Finance Committee on April 9th, 2020

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you, Mr. Chair.

My question is for Mr. Moody.

Mr. Moody, you talked about putting in place conditions, for example, capping salaries, so we don't have multi-million dollar payouts when there is public support for businesses. I certainly agree. When we look at the United States' example, support for businesses is dependent on a series of measures, maintaining jobs and benefits and ensuring there are no executive bonuses, stock buybacks and dividends. Essentially, that support goes to ensure the employees are being maintained, and that helps the entire community.

Do you think it's a good thing that we put in place those kinds of conditions to ensure the subsidies and support that we provide to businesses actually go into the communities themselves?

[Kim Moody]

I think generally the answer is yes, but I would like something like that to occur under the simple proposal that I discussed in my opening remarks.

In my view, we need a simple solution and we need a speedy solution. What we have right now is a slow solution and a very, very complex solution, being the 75%. To add another layer of prohibitions on top of an already very, very complex 75% solution is something that I guess could happen, but I would prefer that prohibition would occur under a simple model.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

We'll go to Mr. Poilievre for five minutes and Ms. Dzerowicz will wrap the panel up with five minutes.

Go ahead, Pierre. Are you there, Pierre?

Does somebody want to take that round for the Conservative side? I'll go to Ms. Dzerowicz and then come back to whoever wants to ask a question for the last round for the Conservatives.

Ms. Dzerowicz, you're on.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair, and I want to thank everyone for their excellent presentations.

I also want to thank all of you, because I think each one of you started off your presentation by thanking the government for our quick work, for our fast work and for the tremendous programs that we've put into place. I really appreciate that. In a five-week time period, we have been dealing with an unprecedented pandemic, and we have put in some historic programs that have never been created in Canada before. Thank you for acknowledging all of that.

My first question is for the Canadian Chamber of Commerce.

This morning, one of the big news items was that Statistics Canada said that Canada lost over a million jobs in March. Our unemployment rate is up to 7.8% and everybody's anticipating it's going to get a little worse. I believe it was you, Ms. Nord, who mentioned that the workforce will be different as we start coming out of this pandemic.

What should we be doing in the coming months to transition Canada's workforce to meet the needs of a changed workforce as we come out of this pandemic?

[Leah Nord]

Yes, the workforce will definitely change. It will not look the same. There are a few trends that will happen.

Jobs and skills will shift. There could possibly be an increased focus on automation. The importance of skilling, upskilling, both work-integrated learning and learning-integrated work, and endurable skills will all be important for individuals. I think it comes back to, first and foremost, the labour and supply side of this. I think what's going to be important in the coming months—because we don't have a road map; we don't have a framework; we don't know what's going to happen—is to ensure that small businesses are at the table during the discussions and are able to look at this information and labour market information as well.

The labour force survey data is incredible. It showed us numbers that we've never seen historically, and it indicates trends. However, within all of your constituencies, for example, they don't know what to do with that data. It has to be drawn down to that local level. It has to be integrated into what's happening to them at that level in order to be able to respond.

Thank you.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

How many minutes do I have left, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

You have pretty near two minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Perfect.

I think it was also the Canadian Chamber that mentioned this. It was mentioned that the team Canada approach has been outstanding and has been unprecedented in history. We have our federal government, our provincial governments, our corporations—basically all sectors—working together to ensure that we are 100% on side in terms of how we can provide support to our small businesses and Canadians at this time.

I would love it if the Canadian Chamber of Commerce would comment on appreciating that this is important. In the coming days, do you think it is important for us to continue to have this team Canada approach? What advice would you have for us on this matter?

[Susanna Cluff-Clyburne]

Hi. It's Susanna from the Canadian Chamber.

Get Parliament back together and get the legislation passed so this help can start getting out to businesses. I think that's our first ask. Absolutely, we need to continue on in this vein as long as we're in this crisis, because it's the only way we're going to get through it in any type of good shape.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

We will end it there.

On that point, Susanna, I did have a note from the government whip just a few minutes ago saying that Parliament will likely sit on Saturday starting at 12:15 p.m. That's good news if that all holds together.

Is Mr. Poilievre back?

Then does Mr. Cumming, Mr. Cooper or Mr. Morantz want in for a couple of quick questions?

Elizabeth May, if you're still on the line, if you want one, we'll give you one question at the very end.

Are any of the Conservatives on the line?

Mr. Cumming, go ahead.

