Finance Committee on May 21st, 2020

[The Chair, Liberal, Wayne Easter]

Try it again, Alexis. See what happens.

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

Yes, Mr. Chair.

Can you hear me in the language in which you wish to hear me, Mr. Crawley? Yes? Good.

I guess we lost a little time. So I'm going to ask my question again pretty quickly.

In my riding, there are a lot of weekly newspaper owners. Most of their income comes from advertising. Right now they are losing about 90% of their revenue, if not more. The federal government put in place a $30-million advertising placement program for all of Canada, whereas in the provinces, for example in Quebec, there is another $30-million plan for Quebec alone.

We hear that information is essential. Wouldn't it be simpler and faster to enhance this program expeditiously and buy a lot of advertising quickly so as to benefit major dailies like yours, weeklies in all the small counties, and local radio stations?

I'd like to hear what you have to say about that, Mr. Crawley.

[Phillip Crawley]

The truth is that with regard to the $30 million that was promised to be spent in Canada, I spoke to the heritage minister, and he assured me that 90% of that money would be spent with Canadian publishers and broadcasters, so I'm assuming that a lot of it has gone to TV and radio rather than to print.

To try to make it easier for the federal government to reach a Canadian audience, the publishers have created a consortium. We've built a platform that is now available to the federal government to use to make it as easy as it is to book with Google and Facebook, who are obviously the dominant players. That was done over just the last few weeks. It enables the government to have a neutral platform. It's a Montreal-based company called “district m”, which makes it a neutral platform that the government can use to reach whichever demographics or whichever audience it wants to reach, whether it's community, dailies or whatever.

It was a lot of work to get that done. We'd now like to see the federal government actually test that out. There's an announcement coming out on that in the next few days. We really hope it will help to channel some of that money into places like the Quebec weeklies, which, as you say, obviously need it, because they don't have the kind of subscription revenues that a newspaper like The Globe and Mail has.

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

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thanks to you both.

Mr. Crawley, are you still there?

[Phillip Crawley]

Yes.

[The Chair, Liberal, Wayne Easter]

You said in your remarks there's an inherent unfairness in the publishing area, I guess, in advertising with regard to global platforms. Basically, I think you were saying that global platforms are not paying their fair share.

What are you proposing there?

[Phillip Crawley]

When you look at what's happening around the world, various countries are trying to put pressure on Google and Facebook to deal more fairly. In Australia, they're trying to do it through compelling the platforms to come to the table for a conversation about sharing some of the advertising revenue. In France, it's more about copyright.

My preference is for the Government of Canada to use its good offices to bring the parties together. If it has to be done legally, it's going to take a long time. This is an urgent situation. We need, I think, the convening power of the government to say, “Come on, let's sit down and work this out, and let's come to some kind of agreement.”

Australia tried that. The platforms weren't really as responsive as the government would like, so they've now put some strictures on Google and Facebook to say, “Okay, there's a time limit on this, and we want you to come to an agreement with the Australian publishers.”

There are options to do this, which shouldn't take years. Copyright changes are inevitably slow and complicated. It's very important—I'm not saying don't do it—but it's not going to help in the short term.

[The Chair, Liberal, Wayne Easter]

Thank you for that.

We're turning to Mr. Julian. Then we'll go to Mr. Poilievre and Ms. Dzerowicz.

You have a couple of minutes and a half, Peter.

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

Thanks, Mr. Chair.

Mr. Dias, I'm really impressed to have you here because you represent workers in so many different industries across the country. There are two sectors I'd like to ask you about.

The first is about the importance of providing support for our public transit systems across the country and for public transit workers. The federal government has not provided those supports to date. There's a lot of money going to the banking sector and companies that use overseas tax havens. There doesn't seem to be the same intention provided to transit workers.

Secondly, for media workers, Mr. Crawley has raised the issue of the lack of a level playing field. I think most Canadians would be stunned to know that these web giants largely don't pay income taxes and don't provide any supports into Canada. They're sucking out a lot of the resources of the country and not making investments in this country. It has certainly devastated the media landscape in my riding of New Westminster—Burnaby and right across the country.

What are the things that the government should be doing, both in terms of media workers and in terms of transit workers and supporting public transit?

