Evidence of meeting #222 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was million.
A recording is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
We'll go back to Mr. Kmiec, then over to Ms. Rudd, and then back to you, Mr. Dusseault.
Conservative
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Thank you.
I'll just go back to equalization for a moment, because I might have missed a portion of the feedback given there.
Do you have any projections for the next three years in terms of the shares of equalization payments, and specifically a breakdown by province?
I'm thinking of the big provinces here—B.C., Quebec and Ontario—and their share of the total amount. There's quite a bit of a jump there in terms of the amounts they will be receiving.
Is the total projected to increase in the next three years? Is the share expected to stay the same?
Quebec gets just over 50% now. Alberta gets zero.
Assistant Deputy Minister, Opioid Response Team, Department of Health
We make that information available on our website as we do the calculations.
As you know, the calculations are based on a three-year rate. Right now, they are growing year to year. The increase of $879 million that you see this year is again based on, as I just described, that three-year multiplying of our 2018-19 amounts by the 4.64% increase.
In terms of the amounts by province and territory, as a forward calculation, we do those calculations on a regular basis and we make them public as the calculations are done. I don't have projections for you on what that looks like moving into the future.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Okay.
I thought it was a three-year rolling average, so it was possible for numbers to actually go down at a certain point.
Is there any expectation of it going down, or is it simply going to keep going up?
Assistant Deputy Minister, Opioid Response Team, Department of Health
We continue to look at the calculations, at the inputs of what that equalization looks like moving forward, from all of the inputs that we use to do that. We don't have calculations that are publicly available on where that is going.
You're right that it is a three-year rolling average. As we're bringing that information in, we do make that publicly available as soon as those calculations are completed. We'll have another round of calculations done.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
I know the formula was put into an omnibus budget bill about two years ago, or it might have been three years ago. It was basically the same formula as previously. There were no changes in it whatsoever, despite a totally different economic condition.
Going forward, when is the next so-called renewal date?
Assistant Deputy Minister, Opioid Response Team, Department of Health
Indeed, it was in 2018 that it received royal assent, and we do updates every five years, so the current period of renewal goes from 2019-20 to 2023-24. We have ongoing conversations on equalization through those discussions and we have input from the provinces and territories on what that looks like.
Conservative
Assistant Deputy Minister, Opioid Response Team, Department of Health
When we do the renewal of that equalization and we have new formulas or new information put forth, that becomes public. The conversations we have with the provinces and territories on how we're doing that work goes into discussions until we reach a final conclusion.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Okay.
I want to go back to OSFI now. I wish the minister had been here so I could ask him a question that I think he might have an answer to, because it's based on the consultation that was done.
At the time that the original draft of the B-20 guideline was put out in October, bankers had identified a problem with the pre-final draft, the finalized version that OSFI was comfortable with before they put out their final version. There was a loophole identified, in that amortizations were not being dealt with inside the B-20 guideline.
Because you could change the length of amortizations used in the qualifying calculation, that percentage basically could be changed. Then you would be paying less for housing, so you'd qualify for a bigger mortgage. Extended amortization would reduce it, and basically you could extend it 25, 30 or 35 years. Your payments would be lower and you'd be able to pass the stress test much more easily. That was basically being left up to the chartered banks to decide.
I'm assuming it was unintentional. Do you know whether that loophole has been closed since then?
Chief Financial Officer, Office of the Superintendent of Financial Institutions
We don't prescribe a maximum amortization period, but we do monitor trends in regard to amortization periods, because what we would not have wanted to see was an extension of amortization periods to accommodate the stress test.
Referring back to what we released on our website last week, we haven't seen any noticeable movements in amortization periods since the implementation of the guideline.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Right. That was left alone because you don't prescribe for the uninsured market.
Chief Financial Officer, Office of the Superintendent of Financial Institutions
Yes.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
You just left it alone, so banks can still do that. If you have 20% down, you can basically go and change the amortization just to make sure your client passes the stress test.
Chief Financial Officer, Office of the Superintendent of Financial Institutions
As I mentioned, we do monitor practices in regard to amortization periods, so it is something we focus on. It is not something that is prescribed as to the maximum, but we've been monitoring developments in that regard, and we haven't seen any meaningful shifts since the implementation of the guideline.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Okay.
I know that the creditworthiness of those with a credit report score of 750 or more before the B-20 stress test was introduced was already going up. For over 50% of all mortgages put out there, credit ratings were at that level. That's according to CIBC Economics Insights by Benjamin Tal.
Since then, does OSFI have any numbers on what that looks like in the marketplace?
Chief Financial Officer, Office of the Superintendent of Financial Institutions
We can speak to the regulated space. We get a lot of data from our regulated institutions in regard to mortgage originations. I wouldn't be able to speak to specific data. I would have to bring in people who deal with that data on a more granular basis to respond more accurately, but in broad strokes, the credit profile of origination since implementation of the guideline has improved. There's a variety of metrics we look at in that regard, but overall, the profiler risk of new origination since implementation of the guideline has trended positively.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
But they were already trending positively before B-20 was introduced—[Inaudible—Editor]
Chief Financial Officer, Office of the Superintendent of Financial Institutions
I'm not the expert on all of the data and the trends in all of the vintages, so I would have to get back to you to talk in more detailed fashion in regard to the pre-B-20 or the—
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Would you be able to ask your colleagues to provide it to the clerk for the whole committee?
Chief Financial Officer, Office of the Superintendent of Financial Institutions
We can, yes.
Liberal
The Chair Liberal Wayne Easter
If you could, that would be great.
We'll go to Ms. Rudd, and then back to Mr. Dusseault.
Liberal
Kim Rudd Liberal Northumberland—Peterborough South, ON
Thank you, Mr. Chair.
Thank you to the growing number of you who are here with us today.
On that point, I had the pleasure of being at a presentation by the deputy chief economist of the TD Bank on the B-20, which my colleague has referred to. In fact, he said their position was that it was the right thing to do. It has done what it needed to do. It of course needs to be constantly re-evaluated. It is something that's often brought up at this table, and I think it's important to point out that there are opinions on that that differ from my colleague's opinion.
I have two quick questions. On the governance council for the Financial Consumer Agency of Canada, can you tell us a little bit about what putting that council in place is providing in terms of the return on the investment, if you will?