[James Cumming, Conservative, Edmonton Centre, AB]

I'll direct my question to Mr. Kelly. Before I do that, Mr. Fraser, to your earlier comment, that's the response I'm getting from small businesses, that they want a more timely response so they can carry on with their business.

Mr. Kelly, I want to go back to you on the idea of fixed costs. I'm hearing a lot from the hospitality sector in particular. They're shut down completely, and they're faced with rents and utility costs and just deferrals. Do you think the current program with the CEBA is sufficient, or should there be some thought about expanding that, either in size or in how much of that loan is rebatable?

[The Chair, Liberal, Wayne Easter]

Mr. Kelly.

[Daniel Kelly]

Yes, you're absolutely right. Of the tools that the federal government has put in place, I think CEBA is the most logical one to allow some support of payments for rent and other fixed costs. My specific suggestion for CEBA is that the government eliminate immediately the wage thresholds, at least the bottom four, so those who pay themselves with dividends or microsized businesses can access it, and raise the top threshold to something a lot more meaningful than $1 million, because it's cutting out way too many small companies—not even medium-sized firms but still very small employers.

We need to make sure that the upfront.... The $10,000 forgivable loan portion, which I think is one of the most attractive features of the CEBA account, in my view should be an immediate grant from government to allow businesses to use those dollars to pay some of their fixed costs. I would further suggest that banks and provincial governments contribute to that.

As this drags on, that $10,000 should be revisited and perhaps become $20,000, because businesses are going to have additional fixed costs as this COVID effect continues.

[The Chair, Liberal, Wayne Easter]

Thank you.

Ms. May, we'll let you in with a question there. We have three minutes left.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Can you hear me?

[The Chair, Liberal, Wayne Easter]

Yes, we hear you.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you, Mr. Chair.

The segue was perfect for my question, because it's exactly to the point that was just being made, and I think it was by Mr. Kelly. I'm dealing with so many businesses locally, and it's the fixed costs and the cash flow that aren't addressed by wage subsidies. I'm wondering if he could speak further to this idea of getting money into the hands of small businesses, many of which—particularly, as you mentioned, in the hospitality industry, restaurant businesses—have been shut down by the pandemic, and wage subsidies just don't give them a lifeline. Neither does a $40,000 interest-free loan, because they fear that when the moment comes to pay it back, this lifeline will have just delayed their bankruptcy, as opposed to helping them avoid it.

Could you expand on those points and suggest—again, as you were doing—some specific measures that would be a real lifeline to these businesses?

[The Chair, Liberal, Wayne Easter]

I'll turn to you, Mr. Kelly.

[Daniel Kelly]

Ms. May, as usual, you're exactly right in terms of the situation in which many businesses find themselves.

Businesses are afraid of taking on debt. When a third of small businesses report they are worried that, because they are shut down, they will never reopen, it is a little tough for them to consider taking on additional debt at this time, which they will be personally on the hook for potentially down the road. Even if the loan is guaranteed by government, it doesn't give them the breathing room to help. They need these costs taken away; they don't just need loans.

I think the Canada emergency business account is a good vehicle, and having the banking partners deliver it is also the right measure. My suggestion is that the upfront piece be $10,000 whether or not you're able to borrow anything. If we kick in $10,000, and we get other parties, such as banks and provinces, to kick in money, that would allow the smallest guys to participate and access that money. There are so many self-employed people who are absolutely desperate right now, and we need to make sure that there are some dollars in their hands so they can make it through.

I talked about the CERB challenge as well, because many self-employed people have a trickle of income coming in and they're now finding themselves ineligible for that. I know the government is talking about a fix there, but that can't come soon enough.

[The Chair, Liberal, Wayne Easter]

I am sorry, but we are going to have to end it there.

I want to thank all the witnesses for coming and giving their views and ideas. We heard a lot of good information on this panel. In the various meetings we've had, we've heard constructive criticism. We appreciate that and ideas to move forward with. Again, thank you.

I'm not sure if the next panel is available yet.

If the Canadian Bankers Association and the Canadian Credit Union Association are on the line, we'll do a sound check.

Okay, we'll officially call this panel together. We have an hour with this panel, so we have to be fairly tight on the time frames, especially for questions. We'll go to five-minute rounds of questions on this one.

We have with us the Canadian Bankers Association and the Canadian Credit Union Association.

Starting with the Canadian Bankers Association, Neil, do you have an opening presentation, please?

[Neil Parmenter, President and Chief Executive Officer, Canadian Bankers Association]

I do, Mr. Chair.

I'm joined on the call today by Darren Hannah, vice-president, finance, risk and prudential policy for the CBA.

