Evidence of meeting #47 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was banks.
A recording is available from Parliament.
Conservative
Ted Menzies Conservative Macleod, AB
I think it's just a pattern of regulatory decisions that were set up. Scott, I know exactly where you're fishing.
Liberal
Scott Brison Liberal Kings—Hants, NS
No, Minister, I think it's important for context. When would these regulatory decisions have been made?
Conservative
Ted Menzies Conservative Macleod, AB
They were made through successive governments' recognizing that a strong banking system is very important.
Conservative
Ted Menzies Conservative Macleod, AB
And I'm happy to admit that the Liberals support what the Conservatives have continued to maintain.
Liberal
Scott Brison Liberal Kings—Hants, NS
I think, Minister, it is fair to say that in the 1990s, when the global trend was to deregulate, in the U.K., throughout Europe, in the U.S.—I would agree with you—it was the right decision at that time for the Liberal government not to.
Conservative
Liberal
Scott Brison Liberal Kings—Hants, NS
Minister, we appreciate your belated recognition.
Now, Minister, in the last 24 hours we've heard another warning from Governor Carney about the level of household debt in Canada. We've seen now two Canadian banks—both BMO and now TD—pushing 2.99% four-year mortgages.
Do you have some concern, given the unprecedented level of personal debt, about cheaper money and cheaper debt being promoted to Canadians at this time? Would you agree with Governor Carney that we have a personal debt and potentially housing bubble in Canada?
Conservative
Conservative
Ted Menzies Conservative Macleod, AB
—I share what I feel is your concern about personal or household debt. We have tightened up mortgage rules to make sure that people take a very serious approach to encumbrances that they take on, the debts they take on; that they understand that.... That's why we've put in place funding for a financial literacy leader: to make sure that people can become more educated, to make sure they understand what responsibilities come along with taking on debt.
I'm not the first one to make this statement and I won't be the last: interest rates have only one way to go, and that's up. Canadians need to recognize that whatever debt you take on now, please plan on the cost of carrying that debt increasing at some point. It may stay low for a long time; we don't know that. But the downside is much less than the upside possibilities.
Liberal
Scott Brison Liberal Kings—Hants, NS
Minister, you referred to your tightening of mortgage rules recently. Was that not simply reversing the same rules that your government loosened in the 2006 budget, when you introduced 40-year mortgages with no downpayment for the first time in Canada?
Conservative
Ted Menzies Conservative Macleod, AB
We tightened up mortgage periods to make sure that people were capable of covering their debts. They had to qualify for a five-year mortgage, even if they were only applying for a one-year mortgage.
We think that's only prudent. Certainly there are concerns with the condo market. We're concerned with it too and encourage people to be very cautious and make sure.
We're certainly not wanting to slow down the housing sector. The housing sector is a huge job creator in this country. So we want to be cautious; we don't want to disincent people from buying a new home or from buying a condo. We just want to caution them to make sure that they can handle their payments when they take them on.
Liberal
Scott Brison Liberal Kings—Hants, NS
Let me put my final question, Minister.
Is there some concern about the politicization of foreign acquisitions by Canadian banks, with ministerial involvement in the approval? Previously—this was referred to by Ms. Glover earlier—that was not the case, in the last period. With Canadian banks being so acquisitive globally, is there some concern about the potential politicization of some of these potential takeovers by means of which we have an opportunity to grow our banking sector globally?
Conservative
Ted Menzies Conservative Macleod, AB
I guess that calls for my own personal opinion, and I would say no, I don't think there is a threat of politicization, simply because the Office of the Superintendent of Financial Institutions still looks at these before the final signoff from the Minister of Finance. He or she—it could be a she—has a 30-day window to make that decision.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Brison.
I want to thank you both for being so gracious to the former Liberal government of the 1990s, especially since neither of you was a member of the party that time.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Thank you, Mr. Chair.
First of all, I would like to start by noting that frequently we get bills that have come from the House and that go on to the Senate. This one started in the Senate. On the Standing Senate Committee on Banking, Trade and Commerce there are many members for whom I have great respect. I certainly intend to read the minutes of their process, which I haven't done yet.
Can I have an indication from the officials, who I'm sure would have followed it in detail—and of course the minister as well—of any issues they brought forward that were of real concern? Could you talk a little about anything that happened in that process?
Conservative
Ted Menzies Conservative Macleod, AB
Let me first of all comment on the Canadian Payments Association. That question was raised and the concern allayed, if you will, through the process in the Senate.
I'm sure there were other questions that happily may answer some questions here. Mr. Rudin, do you have any that come to mind?
Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Yes, I'd be glad to respond.
Senators asked us to explain some of the substantive portions of the bill that Minister Menzies mentioned. The ministerial approval of foreign acquisitions was an issue they wanted to talk more about. They asked Minister Flaherty, who appeared before that committee, to explain that, and we had a number of technical questions about it.
We dealt with the CPA issue.
We dealt with the consultation issue, which was raised here as well.
We had an explanation about the change in the size-based ownership regime. We're moving a numerical threshold, so we were to asked what the purpose of that was and how we went about coming up with the new numerical value.
We had a question about the change we're making to the Bank Act's special security regime—we were to called upon to explain it—which some stakeholders had raised.
I think those are the principal ones. Perhaps Ms. Pearse will remind me, if there is something else. Those would be the main issues that we discussed in the other committee.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Thank you.
This is a very unusual opportunity wherein I think all parties are indicating a pride in our financial system and the strength of our banking system. We're making comparisons, of course. Unlike the U.S. or Europe, we didn't have to nationalize or bail out the banks. It's good to see that there are areas we agree on and are very proud of together as Canadians.
In terms of today's legislation, the piece behind which I would really like to understand the rationale is that we're increasing the “large bank” owner threshold. Can you explain why it's being increased and what impact this increase in the ownership threshold will have on the broader oversight of financial institutions?
Conservative
Ted Menzies Conservative Macleod, AB
Thank you, Ms. McLeod.
When looking at increasing the threshold, I'm sure some people will ask why we need to do it. It's the same reason: to allow growth. These banks are larger than they ever used to be.
Our Canadian banks, because of their strength and the way they came through the recession—they actually came through the recession while some other banks didn't—have grown. They have acquired banks in other countries as part of their portfolio. Their overall threshold needs to reflect that.
It's only for the five big banks that you'll see the $12-billion number, only for the five big banks that we're raising to the $12 billion. The mid-sized banks are moving from $5 billion to $8 billion, and the threshold for the majority of the rest of the banks is being moved to $5 billion. This reflects how much these banks have grown, especially our five large banks. They've taken advantage of the strength that they came through this recession with and have acquired some very profitable operations.