Evidence of meeting #100 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was employees.
A video is available from Parliament.
6:20 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
In 2016, the cases that were investigated by our employee relations team for what we put as a potential category of mis-selling were fewer than 75 cases on a base of 25,000 front-line employees, and significantly fewer than 20 were terminated.
6:20 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
When I say mis-selling, I include fraud or falsification of customer records, which as we talked about earlier is outright wrong. It includes providing services to clients that the clients don't need or cases in which there might be a product bias that caused the advisor to go the wrong way and provide inappropriate advice.
6:20 p.m.
Liberal
The Chair Liberal Wayne Easter
I want to come back to Mr. Dudtschak on how you determine when an employee sells a client a product they don't need.
6:20 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
We have a variety of ways we monitor for this. One is that when we calibrate the programs or crunch the data, we look for skews in performance. We look for individuals who might be providing too much of one thing to the customers they're meeting, which would suggest that there might be a bias on the part of that advisor.
What we also look for is whether the client actually uses the product or services they were provided. Our programs reward individuals for the education—not just the providing of the advice and the solution, but the education—of the client, and we measure whether the client actively uses it after. Those are a couple of examples of ways.
The other thing I want to put out, though—this is the first time we've shared those numbers—is that the reality is that we also watch and monitor for manager behaviour and concurrently watch and monitor to make sure the overall program itself has integrity, because if the numbers got any higher, you would want to ensure that the program in and of itself wasn't creating the wrong culture or the wrong bias.
6:20 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
Then we'd make changes.
6:20 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you.
Ms. Blanchet, did you want to answer Mr. Liepert's question?
6:20 p.m.
Senior Vice-President, Distribution, Solutions and Processes Retail Banking, National Bank of Canada
Of course.
In fact, I'll be very frank with you: I don't have the figures you are asking for. This information will however be provided in the course of the examination by the Financial Consumer Agency of Canada, the FCAC, and the Office of the Superintendent of Financial Institutions, the OSFI.
6:20 p.m.
Liberal
6:20 p.m.
Executive Vice-President and Head of Distribution, Canadian Personal and Commercial Banking, BMO Financial Group
Thank you, Mr. Chair. I will just reinforce the strong risk culture. We have a detailed process for monitoring around behaviours tracking. Then we have an investigative and security services group that would do a deeper, detailed review.
The number is an extremely small one relative to the overall size of the population. Within the extent of the investigations that would occur, a very small subset would actually trigger some disciplinary measures.
6:20 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I think this only applies to the two gentlemen. It wouldn't necessarily all be CSRs; it could be managers of CSRs, could it?
6:20 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
This is our entire work force of managers and front-line employees, right through to the commercial banker or mortgage specialist, a financial planner, or a branch employee.
6:20 p.m.
Executive Vice-President and Head of Distribution, Canadian Personal and Commercial Banking, BMO Financial Group
The same would apply for us as well. It would be for all roles in our branch system.
6:20 p.m.
Liberal
6:20 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much for being here with us today.
I thank all of you very much for your testimony. My questions are addressed to all of you, and are going to be a bit different from the ones I put to the other group of witnesses.
The trust Canadians place in the Canadian banking system was shaken by articles and reports that came out in the month of March.
In a brief submitted to the committee, an Ottawa lawyer, Harold Geller, said this: “The fact that, historically, regulatory organizations have counted on financial institutions to monitor themselves has undermined the confidence of Canadians in the financial system [...]”
In light of the reports of the past few months, and of those that continue to be broadcasted, as well as the testimony we have heard at this committee, what should be the role of the FCAC, or your role as a financial institution? What other type of commitment could you make to restore Canadians' confidence in the Canadian banking system?
6:25 p.m.
Executive Vice-President and Head of Distribution, Canadian Personal and Commercial Banking, BMO Financial Group
Thank you for the question. Trust is the cornerstone of what we do in banking, as you know, and it's why we enjoy a very special relationship with our customers. It is entirely based on trust.
To respond to the question, we are going through a very comprehensive review with FCAC and OSFI. Within our BMO company, we take very seriously the idea of having different risk management capabilities. Of course we have measures that we've discussed within the teams that I'm responsible for. We also have a separate risk management team to make sure that we have appropriate governance. Finally, we have appropriate audit capability within the bank. However, the review that we're doing will be broad and comprehensive, and I suspect that we'll have recommendations that come from that.
6:25 p.m.
Senior Vice-President, Distribution, Solutions and Processes Retail Banking, National Bank of Canada
I would have quite a similar response.
I think there are several parties involved. The legislator, the banks and the regulatory organizations all have a role to play in improving the financial knowledge of Canadians. That is certainly a factor we can all work on together.
6:25 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
We have a variety of internal programs in place, as we've already talked about, to ensure the integrity of the advice we provide. We also have a variety of ways in which we are working hard to increase literacy among our customer base, as was previously said.
You specifically asked about regulators. We are working very closely with OSFI and the FCAC on their request. We believe—and we do fully comply with the regulatory requirements—that they are accountable to you, the Canadian government, not to us.
6:25 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
To all three, I guess my question is this. If these complaints have arisen with the existing systems that are in place, don't you think this might call for additional measures? I'm assuming you would prefer to have measures that you could develop on your own rather than to be regulated to that effect. If that's the case, I'm certain that some blue-skying must have gone on in each of your institutions. What type of additional measures do you think you could take to make sure or
to see to it that transactions are monitored in branches? It seems that that monitoring is insufficient at this time.
6:25 p.m.
Executive Vice-President, Personal and Commercial Banking, Royal Bank of Canada
As was referenced earlier, we stepped up the level of monitoring and controls that we have had in place over the last several years, in particular over the last year or two. We are learning through this process as well. We do believe in listening to our clients and listening to our employees and putting the practices in place that allow us to deliver the kind of advice and experience that our customers want and need, with the types of tools and programs that will allow our employees to not only be engaged but also be enabled to make a difference in our clients' lives. We do continue to step up our programs and our monitoring to listen, to learn, and to change. We are changing our performance programs. We are building new tools directly for our customers, digital tools that our employees will use to make the advice even more consistent and more transparent for our customers.
So there clearly are actions that we're taking, and we will work very closely with the FCAC and OSFI on this review. We'll work with them to implement the outcomes as well.