Public Accounts Committee on May 7th, 2024

[The Chair, Conservative, John Williamson]

Good afternoon.

I call the meeting to order.

Welcome to meeting number 119 of the House of Commons Standing Committee on Public Accounts.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Members are attending in person in the room and remotely by using the Zoom application.

Before we get started, I'd like to go over a few important safety measures for all the members and meeting participants in the room.

To prevent disruptive and potentially harmful audio feedback incidents that can cause injuries, all in-person participants are reminded to keep their earpieces away from all microphones at all times.

The following measures have been taken to help prevent audio feedback incidents.

By default, all unused earpieces will be unplugged at the start of the meeting. If you do plug your earpiece in and then you are not using it, please place it face down on the middle of the sticker that you will find on the table for this purpose, as indicated. It's generally on your right.

If you have any other concerns or questions, please consult the cards on the table for guidelines to prevent audio feedback.

These measures, I will remind you, are in place so that we can conduct our business without interruption and protect the health and safety of all participants, including and especially the interpreters.

Thank you for your co-operation.

This is a reminder that all comments today should be addressed through the chair.

Pursuant to Standing Order 108(3)(g), the committee is meeting to study the Public Accounts of Canada 2023, which were referred to the committee on Tuesday, October 24, 2023.

I would like to welcome our witnesses.

First, I apologize for starting a little late today. We had some votes over in the House of Commons, which I in particular am not able to control, as I'm sure you'll understand. These are decisions that are made by the House, and we, as members, are subject to them.

I'll proceed without further ado.

From the Bank of Canada, we have Carolyn Rogers, senior deputy governor. Thank you for coming in today.

Coralia Bulhoes is the managing director and chief financial officer. It's nice to see you as well.

From the Department of Finance, we have Evelyn Dancey, assistant deputy minister, fiscal policy branch.

Good day. It's nice to see you again.

As well, we have Nicolas Moreau, associate assistant deputy minister, financial sector policy branch.

To all the members, both the Bank of Canada and the finance department have indicated they do not have opening remarks, so I am going to turn it right over to our first round.

Mr. Chambers, you have the floor for up to six minutes, please.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Welcome to the committee. It's one of my first times at the public accounts committee in a while. It's nice to see you again.

I want to stay on the bank losses for a moment. In 2022-23, the loss was $3.1 billion. Is that correct?

[Carolyn Rogers, Senior Deputy Governor, Bank of Canada]

There's a little bit of a transposition. Our year-end figure and the Department of Finance's year-end figure don't match up. If you're looking at the public accounts number, that's the correct number.

[Adam Chambers, Conservative, Simcoe North, ON]

I don't have the number in front of me. Was there a loss recorded in the year prior?

[Carolyn Rogers]

On accounts, I'll turn to my colleagues.

[Adam Chambers, Conservative, Simcoe North, ON]

It's for 2021-22.

[Carolyn Rogers]

I have 2022-23 numbers with me.

[Adam Chambers, Conservative, Simcoe North, ON]

You don't have them. That's okay—

[Coralia Bulhoes, Managing Director and Chief Financial Officer, Bank of Canada]

It's a surplus. We had a surplus in the public accounts of $2.3 billion.

[Adam Chambers, Conservative, Simcoe North, ON]

We went from a surplus in 2021-22 to a loss in 2022-23, and the expectation is for a loss again in this next year. Is that correct?

[Coralia Bulhoes]

That's correct.

[Adam Chambers, Conservative, Simcoe North, ON]

My understanding is that the loss is actually very sensitive to the prevailing interest rates. That is, if the interest rate goes down, the losses will shrink. Is that correct?

[Carolyn Rogers]

That is correct.

[Adam Chambers, Conservative, Simcoe North, ON]

If the interest rate stays where it is or goes up, the losses will grow. Is that correct?

[Carolyn Rogers]

That is correct. As you said, it's sensitive to interest rates.

[Adam Chambers, Conservative, Simcoe North, ON]

The government's projections are that interest rates will actually go down. The government is projecting for its fiscal track or its fiscal health that interest rates will actually fall.

If interest rates just stay the same, that means the loss will actually be bigger than what the government projects. Is that correct?

[Carolyn Rogers]

I'm not able to speak for the government's projection. I'll maybe ask my colleagues to do that.

[Evelyn Dancey, Assistant Deputy Minister, Fiscal Policy Branch, Department of Finance]

We have a limited ability to forecast Crown corporation income into the future, but what you've described as the general relationship between interest rates holds.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay, but the Department of Finance does have a projection for losses of the bank going forward, does it not?

[Evelyn Dancey]

We do.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. That projection was not shared in the budget. I'll note that the Bank of Canada losses were consolidated with the government's Canada mortgage bonds program.

I'll ask the bank. Am I correct that it wasn't the bank's choice to consolidate that line item in the budget? You weren't consulted on that.

[Carolyn Rogers]

We weren't, not that we're aware of.

[Adam Chambers, Conservative, Simcoe North, ON]

This is for the finance department.

Negative $3 billion is a relatively material number. It would be very helpful for committee members and Parliament if we knew what the government projects these bank losses to be in the future. Is that something you could provide to the committee?

[Evelyn Dancey]

It is. For the presentational purposes in the budget, as you say, we aggregate with other Crown corporations, but we're able to follow up in writing.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much. That would be very helpful.

Part of the other reasons that there are losses is that the bank purchased government bonds. Am I correct that these losses are a direct result of the quantitative easing activities that the bank undertook during COVID?