Evidence of meeting #43 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was payments.
A video is available from Parliament.
11:45 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
They exist in most other jurisdictions, notably the G7. In fact, Canada is notable in terms of having an absence of a regulatory framework in this area.
11:45 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
The framework would provide us with flexibility to address cryptocurrencies that are used for retail payments. At the moment, however, there aren't a lot of cryptocurrencies that are used for retail payments. For instance, people aren't using Bitcoin to buy their coffee at Starbucks. Should they be used in a retail context, this legislation would give us authority.
11:45 a.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
It would appear, then, that you're trying to regulate things that people actually have confidence in already. I know with PayPal and things like that, Google Pay and so forth, I haven't heard of anybody being concerned that they were going to lose money on that.
11:45 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
This should provide greater assurance that when a Canadian is using these services for daily purposes, their funds will safely leave their account and make it into the account of the merchant using it. It will provide greater assurance—
11:45 a.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Will it also provide higher costs, then, for Canadians who have been using what has worked very well?
11:45 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
Will it provide higher costs? There will be a cost to implement the framework, and then I would assume that payment service providers would in some way pass that on to clients using their services.
11:45 a.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Okay. It's just shocking to me, because I think in general most Canadians have been very satisfied with things like PayPal, Google Pay, Apple Pay and so forth.
11:45 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
I think that's fair, but to date, nothing has gone wrong. In the instance that unfortunately something were to go wrong, there would be no protections in place.
This framework would ensure, for instance, that you would have access to the funds you have on account at PayPal or at another firm. I don't want to pick on a particular payment service provider, but—
11:45 a.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Sorry. I'll ask one more time. You're saying clients would have access, even though it's not insured, because you're going to make PayPal organize a Canadian bank account that holds in trust the funds that Canadians are using on PayPal.
11:50 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
That's right. The payment service provider would have to hold the funds in trust or arrange an insurance product on the account or a guarantee.
In addition, it would prohibit payment service providers from commingling their corporate funds, their operating funds, with the funds of their clients. They have to be held separately.
11:50 a.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
In regard to this trust that you're asking them, Google Pay and Apple Pay, to create here in Canada, is there any other country that's asking that of them in the G7?
11:50 a.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
I believe we're being consistent with approaches taken in other jurisdictions.
11:50 a.m.
Liberal
The Chair Liberal Wayne Easter
Okay, there's never a problem until there's a problem, and then it's the government's fault. In any event, we require lawyers to hold trust accounts, too.
We'll turn, then, to division 5, which was missing from the agenda. I understand this group is willing to deal with division 5, and then we'll come back to division 1.
I believe Mr. Girard is on the line, not on video. He doesn't have to be on video. We'll let him go ahead with voice.
Who's on division 5?
11:50 a.m.
Jean-François Girard Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
It's Jean-François Girard here. I'm glad to see you. Hopefully you can see me. I see myself now on the screen, which is the result of a tremendous effort by the support staff. Congratulations on having high-quality support.
Division 5 is very simple. It sets $119.5 million as the appropriation set out in the Canadian Securities Regulation Regime Transition Office Act, which represents an increase of $12 million. These payments can be made to the Canadian Securities Transition Office. That's division 5.
11:50 a.m.
Liberal
The Chair Liberal Wayne Easter
Are there any questions on division 5, which relates to the Canadian Securities Regulation Regime Transition Office Act?
There are no questions on that; it's straightforward.
We'll come back to division 1.
Mr. Girard, I believe you are addressing that as well. It's about changes to the Canada Deposit Insurance Corporation Act.
11:50 a.m.
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Yes. I will cover, in division 1, clauses 126 to 139. [Technical difficulty—Editor] for the stability of Canada's financial system by improving the legislative framework that applies to a federally regulated deposit-taking institution or financial market infrastructure in the unlikely event that they were to fail. We also have other amendments that relate to the supervision of payment systems. These amendments are fairly technical and represent a continuation and improvement of the existing framework, rather than new policy.
I'll start with clause 126. The resolution provisions of the Canada Deposit Insurance Corporation Act, or the CDIC Act, provide the power to impose a stay, also known as a suspension of proceedings, to suspend the rights of certain creditors and other counterparties in order to facilitate the resolution of the institution and preserve value. We have amendments that would modify the scope of these stay provisions in certain circumstances. In particular, they support the application of stays and bail-in debt once a resolution has been initiated, exclude sovereign entities and central banks from the state provisions of the act, and provide that CDIC member institutions must include a confirmation of the application of stay provisions in the act in prescribed eligible financial contracts, which are a class of contracts that includes derivatives.
The next clause would modify the provision that authorizes CDIC to take control of a failed member institution. Clause 127 would facilitate the sale by extending the time limit to complete a sale to 12 months from the current limit of 60 days.
Clauses 128 to 132, 134 and 135 would amend the Canada Deposit Insurance Corporation Act and the Payment Clearing and Settlement Act to modify the compensation provisions of these acts, which provide that creditors would not be in a worse-off position by the actions of a resolution authority than under liquidation. More specifically, it clarifies the appeals mechanism available to creditors when a failure has occurred and they request a review of a decision made by CDIC or the Bank of Canada on the compensation to which they are entitled in resolution.
Clauses 133, 136 and 137 would amend the Payment Clearing and Settlement Act to clarify the Bank of Canada's authority to oversee payment exchanges as clearing and settlement systems.
Finally, clauses 138 and 139 would amend the provisions of the CDIC Act that are not yet in force to provide CDIC with a targeted expansion of its authorities to make certain payments of insured trust deposits when there are errors or omissions on the record of the failed member institution.
This concludes my remarks on division 1.
11:55 a.m.
Conservative
Ted Falk Conservative Provencher, MB
Earlier, in our previous discussion, Mr. Fast asked a question about whether the government would be assuming liability for payment services. You're making changes here under the Canada Deposit Insurance Corporation, specifically towards the Payment Clearing and Settlement Act. Are you going to be insuring these payment services through the Canada Deposit Insurance Corporation?
11:55 a.m.
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
No, that is not part of these amendments.
We have a number of amendments. One is on the compensation provision. This really deals with failure of the financial market infrastructure. There are certain powers for the Bank of Canada to take action in such cases. There's a compensation regime that exists now, and we're clarifying the appeals mechanism for it.
The other one relates to the supervision of payment systems. Ms. O'Brien or Julie Trepanier might be in a better position to explain to you exactly what the scope of these provisions is.
May 17th, 2021 / 11:55 a.m.
Director, Payments Policy, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Thank you, Chair.
Under the Payment Clearing and Settlement Act, the Bank of Canada has responsibility for overseeing clearing and settlement systems. These are the core payment infrastructure that banks, for example, use to settle payments among themselves. Under the act, the Governor of the Bank of Canada can designate a payment system if it poses a systemic risk or a risk to Canadian payment systems.
As these systems evolve, the various functions of exchange, clearing and settlement are becoming different functions. These amendments to the Payment Clearing and Settlement Act will clarify the Bank of Canada's authority to designate payment exchanges in order to oversee the risks. There are, however, no additional exceptions in terms of compensation as part of these amendments.
11:55 a.m.
Conservative
Ted Falk Conservative Provencher, MB
None of these amendments is expanding the coverage of insurance towards the payment service industry; is that so?
11:55 a.m.
Director, Payments Policy, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
That's right.