Thank you for this response.
Evidence of meeting #19 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was credit.
A recording is available from Parliament.
Evidence of meeting #19 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was credit.
A recording is available from Parliament.
4:30 p.m.
Liberal
The Chair Liberal Wayne Easter
Just to interrupt for a second, Gabriel, I seem to be getting both Carolyn's voice in French and the English overlaying that. Can the people in the booth check that out?
Go ahead, Gabriel. I won't take your time.
4:30 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Ms. Wilkins, the next question concerns the $200 billion in term repo operations. Yesterday the governor said in his speech that the Bank of Canada had accumulated over $200 billion in new assets.
What exactly are we talking about? Are we talking primarily about loans or Canadian corporate bonds? Are specific sectors being targeted?
I'd like more information on the $200 billion in term repo operations.
4:35 p.m.
Senior Deputy Governor, Bank of Canada
Most of $200 billion consists of term repo operations. We're talking about approximately $140 billion in term repo operations.
In terms of the purchases, almost 95% are bonds that are less than a year old, so very short-term bonds. This is perfectly normal, since the current crisis is expected to be temporary.
We'll publish everything on our website. All our purchases and balance sheets will be available and transparent.
4:35 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Okay. Thank you for your response.
Earlier, in response to Mr. Poilievre's question, Mr. Poloz addressed the issue of provincial funding. The Bank of Canada supports the refinancing of 40% of provincial bonds.
In your opinion, how many provinces would have defaulted on their payments or failed to refinance without this Bank of Canada measure?
4:35 p.m.
Senior Deputy Governor, Bank of Canada
Our 40% support is tied to short-term security action or non-action agreements that are less than a year old. It has nothing to do with provincial bonds. We wanted to provide 40% support to assist all the provinces equally.
The provincial ratings are quite high at the moment. I don't want to comment on the future or on the credit rating of any province.
I can tell you that our program is really about improving the way the provinces, their funding sources and the bond and securities market work. The program has greatly helped the provinces' funding conditions. As a result, the provinces can implement their tax programs to assist the people in their jurisdictions.
Our goal is to improve market conditions, not to resolve the provinces' credit issues.
4:35 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you. I want to highlight the fact that you answered all my questions in French. I really appreciate that.
4:35 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Thank you very much, Mr. Chair.
Thank you so much, Governor Poloz and Deputy Governor Wilkins, for being here today. We hope your families are safe and healthy.
Thank you, Governor, for your service to our country. We've certainly appreciated you coming to the finance committee regularly over the years.
You have spelled out the supports that are going to the banking sector: flexibility on repo facilities, a record low overnight rate and a number of other measures that help us support the banking sector. Other central banks, such as the European Central Bank and the Bank of England, have imposed conditions around those supports, things such as ensuring that there are no executive bonuses, dividend payouts or stock buybacks. In Canada, we have yet to see those conditions.
I can tell you, having spoken yesterday with small businesses in my riding, many of them are absolutely up to their necks. They're very concerned about whether they will be able to get through the next few weeks. I have Canadians who are having difficulty putting food on the table and keeping a roof over their head. At the same time, despite the fact that many credit unions have reduced their rates to zero, as we've seen with Vancity on their credit cards and Community Savings on their lines of credit, the banks have not done this.
There have been marginal cuts at best in some of the facilities they offer to people who are in dire straits. On the mortgage deferrals, I've not yet had one person come to me to say that a mortgage deferral has been approved without interest, penalties and fees. Therefore, Canadians are struggling, and we're not seeing from the banking sector that shared contribution to get through the crisis.
Has the Bank of Canada had discussions around ensuring that the banks do their part in ensuring that Canadians get through this crisis with no one and no small business left behind? Should the federal government be using its tools with the banking sector to ensure that they follow best practices such as Vancity and Community Savings are doing, credit unions that have provided significant supports for people in their communities? What would you say to my constituents who are struggling right now and ending up much more deeply in debt because their mortgage deferral comes with penalties, fees and increasing interest on top of interest so that they are really struggling, and will struggle even more coming out of this crisis?
4:40 p.m.
Governor, Bank of Canada
I guess I should begin by reminding you that regulating the banks is a job for OSFI, and that's not me passing the buck at all. As for what OSFI has said to the banks and publicly, it has not told them they can't pay dividends, but it has asked them not to increase their dividends, which is something that historically they've tended to do, and to stop using their capital for buybacks.
One of the reasons OSFI has taken that position is that it had imposed what we call a dynamic stability buffer, an extra capital buffer on top of its regular capital requirements, in advance during what we call the good times of roughly two percentage points. I think it was going to be 2.25% by now. What happens, then? Saying to them that it's okay to reduce the buffer now has the same effect on the economy as if we were in a different economy without a buffer and they said let's not have any dividends. What it does is keeps capital in the bank and allows it then to be used to expand lending if that is the demand.
As I described before, we had a tremendous amount of drawdowns from companies drawing their credit lines in the early days of this period, so this move by OSFI helped that situation quite a lot because the banks can satisfy the requirements at a slightly lower level. We have at least been operating in the same way; it's just that we had an additional tool there, not a tool that the Bank of Canada manages but OSFI's tool. You'll recall, perhaps, the day that the superintendent and I appeared with the minister to describe the basket of changes that happened all at once.
As for the other items you raised, I'm not going to be the defence for the banks. I'll just say that the banks have been important conduits for the policies that have been enacted. Additional lending policies have been put in place, and the banks are running those programs on behalf, essentially, of the government because they're the ones connected with the clients. They have a lot of risk already, of course, in existing loan books. We shouldn't forget this. In crises, there will be strains in the credit in their books. This is also something to take into account.
As for mortgage deferrals and the reduction of credit card rates, that is somebody else's province. I'm glad to see the flexibility they have put out there, because I think that in this deepest downturn of the economy, that's an important buffering mechanism.
4:40 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay, we are out of time, Peter, but you will get a second round after the next four questions.
We'll now turn to Pat Kelly with a five-minute round and then go to Mr. Fragiskatos.
4:45 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Thank you, Mr. Chair.
Governor, what is the dollar value of purchases under the Government of Canada bond purchase program so far?
4:45 p.m.
Governor, Bank of Canada
I'm going to turn to Ms. Wilkins, who I think has brought those numbers with her. We committed to $5 billion per week. It's only been three weeks, I think.
4:45 p.m.
Senior Deputy Governor, Bank of Canada
I'll check that number. It changes every day.
4:45 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
What is the dollar value of purchases under the provincial bond purchase program and purchases made under the 40% absorption of new debt issued?
4:45 p.m.
Senior Deputy Governor, Bank of Canada
Under the provincial bond purchase program there have been no purchases to date. We just announced that program, so we are finding an asset manager and developing the program. It should be ready to start purchases in three or four weeks. Under the provincial money market program, which is where we purchase the T-bills for one year or less, the purchases are about $2.3 billion.
4:45 p.m.
Conservative
4:45 p.m.
Senior Deputy Governor, Bank of Canada
It would include all of them that have been issuing. It's weekly. We would purchase 40% of the T-bill issuance of every province on a weekly basis, so one province per week.
4:45 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Okay, so this is done automatically for every province.
4:45 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
It is not something you are determining or a capacity of any particular province. So, what's—
4:45 p.m.
Senior Deputy Governor, Bank of Canada
No. I'm sorry to interrupt. That's important because that's what shows you this is meant for market functioning in general and not targeting any particular province.