Finance Committee on June 11th, 2020

[Elisha Ram, Associate Assistant Deputy Minister, Skills and Employment Branch, Department of Employment and Social Development]

Good afternoon.

I think, as we have stated before this committee in the past, the provisions of the supplemental unemployment benefit program that exist under the employment insurance system do not exist for the Canada emergency response benefit. Having said that, there is an exception for up to $1,000 that people can receive from employment or self-employment while they're receiving the CERB, and that can include payments from employers that could be related to a provision under our SUB program. I hope that's clear.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Ram.

Is somebody willing to take the question about ferries?

Go ahead, Andrew.

[Andrew Marsland, Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance]

Thank you, Mr. Chair.

I think the question relates to the definition of eligible entity. The legislation effectively excludes corporations that are wholly or substantially owned by the federal government, the provincial government or a municipality. To the extent that a ferry didn't fall into that category, it would qualify to the extent that it does; it would not under the wage subsidy legislation. That's the overall policy. I'm not sure that I understand in terms of where we are on that; that is the legislative framework as it stands.

[The Chair, Liberal, Wayne Easter]

We will have to end it there.

Your point, Peter, is that BC Ferries isn't eligible, correct? I'm not quite understanding here.

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

My point is that BC Ferries has applied to be a designated organization in the same way that we have specialized schools that were designated and are able to obtain the wage subsidy program. BC Ferries has done the same thing. Our understanding is that an application had been made to make it a designated organization, and I understand that the answer is that this has not been approved.

[The Chair, Liberal, Wayne Easter]

It's information noted, and Mr. Marsland and others can take that back.

We turn now to Mr. Cooper, who will be followed by Mr. Fragiskatos.

Michael.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you, Mr. Chair.

I want to ask a couple of questions about the LEEFF program.

First of all, the minister, in his testimony before the committee earlier today, indicated that there had been some uptick. I am curious to know what those figures look like in terms of the applications.

[Michael Carter]

I think the minister was actually referring to another program.

In terms of our program, we've been open for business for less than three weeks now. We have received a few dozen inquiries. It obviously takes time to get from an inquiry to an application to making a loan. We have not yet made any loans.

I wouldn't expect that we would make any loans for another few weeks at least because the negotiation of those kinds of loans does take some time. It requires the co-operation of other lenders because, as part of our security requirement, we want to be able to share up to 20% in the security, which will require the other lenders to agree to that, which doesn't happen overnight.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Have there been any applications?

[Michael Carter]

Yes.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Roughly how many?

[Michael Carter]

It's around 10 at this point.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

That's all.

In terms of some of the eligibility criteria, is a company required to sign onto the recommendations of the Task Force on Climate-related Financial Disclosures?

[Michael Carter]

We have requirements in the term sheets that companies file the information on what the government wants companies to do in relation to how they get to neutral carbon emissions by 2050. This is a process that securities industries and the government are trying to get all companies to do. We're making it mandatory for companies that borrow money.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

One of the concerns that I've heard about the program is the presence of a government representative on a board. Can you speak to when that observer would cease to be present? Would it be upon the repayment of a loan?

[Michael Carter]

We have a right to appoint an observer. I think in practice we would probably not appoint an observer in most cases. I think it's there as a backup in case we have some concern about the particular company.

Back in 2009-10, the American government had a program for the U.S. banks called TARP . They had the right to appoint an observer. In practice I don't know whether they ever exercised it, but if they did, they certainly didn't exercise it very often. I anticipate we will be in a similar situation.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

What would be the circumstances or parameters upon which an observer would be appointed?

[Michael Carter]

We haven't worked those out yet. Most loans would not be problematic. If there was a problematic loan, we would want to look at what was causing those problems and we might want to take some steps, such as appointing an observer.

[The Chair, Liberal, Wayne Easter]

You have one last question, Michael.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Could you provide some clarity with respect to what constitutes having significant operations in Canada for the purpose of qualifying?

[Michael Carter]

It is not something you can put an absolute hard number on. ISED is doing sector reviews as part of this process, and I suspect ISED will have things to say in that area. It's outside of our area.

[The Chair, Liberal, Wayne Easter]

With that, we'll move to Mr. Fragiskatos. We'll then have a couple of minutes each for Mr. Cumming and Mr. Fraser.

Mr. Fragiskatos.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair.

Thank you to the officials for appearing yet again today. It's very much appreciated.

My question relates to CEBA and the inability of individuals who use a personal account to access it. I'm trying to understand why that has been an issue. What is the challenge with personal accounts? Why are they seen as problematic? I'm just looking for an answer on that.

[The Chair, Liberal, Wayne Easter]

Who wants to take it?

Mr. Halverson, go ahead.

[Soren Halverson, Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

The issue with the personal account has to do with essentially what is referred to as knowing your client. When a business sets up an account as a business bank account, the financial institution they deal with will go through a vetting process. They'll be looking at various websites from an anti-fraud, anti-money laundering perspective, looking at the specific name of that business, looking at the articles of incorporation, looking at the beneficial owners and any connections that business might have to malfeasance. It is the responsibility of the financial institution to have a very good fix on what that entity is.

It also knows that whatever transactions are happening in that account are happening specifically in connection to the business activities. Again, from a money-laundering perspective, you have a clear understanding of the cash flows and the relationship they have to what are specifically business activities.

As you move to a personal account and individuals who are conducting business from a personal account, a couple of things happen. One is you simply do not have the same association with the business name as does the financial institution that has gone through the vetting process. The process they go through in order to get themselves comfortable with an individual involves a considerably more limited degree of scrutiny.

The other thing is that if you're looking at the account from a transactions perspective, what you're likely to find is that there are commingled transactions, where somebody may have been paying for a family dinner and then perhaps on other occasions they're using the account for activities that are very focused on their business purposes. It becomes, for practical purposes, impossible to disentangle those, which just goes to not understanding that entity quite as well.

When it comes to the Canada emergency business account program, because the program was designed to move very, very quickly to make funding available to its recipients, it had to rely on certain points that were very, very easy to validate. That was one of the critical elements of its success in moving as quickly as it did. It was really for that reason that, among other things, it needed to rely on the fact of that existing business banking account.