[Jerry Dias]

Those are great questions.

First of all, let me deal with transit. There are mass layoffs announced in some of the major cities in Canada as a result of COVID-19. As a result of COVID-19, the buses are not fully utilized, obviously, because of social distancing, revenue has dropped dramatically and, in many circumstances, no fares at all are being collected.

What bus drivers are saying, if you can imagine, is that they are driving by bus stops at which there are essential workers who are frequently wearing personal protective equipment and hospital garb.

The simple reality is that the number of riders has dropped, the revenue has dropped significantly and now they've announced layoffs.

You can't say on the one hand that we need essential workers—and transit workers are essential—and then announce major, major layoffs, including right here in the city of Toronto. We can't say they're essential workers and then they get laid off.

The other side of the argument, Peter, is that 75% of all PSWs—all the workers who work in long-term care facilities—take public transit. About 75% to 80% of workers in grocery stores take public transit. At a time when we most need public transit, there are going to be massive layoffs, so the government clearly, clearly needs to step up.

For a perfect example, the transit industry is not eligible for wage subsidies. In fact, if the transit system would at least be eligible for the wage subsidy, that would go a long way in offsetting some of the significant costs.

Phillip laid out the whole issue with the media. Simply put, about 250 local newspapers have closed in the last 10 years. Just in the last few weeks, the National Post announced some major closures in Manitoba. The issue is clearly Google and Facebook. They have had a free ride for years.

Phillip is right. Australia got tough, France got tough and the U.K. is getting tough. Other countries around the world are saying, okay, enough of this. It's got to the point, frankly, where Google and Facebook will steal the information that is paid for and written by The Globe and Mail, The Star or the National Post. They take what is written by other newspapers—conventional media—and they post it but don't pay anything for it. If Google and Facebook lived by the same rules as Phillip Crawley and The Globe and Mail, we'd have a different situation.

They don't pay taxes. They get a complete free ride. There has to be something wrong with the system when we know there's going to be a wholesale wiping out of the industry if we don't do something. You can't have a thriving democracy, which we're very proud of here in Canada, if you don't have a strong media. There's a lot that has to be done.

[The Chair, Liberal, Wayne Easter]

I believe I'm hearing you say, Jerry, that Canada needs to get tough.

I don't see Mr. Poilievre, so we'll go to Ms. Dzerowicz

James, if you want to ask a question, we'll come back to you.

Ms. Dzerowicz, we'll go with you for four minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much.

I just want to say thanks to all the amazing presenters. It's nice to see some friendly faces that I haven't seen in awhile. Hi, Carol.

I'm going to start with Mr. Crawley. I'll start with where Mr. Diaz ended. I absolutely also fundamentally believe that you cannot have a strong democracy in Canada without having strong, independent Canadian journalism. You've mentioned “district m”, and that's something our government should look at. We might not have enough time now, but I would really love to hear a little bit more from you in terms of what more immediate support our government can be providing to Canadian media today. I'm not just thinking about amazing publications like the Globe. I'm also thinking about local publications, and even ethnic media.

The second one is that, when we're looking at a model moving forward, there are a lot of different things happening in the world, from taxing, to having to pay for access to Canadian journalism, to actually providing a share of ad revenues. There are different models we could look at, or a combination of models. If you have some ideas of what we should be looking at, I'd be very grateful to hear from you.

I also want to have a minute and a half left for a question to Ms. Robson.

[Phillip Crawley]

I will give you a quick example for trying to save newspapers. Jerry just listed how many have closed in the last few years. All newspapers have significant printing costs. We print most of our papers with Transcontinental from Montreal, which has major printing plants across the country. Everybody has printing costs. I sign a bill every week for about a million dollars for printing. If the government were to step in and say we're going to help with your printing costs, every newspaper in the country could benefit from defraying some of its printing costs.

The other example I quoted is The Canadian Press. Everybody buys content from The Canadian Press, for news, sports, features, pictures, video. If you were to say, okay, we'll pay a portion of your dues that are owed to The Canadian Press, because typically in a situation like this people stop paying their bills.... People aren't paying rent. That's the risk for The Canadian Press. They will find that people are refusing to pay, even though they've got a contract to do so. Again, a lot of people, whether in radio, TV or newspapers, buy from The Canadian Press.

