Evidence of meeting #18 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was businesses.
A recording is available from Parliament.
4:35 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
My third question is this. If the minister or the government were to require you to cut your rates—to waive interest, to waive penalties and to waive fees—would you respect that requirement?
I'll come back to the issue that was raised by my colleague. We have seen banks in other jurisdictions, such as the United Kingdom, Mexico and Europe, stop dividend payments. The dividend payments that the banks announced this year will, in many respects, be on the backs of Canadians. Canadians want to see that the big banks are not profiting from Canadians during this crisis. If the government were to step in and require members of the Canadian Bankers Association to waive interest and penalties and fees, would you respect those requirements from the government?
4:35 p.m.
President and Chief Executive Officer, Canadian Bankers Association
What I want to tell you is that Canadian banks always follow all the laws and anything that is law today, anything that's been legislated, by all means.
To your point, and what we haven't talked much about today, in addition to the emergency relief measures we've talked about and to your question about profits specifically, I can't be precise, because nothing has been disclosed and we're in the middle of our quarter, but on loan-loss provisions and provisions for credit losses that banks take in a normal course, even in good economic times, banks do lose money when somebody takes out a loan and is unable to pay.
Given the swiftness, the severity and the scope in this case, clearly, in addition to the relief measures that the banks have taken at great expense, one could expect that loan losses will rise dramatically in the near future as well.
4:35 p.m.
Conservative
James Cumming Conservative Edmonton Centre, AB
Thank you.
Thank you to all the witnesses for appearing.
I have a couple of questions for Mr. Parmenter.
First, on the CEBA, the loan program, it looks as if it's open today for most institutions. Can you give us some sense of the timing for the approval process for the businesses that need this capital?
4:35 p.m.
President and Chief Executive Officer, Canadian Bankers Association
Obviously, on CEBA itself, it's not banks that are setting any of the lending criteria. This is money from the Crown, so the government has established the loan criteria. There's no adjudication, outside of the instructions directly from the government in this case.
4:35 p.m.
President and Chief Executive Officer, Canadian Bankers Association
Correct.
4:35 p.m.
Conservative
James Cumming Conservative Edmonton Centre, AB
As to the instructions from the government, what would be the timing? If you're administering it and your clients go in and make applications, do you have a sense of the timing for the approval process from the Crown?
4:35 p.m.
President and Chief Executive Officer, Canadian Bankers Association
I don't have a precise answer for you.
What I can tell you is that there are media reports. Keeping in mind that the portals opened this morning, there are media reports of individual banks about how much they've approved. A Bloomberg article earlier this afternoon referenced that Scotiabank, as of noon today, had authorized $107 million in small business loans in support of CEBA.
I wish I had greater data to share with you at this point, but as you can appreciate, the program launched only this morning.
4:35 p.m.
Conservative
James Cumming Conservative Edmonton Centre, AB
With your members, has there been much discussion? We're hearing a lot from small and medium-sized businesses with issues with rent and rent deferrals, and I get that the banks are offering some latitude on deferrals on mortgages and on interest in some cases. Is there any forward thinking? The deferral mechanisms, for a lot of tenants, are going to create a liquidity problem for a lot of those businesses and their ability to pay rent. Of course, there are landlords who aren't collecting rent.
There's a pending issue here that one month is not bad, but if we get into three months….
Is there any reaction from the banks on what would be good public policy related to that, or are the banks themselves trying to think through how to deal with what I believe will be a very significant issue?
4:40 p.m.
President and Chief Executive Officer, Canadian Bankers Association
That's a great question, and the short answer is that it's more the latter.
As you can appreciate, whether it's commercial real estate, residential rental real estate or any other industry or sector one could think of, there are teams at banks not only collaborating within their own institutions, but also trying to tap the collective selection of capital at, frankly, their competitors, to ask whether there are creative things they can think of. There are teams studying all of these issues across a range of industries, because it's well understood just how significant and how severe these economic challenges are.
As I'm sure you can appreciate, a lot has come at the banking industry in a very short period of time, and in addition to trying to get some of these programs out and launched, which needed to happen, there is an eye to a medium-term and longer-term view as well.
4:40 p.m.
Conservative
James Cumming Conservative Edmonton Centre, AB
Okay, perfect.
