Evidence of meeting #31 for Public Accounts in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was losses.
A video is available from Parliament.
Liberal
Kristina Tesser Derksen Liberal Milton East—Halton Hills South, ON
Thank you.
I'll yield the rest of my time because I have more general questions, and I'm getting the sense that you're not comfortable answering.
Thanks very much.
Conservative
The Chair Conservative John Williamson
Very well.
We'll now go back to Mr. Lemire for three minutes.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Thank you, Mr. Chair.
I want to begin by saying that it would be a good idea for our committee to invite the governor, because many of our questions, including questions regarding the decisions that led to the deficit, are best put to the governor.
Nevertheless, witnesses, this session is important, and I hope that you will be able to answer my questions.
According to the Public Accounts of Canada 2025, you earned revenues of $3.5 billion, but had expenditures of $6 billion. With this $2.4 billion deficit, the Bank of Canada's deficit is now $9 billion. As such, you lost money in 2023, 2024 and 2025. The bank experienced losses year after year due to the massive bond purchases related to Canada's debt. This is therefore its third consecutive loss since its foundation in 1935.
Are you in a position to answer that question? How are you going to remedy this situation?
Managing Director and Chief Financial Officer, Bank of Canada
Yes. The bank's investments are now reaching maturity, and this is reducing our balance sheet. This is one of the things that are happening.
There is also the issue of the interest rate, which went up and created losses. It has gone down again. The revenues generated from the investments that are still in our books are higher than our interest expenses liabilities for deposits maintained at the bank by financial institutions. Our revenues are now higher than our expenditures, and we started to generate a surplus in the second quarter of this year.
We ran up losses of $9.9 billion—almost $10 billion—and we are now returning to a surplus position. The surplus will be used to offset accumulated losses.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
In 2022, there were rumours that the deficit was around $5 billion, but in the end, it was much higher, at $9 billion.
If I understand your last answer, you hit rock bottom, and you have now started to pay off the deficit. However, we are still facing economic uncertainty, as shown by rising gas prices, which could have an impact and cause inflation, or even lead to a recession.
Given fluctuating interests, are your projections for the coming years optimistic or pessimistic? Are we going to experience a similar situation over the next few years?
Managing Director and Chief Financial Officer, Bank of Canada
Our projections rely on interest rate assumptions set by the market, and not by the Bank of Canada. Furthermore, the use of market assumptions gives us an objective basis for our projections. These projections show that we will offset all losses by mid-2030.
Conservative
The Chair Conservative John Williamson
Thank you very much, Mr. Lemire.
Mr. Stevenson, you have the floor for five minutes.
Conservative
William Stevenson Conservative Yellowhead, AB
Thank you.
Thank you to the witnesses for attending today.
A couple of my questions have already been asked, but I'm going to clarify something. Ms. Tesser Derksen asked it in a slightly different way, but how can you ensure that financial losses do not influence your policies?
You talked about how the Bank of Canada's and the government's decisions on fiscal policy are independent from each other, but how can you determine your monetary policy decisions, particularly when they have direct implications on the government's revenues?
You might say you can't quite answer that because it's policy again, but I want to give you one more opportunity to say it that way.
Managing Director and Chief Financial Officer, Bank of Canada
To be consistent, I really can't answer that.
Conservative
William Stevenson Conservative Yellowhead, AB
That's fine. We'll move on. I have another question.
Recently, the Bank of Canada's governor travelled to China alongside the Minister of Finance as part of a trade mission. The bank operates independently, so such engagements have raised some questions about its broader role. My concern is the clarity of the mandate.
Can you explain what role, if any, the Bank of Canada plays in trade discussions or economic diplomacy, and how you ensure that those activities don't blur the lines?
Chief Operating Officer, Bank of Canada
Once again, we're not experts in this area. We weren't involved in any of this, so we don't have a view to offer the committee.
Conservative
William Stevenson Conservative Yellowhead, AB
I think that will go back to my colleague Mr. Lemire's suggestion that we need to get the governor in to answer some of these questions.
This is the next question I have. The Bank of Canada is a public institution owned by Canadians, yet it's now in a court challenge that would compel the bank to disclose compensation for its senior officials. In other jurisdictions, including at the Bank of England, this type of information is proactively disclosed. Even former governor Mark Carney's salaries were publicly available.
My concern is transparency and accountability to taxpayers. Why is the Bank of Canada resisting the disclosure of executive compensation? Do you believe Canadians have the right to know what senior officials at the bank are being paid?
Chief Operating Officer, Bank of Canada
I am familiar with this case.
First, I'll say the salary ranges for the governor and senior deputy governor are public. In this particular case, they were looking for specific salary details. Given the fact that these are private, we refused to submit those exact details. In the first complaint that was raised, this was supported by the Privacy Commissioner.
It was then raised again, separately, by another Canadian. In that case, we worked with the commissioner. There were certain parts of the question that we disclosed that we didn't disclose the first time. Specifically, they were questions around per diems, overtime, bilingual bonuses and vacation pay. The commissioner ultimately agreed that the remaining information constitutes personal information.
Our legal team is in the process of preparing our application, and we expect that this will go to court in the fall.
Conservative
William Stevenson Conservative Yellowhead, AB
I'll follow up on that. You said “we” a few times. Can you tell me who makes the decisions on what levels of executive compensation are being disclosed?
Chief Operating Officer, Bank of Canada
For the governor and senior deputy governor, it's our board of directors that makes the recommendation. Ultimately, it's approved by the Governor in Council.
Conservative
William Stevenson Conservative Yellowhead, AB
I think we have to go back to Mr. Lemire's suggestion. We have some other people to request for testimony.
Conservative
The Chair Conservative John Williamson
Thank you.
Mr. Osborne, you'll close us out for five minutes.
Liberal
Tom Osborne Liberal Cape Spear, NL
I'll try to get to five minutes. I'm not sure if I will.
The monetary policy you indicated is done for the good of Canadians. Monetary policy by the Bank of Canada has a direct impact on the public accounts. The investments, returns or whether you have a surplus or a deficit would have an impact on the books and the public accounts of Canada.
Who determines the monetary policy for the Bank of Canada?
Managing Director and Chief Financial Officer, Bank of Canada
That is the responsibility of the governor and the governing council at the Bank of Canada.
Liberal
Tom Osborne Liberal Cape Spear, NL
Do they solicit outside expertise as well, or is that all done in-house?
Managing Director and Chief Financial Officer, Bank of Canada
I wouldn't be able to speak to how they do it, but I can tell you they have all of the required expertise at their disposal.
Liberal
Tom Osborne Liberal Cape Spear, NL
You mentioned that you invest in bonds and that they are at fixed rates. Is the Bank of Canada confined to investment in fixed-rate bonds? Do they invest in longs or shorts, for example?
Can you provide us some details on the types of investment made by the Bank of Canada?
Managing Director and Chief Financial Officer, Bank of Canada
Yes, the majority of the investments at the bank is made up of Government of Canada bonds, but we also have T-bills. During the pandemic, we also purchased other types of assets that were available in the market at that time.
Liberal
Tom Osborne Liberal Cape Spear, NL
You are able to invest, for example, in utilities as well. You mentioned T-bills. It's not just Government of Canada bonds.
Do you invest in bonds from other countries, or is it just Government of Canada bonds?