Fisheries Committee on June 11th, 2009

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

So this decision really hasn't changed your policy at all.

[Peter Conrod]

Well, it's provided some clarity to the situation, which had largely been untested up until then.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

But in regard to flexibility now?

[Peter Conrod]

The other piece that came out of it, which has been helpful, is that the Department of Fisheries and Oceans has agreed to take note of when there has been a loan granted against a licence and to record that in their records, so that at least for the benefit of any subsequent transfers of licence, they are aware that there is a registered charge.

[Craig Thompson]

If I might respond to that as well, part of the difficulty in extending a longer amortization is trying to get comfortable with the value of the licence or the quota. We've had meetings with DFO just as recently as a month ago where we said to them that the banks would be quite happy to lend more, but what we need DFO to help us with is to find the mechanism to value those licences. It can vary from zone to zone, species to species, year to year. So what we're looking for is some assistance in helping us establish what the value is for a licence in some of those zones for the species. If we can get comfortable with that and there's a mechanism in place to allow for that, then we know the banks, I'm sure, will be happy to look at longer amortization.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

What has the response been from DFO?

[Craig Thompson]

The response from DFO was that they were looking at gathering some information and hopefully would get back to the banks with some idea as to what the viability is long term, because they have all kinds of data, so they might be able to help us use that to determine what the value for a licence in a particular zone is.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Do you expect that soon?

[Craig Thompson]

It's with DFO right now.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you for that.

Can I get a comment from BMO?

[Paul Seipp, Commercial Banking Area Manager, Nova Scotia, BMO Bank of Montreal]

I'll take an opportunity, Scott, to respond to that.

With respect to BMO's perspective on the financing of the licensing, one of the other areas that we've paid some attention to is the wide range of values of the licensing over a number of years. Using LFA 34 as an example in the Yarmouth-Digby area, over the last three to five years we've seen values anywhere from $300,000 or $400,000 through to $750,000 in terms of the market value. In financing, as Peter mentioned earlier, an intangible asset, we're trying to determine a reasonable period based on cashflow for repayment of the licence loan, recognizing that in this period of time there can be wide fluctuations in the price of licences.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

So it's not a hard and fast rule for you?

[Paul Seipp]

No. It's certainly based on the individual nature of the borrower, the balance sheet that the borrower brings to the bank, and of course the zone or lending area or LFA area that we'd be dealing with.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Does anyone else wish to comment on that?

This is something I look at a lot. There's some shipbuilding that takes place in my riding and, of course, financing for the processors and the like. We received a bit of a jolt, we'll say, when the Icelandic banks collapsed, or almost disappeared. Why were they turning to financing of these Icelandic banks and not to you?

[Marion Wrobel]

I think the entry of the Icelandic banks into the Canadian market is a reflection of the changes in the Bank Act that occurred in the last round, where the federal government made it easier for foreign institutions, foreign banks, to set up shop in Canada. Previously, they could only set up shop by establishing a separate commercial entity, a subsidiary. Now they are allowed to enter simply as being branches of the bank back in Iceland. So a number of new banks came into Canada. They found it easier, cheaper—

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Sure, but what made them more attractive?

[Marion Wrobel]

It enhanced competition in the marketplace, and as they came in they saw opportunities. They wanted to get some market share, and they did what they had to do to get market share.

I think we think it's a good thing that the government opened up the doors to easier entry by foreign institutions to serve the marketplace.

[The Chair, Conservative, Rodney Weston]

Thank you.

Monsieur Blais.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Thank you very much, Mr. Chairman.

Good morning, gentlemen. I want to thank you for being here. I know it was not easy to get you here today. I will not attempt to explain what happened. We have wanted to speak to you for some time.

I represent the Gaspé and the Magdalen Islands, in Quebec. My questions will therefore be almost exclusively for the representative of the Royal Bank, as the Bank of Montreal has no branches in our maritime communities and the Bank of Nova Scotia has been replaced by the Laurentian Bank. The Caisses populaires Desjardins are much more present in our communities. However, the Royal Bank is present and, in fact, I am a customer. One might say I almost have a conflict of interest.

Mr. Conrod, I would like to better understand the value of the licences and of the quotas. You said that you had a meeting with the Department of Fisheries and Oceans quite recently. Was it at your request or at the request of the department?

[Peter Conrod]

I was not in attendance at the meeting, but there were representatives from the Royal Bank. I know Craig and Paul were there, so if you're comfortable, perhaps they could address that.

[Craig Thompson]

The minister was not in attendance at the meeting, and the meeting was held at the request of DFO.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Was it the first time you were attending this type of meeting?

[Craig Thompson]

No, actually, there had been a meeting prior to that in December 2008 also, with representatives of both the federal and provincial governments, specifically to discuss the financial health of the lobster industry in Atlantic Canada.

[Paul Seipp]

Similarly, at BMO we've met twice this calendar year with representatives of both the federal and provincial departments.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Were there any meetings of this kind before December?