Finance Committee on May 21st, 2020

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

So you're telling me that if we ever want to help our small businesses instead of the big credit card issuers, the government should introduce legislation to regulate interchange fees.

[The Chair, Liberal, Wayne Easter]

Alexis, that really is a question that needs to be.... The next time we have the minister here, you know the question that you have to ask. It's unfair to ask it to Mr. Rudin.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

You have one more question, Alexis.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

I have no further questions, Mr. Chair. You may redistribute the rest of the time as you see fit.

[The Chair, Liberal, Wayne Easter]

That's great, Alexis. We can use the time.

Thank you very much.

We'll now go to Mr. Julian.

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

Thanks very much, Mr. Chair.

Thank you, Mr. Rudin and Mr. Gully, for being here today. We hope that you and your families are safe and healthy.

I want to get a handle on the amounts of supports that are being provided to the banking sector, both through regulatory relaxation, as you mentioned, with the domestic stability buffer, and also in terms of support measures. We heard earlier this week from CMHC that there's $150 billion that banks can access through the IMPP.

We just heard from the Minister of Small Business, who indicated that about $100 million will be provided through the CEBA as the percentage of CEBA to handle in terms of administration fees. You mentioned that the domestic stability buffer is $300 billion. We're close to, if not over, half a trillion dollars in supports now, and that's not including the term repo changes that the Bank of Canada has brought in.

Is OSFI monitoring the overall level of supports and the overall impact of regulatory relaxation? Do you have a figure for us right now for what is available to the big banks in Canada?

[Jeremy Rudin]

The questioner pointed out a variety of ways that the government is supporting the financial system, both directly and indirectly. Direct support comes principally through the activities of our office, of the Bank of Canada and of CMHC, but the indirect support is very important as well.

By providing income support to Canadians, whether it's income support or loans to businesses, this also relieves a considerable amount of pressure on the financial system. We are watching that very carefully.

That said, I'm afraid that I didn't bring a sum total to this meeting, and I can certainly undertake to provide it to the committee.

[The Chair, Liberal, Wayne Easter]

I believe Peter is frozen. He's used two minutes of his time. We'll come back to him later.

Mr. Cumming, do you want to take over?

[James Cumming, Conservative, Edmonton Centre, AB]

Sure, I'll step in for him. I'm sure he wouldn't mind.

Could you elaborate a bit on the stability buffer, where you've decided to go to 1%? What was the rationale to take it to that level at 1%? What was the analysis such that you picked that threshold?

[Jeremy Rudin]

I'm going to call on my colleague to provide a bit of colour here. I will just say that we had built up one of the largest counter-cyclical capital buffers in the world. We felt that put us in a position to make a measured reduction and to keep a certain portion of it in reserve, if needed, and we are prepared to release that, if that's the case. I think Mr. Gully can add a bit of detail.

[Ben Gully]

A variety of factors go into the setting of the domestic stability buffer. A large part of it relates to the strength of the economy and the growth in underlying assets, as well as broader questions around risk, such as household debt and consumer debt, as examples.

In this particular case, the release was very much one whereby we wanted to have a sufficient enough release to be meaningful to support lending across the economy. Typically, we have used on increases increments around a quarter of a per cent to half a per cent. We felt that it needed to be significant and large in order to convey the significance of the response and to provide clarity to institutions so that they have a clear runway to use that.

Obviously, we have the benefit of international practice to see what other jurisdictions have done as well, in order to calibrate the overall response, but we felt that the one and a quarter per cent was a response to the situation and was significant.

[James Cumming, Conservative, Edmonton Centre, AB]

Mr. Chair, do you want me to carry on?

[The Chair, Liberal, Wayne Easter]

Yes, you will finish your round. Then we'll go back to Peter.

[James Cumming, Conservative, Edmonton Centre, AB]

I think Peter visited one of his offshore bank accounts or something.

[A voice]

Oh, oh!

[James Cumming, Conservative, Edmonton Centre, AB]

Given that this has created that liquidity and that was the intent of this—and I understand that—and you aren't able to comment yet because the banks haven't reported on what's happening with their operations, I will ask you to comment. If we've created this environment of liquidity and it's working the way it should, then why is it that we should have so many other measures that the government has had to announce, whether it be through loan guarantees, special loans and the CEBA, or through a variety of other liquidity avenues such as BDC lending and EDC lending, to backstop some of these activities? Can you comment on that from a policy standpoint?

[Jeremy Rudin]

Mr. Chair, in this context I can only speak from my own perspective as superintendent, rather than for the government as a whole.

When I look at this from the perspective of superintendent, we have created a space for banks to lend, and they're being supported on the liquidity side, as I mentioned, by the Bank of Canada and CMHC. At the same time, banks remain commercial enterprises, and they're responsible for their own underwriting. They need to take reasonable risks. In this context, where it's very difficult to predict the future path of the economy, where it's difficult to fully assess the creditworthiness of enterprises, the fact that the government is coming forward to provide support to bank lending by taking some or a large portion of the risk onto the government's shoulders, it has clearly made it more likely that banks will be able to meet the loan demand presented to them.

[The Chair, Liberal, Wayne Easter]

Thank you.

A quick one, James, if you have one.

[James Cumming, Conservative, Edmonton Centre, AB]

On your website you mentioned temporary measures put in place to protect the rights of members and beneficiaries related to pension funds. Can you elaborate a little on what those temporary measures were?

[Jeremy Rudin]

I'd be glad to do that, Mr. Chairman, but Mr. Gully would be a better speaker on this topic.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Gully.

[Ben Gully]

Thank you, Mr. Chair.

On March 27, we introduced a portability freeze. That is regulatory-speak for the extent to which transfers can be pulled out of pension plans. We did that because of the uncertainty facing the solvency positions of those funds because of the extraordinary uncertainty in the markets. Those restrictions were a blanket restriction for colleagues looking to transfer value out, but on May 7 we updated those restrictions and provided consent to those looking to retire early; they needed that cash, subject to certain restrictions.

Again, the balance here is wanting to preserve the value and the position of the funds for the benefit of members who stay in the fund, while also allowing some targeted relief for those who are looking to withdraw.

[The Chair, Liberal, Wayne Easter]

Thank you for that.

Peter, you have about three minutes left.

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

How much in all sectors is support being allocated to the banking sector, either through regulatory relaxation or support measures? Is OSFI is tracking that? Just yes or no if you don't have the figures.