I'm pleased to have this opportunity to appear before this committee, albeit in a slightly different format than we're accustomed to.

I want to start off by sending best wishes to the members of this committee, their families, colleagues and constituents during this difficult time. On behalf of our board and our more than 60 member banks, we hope everyone stays healthy and safe.

The economic upheaval caused by the COVID-19 outbreak is the most urgent crisis Canada has faced in recent memory. To confront the financial dimensions of this challenge, Canada's banking sector has worked in lockstep with the federal government, the Bank of Canada and regulators to implement a series of relief initiatives for the millions of Canadians whose lives have suddenly been altered by COVID-19.

Banks assembled quickly to help, with the members of the Canadian Bankers Association immediately announcing comprehensive programs to support individuals, businesses, employees and communities as we come together to manage today's financial uncertainty and economic disruption. For personal banking customers, Canada's banks are offering immediate relief to impacted clients on all forms of lending: mortgages, lines of credit, personal loans and credit cards. As of April 8, 13 CBA member banks have provided help through mortgage deferrals or skipping a payment to almost 600,000 Canadians.

CMHC data shows that the average monthly payment of Canadian homeowners is approximately $1,326. This means that the cash flow freed up from deferrals completed to date is roughly $770 million per month, or $2.3 billion per quarter. This keeps money in the pockets of people who need it now. Banks have publicly reported that more than 90% of those seeking a deferral are approved.

Banks have also taken decisive action to help an additional 200,000 Canadians manage credit card payments, with multiple banks announcing various programs to defer payments for customers along with heavily discounted or low fixed interest rates. Our members have worked to ensure that Canadians have access to term loans, lines of credit and other products that carry lower interest rates and can suit their unique circumstances. In addition, banks are taking steps to ensure credit scores are unaffected by deferrals and skipped payments, and many standard fees for a range of services are being waived. Combined, these efforts are worth tens of millions of dollars more each month.

Canada's banks are proud to serve three million small and medium-sized businesses, having authorized more than $247 billion in credit to this sector as of September 2019. In response to the current strains on businesses, member banks have extended operating lines of credit and introduced a range of flexible measures for these loans, including deferrals. Most recently, banks have announced that they have now opened the enrolment process for the Canada emergency business account, which will provide qualifying business customers access to a $40,000 line of credit with 0% interest until December 31, 2022. This lifeline, which banks have worked with government to implement, can serve as an effective bridge until the 75% federal wage subsidy program is available.

Canada's banks are in a strong position to deliver relief programs and provide support to Canadians during this challenging time. Banks are continuing to lend to businesses and personal customers and hold significantly more capital entering the COVID-19 crisis than they did entering the global financial crisis. From the end of 2009 to the end of 2019, the total capital of banks in Canada more than doubled, from $163 billion to $336 billion. The current provisions for credit loss among Canada's largest six banks stands at more than $10.4 billion.

More than 275,000 Canadians are employed in banks across the country, and they are doing an outstanding job helping customers by staffing branches, answering phone lines at contact centres and maintaining the critical back office infrastructure that keeps Canada's payment network running. As a case in point, banks worked closely with the government to offer wider access to online enrolment for direct deposit from the Canada Revenue Agency, which ensures more Canadians are able to receive the CERB quickly and securely. As of yesterday, more than 663,000 Canadians had newly enrolled to receive relief payments via direct deposit, getting much-needed relief more quickly than waiting for cheques. We have also mounted an awareness campaign in concert with the Canadian Anti-Fraud Centre for the public about scams that prey on the uncertainty of our times.

Hundreds of bank employees have been redeployed to work directly with customers experiencing hardship to tailor customized plans to help them manage their finances. Our members have introduced programs to meet the needs of health care workers, ensure seniors have priority line and contact centre access and that vulnerable populations continue to be served. Canada's stable, well-regulated banks can provide this high level of engagement and support because of their strength.

In 2019, banks and their subsidiaries paid $30 billion in salaries and benefits; provided $21.3 billion in dividend income to millions of Canadians, pension funds and charitable endowments; and paid $12.7 billion in taxes to all levels of government in Canada.

For hundreds of years, Canada's banks have helped Canadians through many challenging times, working in partnership with governments of all stripes and building global recognition for our financial strength, stability and resilience. Without question, these are unsettling times that have put so many Canadians under great strain. Our country faces an unprecedented and monumental challenge.

Canada's banks will continue to work hand in hand with government, regulators, customers and communities to ensure that Canada emerges through this crisis resilient, strong and growing.

