Finance Committee on Nov. 22nd, 2016

[Dr. Fabiano A.S. Taucer]

Certainly. In our group, and many groups like it, the group provides a radiologist to consult with the hospital. Generally, it's the chief or another member, wherever it's appropriate. Those services are not remunerated. I sit on the radiation safety committee for the hospital. That's not remunerated. I was chief for 10 years and I can't count the number of meetings I attended where everybody in the room was paid, but not me. That's the sort of non-medical care that is supported by a group practice.

I'll give you another example. There are many interventional procedures that, for whatever reason, are very poorly paid but very important. Radiologists perform procedures through a very small hole in the skin, where before they were done with open surgery, and patients really appreciate that. Those are very poorly remunerated. In a group setting, the physician offering that service is not penalized financially. The income is pooled and everybody shares in that income.

Certainly you can see, as a patient, you would want to have a system where physicians doing important things are not given a disincentive.

[The Chair, Liberal, Wayne Easter]

Okay, thank you.

Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

Ladies and gentlemen, welcome to the House of Commons parliamentary committee on finance.

My initial questions will be for you Mr. Campbell, and they have to do with the banking system. I am very happy to welcome you to our committee.

Obviously, you know better than anyone that, in early October, the Minister of Finance decided to tighten the standards for home ownership by using what we call a stress test, in which the mortgage rate is doubled, in a way. I'm cutting corners by saying that, but the mortgage rate is doubled to determine whether the person who wants to borrow can survive such a situation, should interest rates rise.

With the statement the day before yesterday by the president of the US Federal Reserve that interest rates could rise starting in December—December, that's in one week—we are obviously all a little surprised by this.

First, I would like to ask you about interest rates for first-time homebuyers. What reactions have you seen so far in your banks and with potential clients, so young families and people who want to buy their first home?

[Terry Campbell]

I'm sorry, but I will have to speak in English.

I'd say it is the question that is on everybody's mind these days. You can't open a newspaper without seeing something about housing.

What I would say is this. I'm going to answer your question in a bit of a roundabout way, but I'll come very specifically to the answer. The housing market, the mortgage market, in Canada is an extraordinarily complex one, as you know. There's no one mortgage market. There are a range of factors going into affordability. The key thing that we look for, and we looked for it when the previous government made a series of changes and we looked for it when the current government turned its mind to these issues, is the balance between the goal, if it is to maybe slow things down, take a bit of the heat off, and maybe spread out the risk a bit, on the one hand, and not damaging the vitality of the marketplace, on the other hand. Therefore, what we look for are targeted, incremental, step by step....

Now, every bank is going to have their own portfolio. Every bank will have their own relations with customers. From what we have seen so far, the reaction my bankers express to me is, “Let us see how this current set of changes”—the stress test that you mentioned, the portfolio test, the changes in down payments that were made last December—“work through the marketplace before we contemplate any further changes”.

I think where most people are focused is the impact on those first-time customers.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

But, Mr. Campbell, why do we have to have all these new rules, while you should be more cautious with your clients?

When we knock on the door for the first time at a bank, all of us are a bit nervous. I'm sure it was the case for you; I can tell you it was the case for me. I had the chance 25 years ago. I had a mortgage, a good one, I'm very pleased with that, but I could have gone higher than that, nearly twice that. They said, “You have really good wages, your wife too, so you could have gone a bit more.” It would have put me in jeopardy. Don't you think that you, as bankers, should be more cautious with the young people who are knocking at the door, instead of having those new tests implemented by the government?

[Terry Campbell]

First of all, for me, it was 35 years ago, and my interest rates were 16% and 18%, respectively.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Oh, you were there.

[Terry Campbell]

Anyway, to your point, let me say a couple of things.

First of all, the quality of the underwriting has not changed. It is as strict as it ever was, and our prudential regulator won't let it be anything other than what it is. In fact, Mr. Deltell, I think a very telling case is that one of the proofs of the quality and the strictness of the underwriting is the rates of mortgages in arrears, when people can't pay them back. It is at virtually a historic low. It is less than a half of 1%. It's currently sitting at 0.28%. It's been under a half a per cent in periods of high inflation, low inflation, high unemployment, low unemployment.

