Finance Committee on May 27th, 2021

[Phil King]

Perhaps I have it now.

[The Clerk]

Yes, you do.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Phil King]

I wish I could give you a very firm answer and that we had very well-specified and good models for predicting and relating quit rates to the prices. It's not always possible, because the past isn't necessarily a good indicator of the future in this case.

For example, far fewer people are smoking now in Canada, and the nature of those smokers is a bit different. You're down to the hardcore smokers now, in contrast with many years ago, when people were recreational smokers, if you could call them that. You have as well very different options, such as vaping. We didn't have vaping options years ago either.

It's difficult to draw a fine line and be very specific when it comes to this sort of question about translating the dollar increase into the quit rates. All I might do is reiterate my initial remarks: Tobacco taxes have gone up over the years and quit rates have also been maintained. The smoking rate has dropped from about 25% to about 15% since 1999 or so.

[The Chair, Liberal, Wayne Easter]

Thank you.

Shall clause 125 carry on division?

(Clause 125 agreed to on division)

[The Chair, Liberal, Wayne Easter]

I'm not sure who's in the waiting room for part 4 and the various divisions, but we'll start with division 1, “Stability and Efficiency of the Financial Sector”.

There are no amendments put forward on clauses 126 to 139. Do we have unanimous consent to see them as one?

[Ed Fast, Conservative, Abbotsford, BC]

No.

[The Chair, Liberal, Wayne Easter]

No? All right.

(On clause 126)

Going to clause 126, do we have anybody in the room...? I see Ms. O'Brien. Are you on that one?

[Erin O'Brien, Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance]

I'm actually going to hand it off to a colleague of mine if we're required to go through it clause by clause. We have both Jean-François Girard and Julie Trepanier in the waiting room. They can provide overviews of clauses 126 through to 139.

[The Chair, Liberal, Wayne Easter]

Okay, then, can we bring them in, Mr. Clerk? He's nodding his head. We'll get them in, Erin.

[Erin O'Brien]

Terrific. Thank you.

[The Chair, Liberal, Wayne Easter]

Jean-François Girard, I see him, and Julie Trepanier.

Who wants to take on clause 126 and give us as concise an explanation as you can?

[Jean-François Girard, Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance]

Thank you, Mr. Chair.

Clause 126 would amend the Canada Deposit Insurance Corporation Act, in particular the stay of proceedings provisions of the act. These stays can be imposed when an institution has failed and is under the resolution provisions of the act.

The clause has a couple of components. One of them deals with stays that would apply to certain shares and liabilities that can be converted into equity on the resolution. Another element would apply to certain eligible financial contracts. These are typically known as “derivatives”. The amendment would exclude the application of the stay provisions of the act to eligible financial contracts—EFCs—entered into between the member institution and sovereign entities and central banks.

As well, there's a provision in there that would enable the CDIC to make bylaws to require that certain clauses be included in the eligible financial contracts of its member institutions. That's clause 126.

[The Chair, Liberal, Wayne Easter]

Thank you.

We have a question from Mr. Falk.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

Yes, I'm just a little curious about the impetus for these changes to the CDIC. Is the intent just to purify the types of deposits that are insured, or is there a different motivation? Are you just looking at deposit accounts, or was there an actual situation in which some of these derivatives were in play or there were rollovers into equities?

[Jean-François Girard]

These provisions do not affect the deposit insurance framework itself. They deal with situations that arise when the institution has failed.

There are some provisions that deal with these EFCs that are part of the management of the bank's books. Normally these EFC clauses have termination rights. However, when the institution is in resolution, the CDIC will generally attempt to sell the institution to a buyer. The value can be preserved if the books are kept whole so that these EFCs are not terminated. There are some stay provisions in the act that apply in these circumstances, but this has really nothing to do with deposit accounts and the payment of insured deposits.

[The Chair, Liberal, Wayne Easter]

I see no further questions. Shall clause 126 carry?

(Clause 126 agreed to on division)

(On clause 127)

[Jean-François Girard]

Clause 127 also deals with resolutions. Currently the CDIC can take control of a member institution. It has to resell it within 60 days. An extension can be granted by the Governor in Council. The amendment would extend the period under which the sale would take place by up to 12 months. The Governor in Council could extend the period by up to 18 months.

That's it. That's clause 127.

[The Chair, Liberal, Wayne Easter]

Shall clause 127 carry?

(Clause 127 agreed to on division)

(On clause 128)

[Jean-François Girard]

Clause 128 deals with the compensation provisions of that act. Again, it doesn't really have anything to do with the insured deposits. It applies to other creditors that may be in a position....

Sorry; let me take a step back.

The compensation provisions of the act provide a framework whereby creditors are made no worse off under the actions of the CDIC than under a liquidation. Clause 128 really clarifies that in the application of these compensation provisions, the person who is entitled to compensation will be determined as a result of the application of the regulation. It's just clearing up an ambiguity in the drafting.

[The Chair, Liberal, Wayne Easter]

Shall clause 128 carry?

(Clause 128 agreed to on division)

(On clause 129)

[Jean-François Girard]

Clause 129 is also a fairly technical amendment. It adds the term “determination” to the drafting of the act, which was an ambiguity in the English version only. It uses “decision” and “determination” in certain areas, so it clarifies that it's either a determination or a decision.

[The Chair, Liberal, Wayne Easter]

Shall clause 129 carry?

(Clause 129 agreed to on division)

(On clause 130)

[Jean-François Girard]

Clause 130 also deals with the compensation provisions of the act.

Essentially, when a determination of a compensation has been made by the CDIC, there's an appeals mechanism if the creditor feels that the compensation was erroneous. The provisions proposed here clarify the standard to be met to use the appeals mechanism, and essentially it's that the corporation would have made a determination based on an erroneous finding of fact that was made in a perverse or capricious manner, without regard to the material before it, or in an unreasonable estimate. That's the test that's being clarified for the appeals mechanism.

[The Chair, Liberal, Wayne Easter]

Shall clause 130 carry?

(Clause 130 agreed to on division)

(On clause 131)