Evidence of meeting #52 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was clauses.
A video is available from Parliament.
4:50 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
Yes, there are exceptions for loyalty points and mall cards.... Exactly.
4:50 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
They are not currently overseen by a financial sector regulator. We have determined that the risks associated with those products are quite minimal.
4:50 p.m.
Conservative
Ted Falk Conservative Provencher, MB
Very good.
You don't see, then, any conflict, in the legislation being presented here now, with the current Payment Clearing and Settlement Act?
4:50 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
No. In fact, they're very complementary.
Our perspective is that it's a spectrum of oversight. As I mentioned previously, we have a very rigorous regulatory system with respect to systemically important systems and prominent systems, as outlined in the PCSA. The retail payments oversight framework basically enhances or rounds out our oversight of payment systems. At the heart of the approach is to bear in mind the risks that these systems present and to develop an oversight framework that's appropriate.
It's a continuum and a case of managing the risks that present along that continuum.
4:50 p.m.
Conservative
Ted Falk Conservative Provencher, MB
Have you done a cost analysis at all for the Bank of Canada, of what it's going to take to ramp up to fulfill the additional duties that are going to be given to it once this budget implementation act has been passed? How much of a staffing increase and how much of a budget increase will the bank require?
4:50 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
As I mentioned, what we estimated and presented in budget 2021 was that the overall cost of the framework is about $160 million, of which $130 million is apportioned to the Bank of Canada to cover its costs.
Of that $130 million, the bank plans to recover costs from payment service providers, but then would contribute the remainder from revenues that it generates through seigniorage. It is, then, approximately $130 million over six years.
4:50 p.m.
Conservative
Ted Falk Conservative Provencher, MB
Are you saying that the Bank of Canada would contribute this to the Government of Canada? If we're giving it $130 million to ramp up to accommodate these responsibilities and to regulate the industry, but it's going to do it on a cost-recovery basis and recover that $130 million—it's going to take it into income—is it actually receiving a loan from the Government of Canada, in essence, that will be repayable at some time?
4:55 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
As I mentioned, part of the $130 million would be recovered: $71 million is anticipated to be recovered through fees and assessments on the industry. The remainder, though, would be covered by seigniorage revenue. In essence, those are revenues that the Bank of Canada generates as a result of its responsibilities for currency. It will be paying for the costs from those revenues.
In essence, then, the Canadian government is foregoing those seigniorage revenues that normally would have been contributed to the consolidated revenue fund.
4:55 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
Yes, it's for six years. Then we will have experience and will determine the ongoing funding profile.
4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Yes.
I believe Ms. Dzerowicz was trying to get on the record the fact that this legislation is being put in place because of the use of cryptocurrency in retail. I also understand from Ms. O'Brien, however, that cryptocurrency is not being used in retail at this point in time.
I'm a bit confused. I don't know whether I heard it wrong.
4:55 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
The legislation gives us the authority to cover cryptocurrencies that are used for retail payments services. At the moment, they're not readily available in the retail space, but I agree with comments made by a member of the committee earlier that we're anticipating development in the space. It has been quite rapid. The act will give us the authority to outline regulations and assume more specific oversight of cryptocurrencies.
4:55 p.m.
Liberal
The Chair Liberal Wayne Easter
I see no further questions.
(Clause 178 agreed to on division)
Ed was muted. I hate it when he's muted and is saying, “Carry that.”
4:55 p.m.
Voices
Oh, oh!
4:55 p.m.
Liberal
The Chair Liberal Wayne Easter
Before I go to clause 179, just so that people know—because the agenda may be unclear on this—we will have to suspend from 6:00 till 6:30 to give the translation folks a break. This section of the meeting will go from 4:00 to 6:00, Ottawa time. We'll suspend for a half hour and will come back from 6:30 to 8:30. I know people were wondering about that.
We're on clause 179. Go ahead, Erin or whoever.
(On clauses 179 to 188)
4:55 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
Sure, I'm happy to.
I think we've done a lot of heavy lifting in clause 178. Clauses 179 to 188 are related consequential amendments such that we can bring the retail payment activities act into force. All of the next six clauses include amendments to acts that will allow information sharing among the Bank of Canada and other respective financial sector regulators, including CDIC and the Proceeds of Crime (Money Laundering) acts.
That's a general introduction. I can go through each one individually, if that's the desire.
4:55 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay. I'll go to Mr. Fast on this question. Should we do them all in general, as they're consequential, or one by one?
4:55 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
I don't see any reason to do them individually, because they're all related to clause 178 and implementing the framework itself.
My question is simply this: Ms. O'Brien, how long is it going to take for this payments framework to be in force and in effect? There's legislation and there are regulations that have to be put in place, and probably some additional policy work around that. How long is it going to take before all of this is in place and effective?
5 p.m.
Director General, Financial Services Division, Financial Sector Policy Branch, Department of Finance
Thanks for the question. In my opinion, it can't come soon enough. We're really committed to moving forward and standing up the legislation at the earliest possible opportunity. I mentioned the need for the act. That said, I recognize that there is a lot of work involved, particularly in terms of there being a significant regulatory package and guidance that will be required before we can give life to the legislation. We think that work will likely take a minimum of two years.