Evidence of meeting #15 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was part.
A recording is available from Parliament.
4:10 p.m.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
I think Canada Post can go and try to get new market shares if it is deregulated.
4:10 p.m.
Director, Portfolio Management, Crown Corporation Governance - ADC, Department of Transport
Ah, yes.
4:10 p.m.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Canada Post has been facing competition for 20 years and it estimates that it might lose $40 to $60 million, or perhaps $80 million. It could earn $40 to $80 million, if they do the job.
4:10 p.m.
Director, Portfolio Management, Crown Corporation Governance - ADC, Department of Transport
Canada Post is experiencing a number of challenges and is always looking for new revenue generation opportunities.
4:10 p.m.
Conservative
4:10 p.m.
Conservative
The Chair Conservative James Rajotte
Merci.
We'll go now to part 16, amendments to the Canada Deposit Insurance Corporation Act.
Can I go to part 17, then...?
4:15 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Can someone tell me what is meant by, “Clarify rules that apply to the assignment of derivative contracts to a bridge institution”?
4:15 p.m.
Sandra Dunn Chief, Financial Sector Stability, Department of Finance
Sure. In budget 2009, CDIC received the power to create a bridge institution if there was a non-viable financial institution, and it was determined they didn't--
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
If the CDIC board didn't want to close a bank that was determined to be failing.
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
So this is another tool that CDIC now has, which essentially would take a failing bank, put it into receivership, and create a new bank. CDIC would transfer assets and liabilities from the failing bank into the new bank, which is called a bridge institution.
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
Over a period of time, it would try to market that institution and put the viable institution back into the free market.
4:15 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
You strip out the liabilities, put the assets into the institution, and try to sell it off?
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
Yes, it essentially protects insured depositors in the new institution and whatever other assets and liabilities it would bring in.
Just to clarify with respect to derivatives, CDIC could transfer derivative agreements into the new institution.
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
It can, but there was some more clarification sought in terms of whether CDIC could choose which parts of the counterparty agreements could come in, so this essentially says if derivatives are being transferred over CDIC can't cherry-pick among the counterparty's derivatives. They have to take all derivatives within one counterparty.
4:15 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
What is the factual situation that drives this desire to create these bridge institutions and derivatives that follow from there? What are the facts that drive the necessity of this legislation? Can you give me an example of an institution that you wanted to treat this way and couldn't?
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
The U.S. uses this from time to time where there is an institution that they think has some value to it but they don't have a buyer on the ready, and yet they think that over time they could maintain enough value in it that it could be sold back into the market. The option would be to just close down the institution, pay out the insured depositors, and let the institution go into liquidation. That may be destabilizing event, depending on what's happening in the rest of the market.
4:15 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
So we don't actually have a Canadian factual situation.
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
No, it's a new power. It has never been used in Canada but it was determined that it would fill a hole in the toolkit essentially that CDIC currently had. And in looking at how the U.S. used it, they thought that it was worthwhile adding to CDIC in last year's budget.
4:15 p.m.
Conservative
4:15 p.m.
Bloc
Daniel Paillé Bloc Hochelaga, QC
I am aware that this expands the powers of the CDIC, the tools in its box, as you said, but is there a problem at present? The Minister of Financeis fond of telling us that the Canadian banking system is one of the best regulated in Canada and that this is why, in the last financial crisis, Canada did not have the same kind of disruptions as the United States. If I understand correctly, you want to prevent a potential situation by adding tools to the box?
4:15 p.m.
Chief, Financial Sector Stability, Department of Finance
These are really technical amendments. I don't mean to say a problem is foreseen in the financial sector. As you said, the sector is well capitalized, there was no problem in the financial sector. In any event, the objective is really just to clarify the law or add a clarification to it, to improve it overall.