What that says to me is two things. It says that banks continue to be very strict lenders, just by culture, but also our regulators require it. But it also says that Canadians are very good borrowers. They're very careful in paying their loans back.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Yes, you're right. I once heard Premier Jean Charest say in a speech that Canadians are dull, but this is why we're safe.

[Voices]

Oh, oh!

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

I'm sure he will be happy that I quoted him.

However, my last question, Mr. Campbell, is on an issue I raised in my introductory notes. A few days ago, the chair of the Federal Reserve System in America said that the rates could go up a point. Are you afraid of that? Are you cautious of that?

[Terry Campbell]

We've been watching the Federal Reserve board for quite some time. Will they raise it? I think it will happen. I don't know. I'm not making a prediction. I would say this. The deputy governor of the Bank of Canada, Tim Lane, was asked that question, and he made it very clear in his speech shortly after, in terms of speculation about where the Federal Reserve board would go. He said that Canada does not need to work in lockstep with the United States. We will not march in lockstep. We will consider the circumstances as appropriate to Canada.

Now, this is not my decision; it's theirs. We're going to have to see. The United States is going up like this, but if you look around the rest of the world, it's hard because it's not out of second gear yet. I think that our Bank of Canada, in setting their rates, will take into account all the factors it needs to, but it will look for a “made in Canada” approach. That's my sense.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Mr. Caron, go ahead, please, for seven minutes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair. I would like to thank the witnesses for being with us today.

I'll start with Mr. Lawford and Mr. Campbell.

Your testimonies about the impact of section 5 are fairly different. Mr. Lawford presented certain arguments on this matter.

Mr. Campbell, could you respond to his concerns about the scope of tax jurisdictions or even about the impact it might have overall, such as possibly offering lower protection to consumers?

[Terry Campbell]

I say this with respect and affection for my friends from PIAC: I disagree. I disagree on a range of fronts.

If you look at it from the perspective of a consumer, the consumer does not want to have conflicting provisions. They won't know which will apply. They don't want to have provisions that can't work together. They don't want to have provisions about which there is confusion. Do they go to the FCAC? Do they go to the ombudsman? Do they go elsewhere?

The other thing to bear in mind is that, unlike provincial credit unions, which are in a local area, banks work across the country. This is a national regime. People move in Canada, and banks have to plan on a nationwide basis. With this legislation, we think there is strength in a uniform approach. We think there is strength in uniform supervision. Quite frankly, everyone around this table is a federal MP who has a view about how policy should be formulated. We think a uniform approach to policy is a good idea.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much. I must keep going because my time is limited.

[Glenn Campbell]

Yes, I understand.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Lawford, would you like to add anything?

[John Lawford]

I will answer in English.

Consumers don't necessarily want a uniform approach. There are some advantages to that, but what they really want is a good approach. The rules that are being offered here today in Bill C-29 basically sweep a bunch of current rules into the act and add not very much. In return, consumers are being asked in certain provinces, notably Quebec, to forgo protections that they have, but there will be other provinces where there are higher standards, which will potentially be cut off at the knees by this bill.

What consumers really want is good banking practice, good financial services practice. That's what they're looking for. The suggestion that they'll be confused by it is unnecessary. If this bill had had more consumer protection in it, there would have been less need to say there's going to be a problem in the future. However, because there's so little, I can guarantee you there will be problems in the future, because consumers will be dissatisfied. They will go to their governments, provincial or federal, and ask for more.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

So you really believe that there is a jurisdictional constraint on this. Can we compare that to the situation with the single securities regulator? Is this a similar case?

[Jacques St-Amant, Consultant, Public Interest Advocacy Centre]

With all due respect to Parliament—and I have great respect for it—Parliament can't easily change the Constitution. In recent years, the Supreme Court has repeated there is a shared jurisdiction over consumer protection in banking services. In fact, respectfully, when the minister tells us that he wants to regulate everything and standardize everything, he is in danger of having the same kind of difficulty as dealing with securities.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

So we risk being before the courts for—

[Jacques St-Amant]

We will certainly be back in court.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

[Jacques St-Amant]

These provisions are a guaranteed recipe for new constitutional litigation.