a variety of payment instruments to purchase goods and services, make financial investments, and transfer funds between two parties.
Financial institutions need arrangements to transfer funds among themselves. This is facilitated through clearing and settlement systems and a framework of rules and standards maintained by the Canadian Payments Association. On an average day, we clear and settle $202 billion. Last year alone, we cleared and settled more than 5.7 billion payment transactions.
The CPA operates in a very well-defined environment. We operate pursuant to our legislated mandate and our clear public policy objectives, and under the careful oversight of both the Minister of Finance and the Governor of the Bank of Canada.
Our bylaws are considered statutory instruments. As such, they require Governor-in-Council approval.
The rules we develop in support of the various payment applications and for the operation of the clearing and settlement system are subject to scrutiny by the Minister of Finance, who has the power of disapproval on any CPA rule, in whole or in part, for public policy reasons.
The CPA also owns and operates this country's Large Value Transfer System, which has been designated as a systemically important payments system under the Payment Clearing and Settlement Act. As such, the Governor of the Bank of Canada has direct oversight responsibility for this system and the affairs of the CPA with regard to that system.
But the relationship with both of these important oversight bodies extends well beyond the formal requirements established in the legislation. As an effective self-regulated organization, the CPA fosters and promotes close relationships with all the stakeholders in the payment system.
In this regard, the CPA maintains a rigorous consultation process. In the development of new rules or policies for the payment system, we rely heavily on the advice provided by specialized committees composed of members and stakeholders alike.
Once the new policy has been drafted, it's presented to the Stakeholder Advisory Council for their consideration and guidance. Subsequently, board approval is sought for the release of this policy for broad public consultation. Only after stakeholder and member input is fully considered will the final recommendation be put forward to my board of directors. If the new or amended rule is approved by the board, it will immediately be sent to the Minister of Finance for his consideration. The minister has disapproval power of any CPA rule within 30 days of receipt.
A moment ago, I spoke of the importance of the Stakeholder Advisory Council. It’s been in existence since 1996, but only enshrined in our legislation since 2001. The council is composed of 18 stakeholders, representing retailers, large and small corporate entities, provincial and federal governments, payment service providers, and consumer groups. Given the breadth of knowledge on this council and the diversity of its composition, the members of this council participate in all significant activities at the CPA.
Now, returning to my mandate for a moment, the first mandate, “to establish and operate the system”, is in fact critical to a well functioning Canadian economy, but the CPA's facilitation role is equally important for the smooth operation of the payment system and its evolution. The change drivers to the payments system are many, but the CPA continues to be responsive to the industry's needs through the provision of a rules framework for payments and the portal for members to clear and settle these payment transactions.
As a result, the focus of financial institutions and payment service providers need not be on the back end of the payments system, but on the front end and the development of new and more efficient payments applications to meet the needs of Canadians.
Before I conclude, I'd like to briefly comment on credit cards. Credit cards have not historically been seen as part of the CPA's scope. When the CPA was first created back in 1980, payments were, for the most part, paper cheques, and our business was to clear and settle payments drawn on demand deposit accounts. Since credit cards at that time did not draw on demand deposit accounts, they were not seen to be part of the CPA's mandate, and that remains true today.
That point aside, we're all aware that the landscape continues to change quickly. In this regard, the CPA continues to play a leadership role in providing safe and efficient clearing settlement systems to meet the current and future needs of Canadians.
Thank you very much.