With that, are there any suggestions on policy? Have your members been looking, or have you been looking, at what other jurisdictions are doing?
I know that in the U.S. there were backed loans that they could use toward rent, utilities and employee costs. They were refundable loans.
Has there been much thought on that, or is that in its early stages?
4:40 p.m.
President and Chief Executive Officer, Canadian Bankers Association
I would say it's premature, certainly, to share. What I can tell you is that with regard to the receptivity from all of the provincial regulators, from agencies like EDC, from the department itself, in my 25-plus-year career in banking, never have I seen such great coordination and collaboration among regulators, government, industry and, frankly, competitors. I think it's just a recognition of where we are.
It's premature to share anything with you, but know that teams at banks are studying and exploring all kinds of alternatives, and there's receptivity in government to creative ideas and suggestions. It's something I've never seen in my career.
4:40 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you all.
We'll turn now to Mr. Fraser and then go on to Mr. Morantz from there.
Sean? You're on mute, Sean.
4:40 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you. It was a brilliant opening to the question. I'll reassure you, Chair, that you missed out there.
Turning to the Canadian Bankers Association, one of the things I've heard in a few anecdotal examples—and I think it came up during our previous panel—is that there have been small businesses that sought to access a loan through the emergency business account, and they were being treated the same as if they had been applying for an ordinary line of credit through the bank, with the bank exercising its criteria.
Am I correct in understanding—since it's not the banks that will put up the lending criteria here, but the government—that this was done in error, and that in fact the vast majority of businesses that meet the eligibility criteria will in fact be granted access to a loan through this program?
4:40 p.m.
President and Chief Executive Officer, Canadian Bankers Association
Yes, your understanding is correct.
As I said earlier, the eligibility criteria have been set by the government. These aren't credit adjudication decisions being done through an individual risk profile by the bank. What they are doing is merely enforcing the eligibility criteria that the government has established for the loan.
4:40 p.m.
President and Chief Executive Officer, Canadian Bankers Association
Sorry. I was going to say that I did hear the comments earlier. It's certainly something we will take back to our members, but I can assure you that the process here is to follow the government's loan criteria, not an individual bank's risk profile.
4:40 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you. As long as you take that back to your members to ensure that the message is received at the branch level, where many businesses are going to be seeking access, I would greatly appreciate it.
Quickly, still on the emergency business account, to our friends representing credit unions here today, thank you for your comments about your willingness to partner. Can you give a sense of the importance of having credit unions administer some of this lending to small businesses, in small or rural communities in particular? There are certain areas that I represent that may have limited access to our nation's major financial institutions, and I'm curious if you can shed some light on the importance to small towns and rural communities of having this program administered also by credit unions.
4:45 p.m.
President and Chief Executive Officer, Canadian Credit Union Association
As you know, credit unions and caisses populaires in Canada do have 20% market share of SME business and small business, particularly in microbusinesses, the very, very small ones.
In certain areas of the country they also have very large market share. In the case of Desjardins in Quebec, its market share is in the 40% to 50% range. For credit unions in western Canada, in Manitoba, outside Winnipeg, the SME market share hovers around 60%. In Saskatchewan it's around 40%. In B.C. it's also very high outside of the Lower Mainland.
Therefore, it's very important that credit unions have access in order to serve not only those who don't have access to banks but also those who choose to bank with a credit union as opposed to one of the larger financial institutions in Canada.
I think I mentioned as well that in over 400 small towns and small communities across Canada outside of Quebec, credit unions are the only game in town, the only option for those communities in bricks and mortar. Of course, bricks-and-mortar institutions are still important when it comes to meeting the financial needs of people who are managing small businesses.
We're an important contributor to the financial ecosystem in Canada. We may not be the largest and we may not be as visible in provinces like Ontario, but certainly in the west, in the Atlantic region, in Quebec and in rural communities, we play a very important role for individuals, and particularly for small businesses.
4:45 p.m.
Liberal
4:45 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
As a final quick question for the Canadian Bankers Association, one issue that I raised during our last call was this: If we're willing to work with the big banks or the credit unions to help get money out the door through the wage subsidy, is this the kind of thing you would be willing undertake if you know a business has access to 75% of the cost of their wages through the wage subsidy program? Is there an opportunity for lenders to front that cash in order to inject liquidity into different sectors or businesses much more quickly than the program would allow on its own?