Thank you, Mr. Chair, and I look forward to members' questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Neil.

Before I go to Martha, I'll remind you that the first round of questions will be five minutes. We will start with Mr. Cooper, and then we will have Ms. Dzerowicz, Mr. Ste-Marie and Mr. Julian.

We'll turn to the Canadian Credit Union Association. Martha Durdin, you're on.

[Martha Durdin, President and Chief Executive Officer, Canadian Credit Union Association]

Thanks very much.

Good afternoon. Thank you very much for the opportunity to speak with you today about helping Canadians during these difficult times.

My name is Martha Durdin, president and CEO of the Canadian Credit Union Association, or CCUA. With me, virtually of course, is our VP of government relations, Michael Hatch.

CCUA is the national trade association for 233 credit unions and caisses populaires outside of Quebec, which provide deposit, loan and wealth management services to almost six million Canadians across Canada. Credit unions are regulated, 100% Canadian-owned, full-service financial institutions. They employ roughly 60,000 people across Canada and manage over $246 billion in assets.

Credit unions represent 10% of the financial sector, but in small business they have nearly 20% market share nationwide and close to 50% in the Prairies. In Manitoba, for example, outside of Winnipeg, that market share is close to 60%. In about 400 Canadian communities not served by banks, credit unions are the only bricks-and-mortar financial institutions. As financial co-operatives, credit unions have stepped up to assist their communities during this time through a range of community support programs, and that is always the credit union way.

Credit unions have taken decisive action to stabilize our financial system and help Canadians. They've moved rapidly to deliver financial relief by reducing credit card and loan interest rates, implementing mortgage deferrals and increasing tap limits to slow the spread of COVID-19. Credit unions have reduced credit card interest rates by 50%, to just under 10%, with deferred payments for up to six months. Canada's largest credit union, Vancity, has reduced its rate to 0%. Our credit unions report that 98% of those seeking relief have been approved.

The credit union sector has spoken frequently with regulators and governments to help meet the challenges Canadians face. We've been impressed with the government's swift work to create relief measures and are appreciative of its willingness to listen to stakeholders and adjust measures as necessary.

Particularly with regard to the Canada emergency business account, known as CEBA, we were pleased this morning, after two weeks of work with Finance and EDC, to be told that all credit unions will be brought into this program. This has the potential to help hundreds of thousands of small businesses, and we fully support that. It will be of utmost importance that the government follow through on this commitment to onboard every Canadian credit union into this program swiftly this month.

I don't have to tell you that small business owners are in crisis across the country. I can share the example of one of our credit unions' clients who got in touch, Tauna and Greg Butler, who have 30 years of hospitality experience. They recently bought a small hotel in B.C., taking on a mortgage to invest in and grow their business. They employ 15 people and, until this crisis, were happily tracking on their business plan. Today, they're closed. They have laid everyone off and are struggling with expenses and two leases, which are also small businesses: a brewery and a restaurant. They are struggling to pay their rent.

This is just one of the stories of hundreds of Canadians who bank with credit unions and are in urgent need of a bridge to the other side of this crisis. If credit unions were not part of this, they would be shut out.

We have made some progress this week on CEBA, but we urge the government to ensure that all businesses that qualify can access this program this month. As the government continues its response to COVID-19, we ask for an approach that includes all Canadians, no matter where they choose to bank.

Today we are asking for your assistance in implementing measures that will help credit unions provide the support that hard-working Canadians are entitled to and need now more than ever.

As you know, the business credit availability program, BCAP, is one other component of the business liquidity plan, to which all our members can apply. It will be important for this program that the largest financial institutions not be allowed to swallow up 100% of the funding allocation before smaller players like credit unions can gain access on behalf of their members.

We understand that taxpayer dollars are finite, but access to BCAP and other programs must be shared equitably across all players in the financial sector so that they can be delivered equitably to all Canadians across the country. This will ensure that the government can deliver on its commitment to help those in crisis, and that Canada's financial sector remains healthy, competitive and diverse throughout and after COVID-19.

Canada's credit unions are standing by to help you help Canadians. We appreciate your commitment to continued dialogue and remain ready to assist in any way we can.

Thank you for your time. My colleague Michael and I will be pleased to answer any questions. On behalf of our board and credit unions across Canada, we wish you and your families all the best in a safe environment. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you for that presentation.

We'll start with five-minute rounds so we can get in as many questions as possible.

We'll start with you, Mr. Cooper.