[Julie Dzerowicz, Liberal, Davenport, ON]

Sorry to cut you off, Mr. Crawley, because your ideas are important. I really do encourage you to submit them to the committee. I'd like to make sure that we are considering them.

[Phillip Crawley]

I will. Thank you.

[Julie Dzerowicz, Liberal, Davenport, ON]

My last minute and a bit is to Ms. Robson.

Ms. Robson, I follow a lot of what you write very carefully, because I'm also very interested in dealing with income inequality in our country. We're learning a lot through this pandemic. We're learning about gaps in our social welfare system, gaps in supporting Canadian workers. Our Prime Minister talks about “building back better”, and I think he wants to build back better around income inequality. What data do you think we need to be gathering now that will help us to make good public policy decisions moving forward, and to build a better system to address income inequality?

[Prof. Jennifer Robson]

I'll try to keep my response very concise.

I would say there are a couple of points on data.

Number one, it would be fantastic if we could get much better and more timely data, and disaggregated data, on how the programs that have been rolled out are working. That will allow us to actually do faster learning. There's that piece to it.

I would also say that there are two really important blind spots that we have in Canada, or at least spots that are not sufficiently covered in terms of our current data sources. One, I would say, is more frequent data on household assets and debts. I'm delighted that we now finally have a triennial survey on that, but perhaps more frequent data on that and longitudinal data, so that we can actually see how people move in and out of things like asset poverty and how debt evolves within a household over time.

The other blind spot I would say is “within year” income information. We have quite good administrative records that show us the transitions in and out of poverty and how inequality changes year over year, but I think that this crisis has told us that people's situations can change rapidly and within the year. To be able to “build back better”, I think that this really does have to mean coming to grips with the volatility that also can take place in people's incomes within the year as well.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Mr. Cumming, the final question is for you if you want it.

[James Cumming, Conservative, Edmonton Centre, AB]

Sure. I'll go to Ms. Gaffney or Ms. Stephenson from the Stratford Festival. It's a fantastic festival and great for Canada. We have events like that across the country that communities depend upon. I know that in Alberta we have many that are important, and which we often talk about.

How important do you think it is for there to be an actual program that deals with that sector—events, hospitality—a very specific program able to support those important events?

[Anita Gaffney]

Great. Thank you.

There was a $500 million fund announced last week. I think it really speaks to the value of Canadians caring for the social and economic fabric of the country. Festivals and major events—and I know that FAME presented to this committee last week or earlier this month—drive the economy across the country, from the Calgary Stampede to the Charlottetown Festival and other major festivals and events. In a place like Stratford, we operate six months of the year. We're driving tourism for six months. You have festivals that are running on weekends or for weeks at a time. They drive the tourism economy.

I think it would be a huge benefit to have a fund that specifically focuses on how those tourism events can be a part of building back the economy and drawing domestic and international visitors.

[The Chair, Liberal, Wayne Easter]

Okay. We will have to end it there. Usually we can go a little overtime, but we do have another panel with the Office of the Superintendent of Financial Institutions shortly.

On behalf of the committee, I do sincerely want to thank you all for making presentations in what, I know, is a bit of a rushed atmosphere today, with this many panellists. I do believe a lot of valuable information and points came out. Those will certainly go up the line. Hopefully, at the end of the day, we'll be out of this pandemic and all of these points will assist us in getting there.

On behalf of the committee, thank you again to all the witnesses. We will suspend for two minutes while the clerk lines up the next panel. The meeting is suspended.

[The Chair, Liberal, Wayne Easter]

I call the meeting back to order. Welcome, witnesses, to meeting number 30, panel number three today, of the House of Commons Standing Committee on Finance. As everyone knows very well by now, we're operating pursuant to the order of reference of Tuesday, March 24, and are meeting on the government's response to the COVID-19 pandemic.

We're pleased at this session today to have, from the Office of the Superintendent of Financial Institutions, Jerry Rudin, superintendent of financial institutions, and Ben Gully, assistant superintendent, regulation sector.

I'll turn the floor over to you, Mr. Rudin. Then we'll go to a round of questions.

