Evidence of meeting #51 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was agreed.
A video is available from Parliament.
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Clause 131 is really an enabling provision to clarify that certain bylaws can be made by the corporation.
Liberal
The Chair Liberal Wayne Easter
I see no questions.
(Clause 131 agreed to on division)
(On clause 132)
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Clause 132 essentially repeals a transitional provision that will be introduced in clause 138. I can deal with it at that time or I can explain what clause 138 does.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
If you could explain it at the same time, that would be helpful. Thank you.
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Okay.
Essentially, clause 138 clarifies certain powers for the CDIC to pay out certain insured deposits, trust deposits that are made through a broker.
Certain deposit brokers can place deposits on behalf of their customers, and these deposits are held in trust. The clause deals with a new regime that is planned to come into force next April and clarifies the information requirements that must be kept on the records of the financial institution for these trust deposits to ensure a precise and fast payment in the event that the institution fails and insured deposits need to be paid out.
Clause 138 has two elements to it. One is that it deals with situations in which there might be an error or an omission in the records of the financial institution. It essentially provides that CDIC may pay deposits that are insured in the event that there is an error made by the trustee, or an omission, but only under certain circumstances, such as having made best efforts to correct it.
The other element under clause 138 is a transitional rule. That's the one that will be in place for two years. Essentially, it provides a bit of a cure period. In the event there's an insured deposit that must be paid and there's an error or omission in the records of the institution, there's a cure period of 90 days whereby, if the information is provided to the CDIC, the payment could be made over that period. That provision would only exist for two years, reflecting a transition period for the new regime that comes into force next April.
Liberal
The Chair Liberal Wayne Easter
Okay. We'll deal with clause 132.
Ted, are you on clause 132 or clause 138?
Conservative
Ted Falk Conservative Provencher, MB
I'm at clauses 131 and 138.
What he has described to us is very interesting, but what actually is the frequency of something like this coming into play?
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
The frequency is fairly low. The last failures in Canada occurred in the nineties. This regime that we're talking about, about trust deposits, is a new regime. These trust deposits were already insured deposits, but the information requirements have been updated through legislation adopted in 2018.
Essentially, failures have not occurred in the last 30 years, so these are, I would say, unusual events. The purpose of the act is to be ready if it were to come about.
Liberal
The Chair Liberal Wayne Easter
Thank you for that.
(Clause 132 agreed to on division)
(On clause 133)
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Clause 133 is for my colleague, Julie Trepanier.
Julie Trepanier Director, Payments Policy, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Thank you, Chair.
Clause 133 replaces the definition of “clearing and settlement system” and “clearing house” in section 2 of the Payment Clearing and Settlement Act to clarify that the act also applies to systems for the exchange of payments. This is to reflect the fact that as payment systems continue to evolve, the exchange, clearing and settlement functions are becoming independent. These amendments would essentially clarify the Bank of Canada's authority to designate payment exchanges to receive the risk management of payment systems in Canada.
Liberal
The Chair Liberal Wayne Easter
Shall clause 133 carry on division?
(Clause 133 agreed to on division)
(On clause 134)
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Clause 134 is an amendment to the Payment Clearing and Settlement Act that deals with the compensation provisions in that act in the event of a failure in financial market infrastructure. The provisions essentially mirror those that I just described for the CDIC Act, but they are in the Payment Clearing and Settlement Act.
Essentially, clause 134 sets out the standard to be met for the appeals mechanism I described a moment ago for the CDIC.
Liberal
The Chair Liberal Wayne Easter
Shall clause 134 carry on division?
(Clause 134 agreed to on division)
(On clause 135)
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Clause 135 is similar to the clause I described a moment ago, which clarified the English version of the Payment Clearing and Settlement Act that speaks to a determination. It has the term “determination” in that section.
Liberal
The Chair Liberal Wayne Easter
Shall clause 135 carry on division?
(Clause 135 agreed to on division)
(On clause 136)
Senior Director, Financial Stability and Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Clause 136 is for my colleague, Julie.
Director, Payments Policy, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Clause 136 replaces subsection 14(1) of the Payment Clearing and Settlement Act to ensure the information-gathering powers of the bank in respect of the clearing and settlement system also apply to payment exchange. This is in relation to the modification of the definition in clause 133.
Liberal
The Chair Liberal Wayne Easter
Shall clause 136 carry on division?
(Clause 136 agreed to on division)
(On clause 137)
Director, Payments Policy, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Clause 137 replaces subsection 18(3) of the PCSA, which is about the ability of the governor of the bank to share information on designated systems. This is to make sure that these powers also extend to payment exchanges, and again is in relation to the change in the definition.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
I'm curious. Are we making all of these changes because we are expecting a lot of institutional failures after the pandemic? If we haven't had many of them over the last 30 years, why are we making these changes?
Liberal
The Chair Liberal Wayne Easter
Did you never go to Boy Scouts, Tamara, and hear “Be Prepared”? Sorry.
Julie, could you answer that?
Conservative
Director, Payments Policy, Financial Systems Division, Financial Sector Policy Branch, Department of Finance
Actually, this is probably more a question for Michaël or Jean-François.