Evidence of meeting #35 for Finance in the 43rd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was companies.
A recording is available from Parliament.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
When the bank makes a decision to defer a loan.... You mentioned that there were deferrals earlier, and I assume that they were EDC-guaranteed loans, but on those ones, does the bank need your permission to do that, or can it just do it on its own?
President and Chief Executive Officer, Export Development Canada
No, it would need to come to us for some type of waiver on one that is with respect to any of our guaranteed products.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Again, with regard to the issue of deferrals, if a loan were to default, would you be in a position then, if the loan remained in default, to ultimately end up executing on the security and requiring the borrower to pay?
President and Chief Executive Officer, Export Development Canada
I know that you will not like the answer of “it depends”, but it does depend on the capital structure of the companies themselves. Often we understand where different loan arrangements themselves fit in the waterfall. The loans that are under COVID-19 are usually additional loans for loans that already exist, so it then relates to the actual ranking of the loans in the capital structure.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Yes. I'm really simply asking if there can be a situation in which a loan that you guaranteed goes into default. In most cases, a guarantor, if they had to step in and provide their guarantee, would then take over the security and execute on it. Is that a possibility under any of the BCAP loans?
President and Chief Executive Officer, Export Development Canada
Yes, it is a possibility.
Conservative
Liberal
The Chair Liberal Wayne Easter
Thank you.
We'll turn to Ms. Dzerowicz, followed by either Mr. Ste-Marie or Mr. Brunelle-Duceppe. It's whoever wants to go on the Bloc side.
Go ahead, Ms. Dzerowicz.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you so much.
I want to thank all of our panellists today. Thanks for the important role that you are providing to Canadian businesses during this time. I know that you've had to step outside of your main mandate, so I very much appreciate all of your efforts.
I am curious. You mentioned that there have been 400 loans approved. Do you keep a tally on how many loans have not been approved?
President and Chief Executive Officer, Export Development Canada
Perhaps I can take that one quickly.
These are the loans that the banks have advised us that they have currently in the works. We've also asked them to provide us with some details of loans that they have declined. That's the data that we are collecting and that we would hope to then share with the committee by the end of the week when we have that data.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Okay. That would be helpful, just because it would be nice to know who is asking for help that for some reason we're not able to provide.
Then it gets into a little bit of the transparency of just who is receiving the loans. Do we have a clear list of who the loans are going to and how much money is actually being allocated for the different loans?
President and Chief Executive Officer, Export Development Canada
We will have details of who is in receipt of the loans. They are formal arrangements between the bank and the customer, so we will have that.
As we built the program, one of the things that we put in place was a reporting requirement 45 days after loans are assigned and agreed to with the customer. Part of our challenge in reporting data is that there is quite a lag time in getting the data. We have subsequently asked that we have the ability to reach out to the companies and understand a bit more about the data behind the company itself, not just the name but what sector it is in, what geographical area it is in and perhaps some other information about the companies receiving the loans.
With respect to the CEBA program, that information is all available today.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Just so I'm clear, are you asking the banks for that information, and then you are just waiting for a reply? I think that's important information. Ideally it would be more timely than 45 days.
President and Chief Executive Officer, Export Development Canada
Yes, we understand. Perhaps we should have reflected at the start, when we set the criteria with the banks, that they should be collecting all of the information. One of our parameters was to try to ensure that it was faster, so we didn't ask for a lot of upfront data on the companies. We will have to collect it afterwards, and we are seized with getting that done.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you.
As you know, we're starting to reopen the economy. We're starting to try to look into the future. Our Prime Minister has often talked about how we're going to be moving forward to build back better. I think everybody knows that we have a number of commitments around a net-zero economy and achieving our Paris accord targets.
If you look at the loans and the loan programs that the federal government has introduced for large employers as supports, you see that a number of criteria have been applied. One of those criteria is around climate-related disclosure and how their future operations will support environmental sustainability and national climate goals. If we were to apply that criterion to our medium-sized companies, do you think it would have an impact in terms of companies applying for these loans in the BCAP program?
President and Chief Executive Officer, Export Development Canada
There are two BCAP guarantee programs, one for the small companies and one for the medium-sized companies.
What I can share with you is that with respect to our support in the oil and gas sector, we have attached the requirement for climate-related disclosures in line with the task force for climate-related financial disclosures. We have done that very specifically with respect to our carbon-enhanced industry. That is part of the criteria for our support with respect to the RBL guarantee.
With respect to the guarantee, it's difficult for me to say whether companies would decide that this was something they would take on or not. We certainly are advocates. In fact, EDC itself signed on to the TCFD in 2018. These are discussions we have often with our large customers in understanding their own approach to climate and where they're going.
As for the companies themselves, we have not had any feedback to EDC specifically with respect to either accepting or declining loans on the basis of climate-related disclosures.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Are you already asking, right now, for companies that are applying for BCAP to disclose the risks posed by climate change to their business before they can apply for a loan?
President and Chief Executive Officer, Export Development Canada
We are asking that specifically in our support for the oil and gas sector.
Liberal
The Chair Liberal Wayne Easter
Thank you.
Before I turn to Mr. Ste-Marie, I have a question myself. With the new measures that have been put in by the COVID-19 pandemic, how far has that taken EDC from its original mandate, or is it any distance at all, for that matter?
I know EDC through the potato industry and the aerospace industry. In fact, in the potato industry, the various exporters wouldn't be in their markets if it weren't for EDC. You get very high marks in my province for the efforts you make in guaranteeing loans with other countries.
Where do these new programs put you in terms of your original mandate in the export business? We are an exporting nation, so I don't see it being another bank. That's the bank's job.
Can you answer that?
President and Chief Executive Officer, Export Development Canada
Yes, I can, Mr. Easter. Thank you for that question.
You're quite right that there are some sectors where EDC is extremely well known. Another one would be seafood. We've done a lot of support in those specific sectors. I would say that those customers are very familiar with EDC. During the crisis, we've seen a lot of outreach from those very traditional exporting sectors that do understand EDC.
I would say that where we have seen it the most is in our credit insurance program, because that's truly where we are counter-cyclical. Often in these times of crisis, the coverage in insurance programs can be pulled back from the market because the risk has increased, so that's really where EDC needs to step in with a product for people who are interested in insuring their receivables. We now get a lot more queries from domestic companies that are interested in understanding credit insurance and how EDC supports credit insurance.
Our basic principles are ensuring that we are complementary to the market, so when you ask if we've moved away from our traditional mandate, the answer is yes, in areas where we have had to move away to try to help companies. Can we move back from that? Absolutely. We did it in 2009 and we can do it again, but the primary place would be in our credit insurance product.
Liberal
The Chair Liberal Wayne Easter
Okay. Thank you very much.
We'll go to rounds of two and a half minutes for the next two questions.
First is Mr. Ste-Marie, and then it's Mr. Julian.