Just as a heads-up for committee members, we'll start with Mr. Poilievre and then go to Mr. Fragiskatos, Mr. Ste-Marie, and Mr. Julian.

The floor is yours, Mr. Rudin. Welcome.

[Jeremy Rudin, Superintendent of Financial Institutions, Office of the Superintendent of Financial Institutions]

Thank you very much, and thank you for inviting me to appear today.

As you mentioned, I am joined by my colleague, Ben Gully, the assistant superintendent of the regulation sector at the Office of the Superintendent of Financial Institutions, or OSFI, as it's usually called.

OSFI is Canada's prudential regulator and supervisor. We promote financial stability by keeping a close eye on the solvency, liquidity, safety and soundness of federally regulated financial entities. Our core functions are regulation, which is setting rules and guidelines, and supervision, which is assessing adherence to these rules and making sure institutions close the gaps that we identify. We regulate and supervise about 400 financial institutions, mainly banks, insurance and trust companies, and over 1,200 private pension plans.

OSFI works closely with its federal counterparts, namely the Department of Finance, the Bank of Canada, the Canada Deposit Insurance Corporation, the Financial Consumer Agency of Canada, the Canada Mortgage and Housing Corporation, and its provincial counterparts.

It also exchanges information with the international bodies to which it belongs, such as the Financial Stability Board, the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors.

I do not need to tell you that these are extraordinary times. COVID-19 has caused many tragedies and great disruption, as well as forcing us all to change how we live and work.

In these unprecedented times, Canadians can have confidence in our financial system because it is resilient and well prepared. Our role has always been to think about how to prepare for and how to respond to severe scenarios, whether they affect a single financial institution or the entire financial system.

While much of what is happening now is clearly extraordinary, many of the challenges facing the financial system are elements that OSFI has been preparing for for some time.

In particular, OSFI strengthened its regulation and supervision of financial institutions in the decade that followed the global financial crisis, even though the Canadian financial system had performed well during that period. This included new requirements in areas such as capital adequacy, which is the capacity to absorb significant losses and continue to function; liquidity adequacy, which is the ability to make good on cash outflows as they come due even in stressful financial market conditions; and operational resilience, the ability to function even during a serious disruption.

Not only did OSFI raise minimum capital and liquidity standards, it further required banks and insurers to exceed those standards under normal conditions, thereby building robust buffers for use when necessary.

One of OSFI's most important tools in the current situation is setting capital levels. You may wish to think of capital as a form of self-insurance which provides both a buffer against unforeseen losses and an incentive to manage risk-taking. Strong capital levels allow a financial institution to operate normally even if it experiences losses.

Part of our capital regime is the domestic stability buffer, which requires Canada's biggest banks to set aside additional capital during good times and then allows them to draw it down at a time like this. This positions banks to continue to support the economy during an economic downturn even though they face the prospect of losses on some of their loans.

We reduced the domestic stability buffer by 1.25 percentage points on March 13, which increased the lending capacity of Canada's largest banks by over $300 billion. OSFI will continue to monitor the economic situation and, if conditions warrant, is prepared to release the remaining 1.0 percentage points of the buffer.

As part of that mid-March announcement, OSFI instructed banks to not undertake dividend increases and share buybacks so that the additional capital will be used as intended.

In early April, I issued a further statement on bank capital and dividends to contribute to a broader understanding of the capital regime in Canada and the resilience that is already baked into the system before further actions are required.

While the actions we take in anticipation of an economic downturn are important, we must also respond to the downturn by adapting our supervision of financial institutions and pension plans and by adjusting our guidance and regulatory requirements as circumstances warrant.

Since the start of the pandemic, OSFI has been closely monitoring the financial condition of banks and insurers, reviewing their responses and maintaining ongoing communication with them.

My colleague, Mr. Gully, will describe the regulatory measures that we have taken recently.

Just before I call on Mr. Gully, let me reiterate that Canadians can be confident that OSFI is acting to meet its mandate of protecting depositors, policyholders, creditors and pension plan beneficiaries in these extraordinary times.

I will stop here so my colleague can deliver his remarks, and then we will be pleased to respond to your questions.