Special Committee on Cooperatives Committee on July 10th, 2012

[Jeremy Rudin]

All of the deposit-taking institutions in Canada, whether they're federally or provincially regulated, participate in deposit insurance schemes. In the case of banks and other federally regulated deposit-taking institutions, it's the Government of Canada that is the ultimate guarantor. In the case of the provincial schemes, they're organized in a variety of ways.

There are also limits on the amount of insured deposits that each individual can have, and they vary among the federal and various provincial schemes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Okay.

Now, with the different regulations—you mentioned some credit unions are federal, some are provincial—at what point...or is there a point at which the provincially legislated and regulated credit unions would have to come under federal legislation?

[Jeremy Rudin]

Just to clarify something I said, we have created a legislative framework for federal credit unions. There is as yet no federal credit union. We have yet to bring into force all of the regulations that are required. As I mentioned just last week, they were prepublished for comment.

This legislation will allow a credit union to establish from the get-go under the federal scheme. That's probably not the most likely way in which we'll see the first federal credit unions.

The other thing that is anticipated is that a provincially incorporated and regulated credit union could opt to continue into the federal sphere. In that case, they would need the consent of their home province, to begin with, and then approval from the Superintendent of Financial Institutions. So it's an option; it's by no means an obligation.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Now, we notice substantially lower service fees for the different borrowing...or even chequing. The fees associated with your daily and monthly banking are substantially less than with banks.

Can you explain to the public why it would be that credit unions would be able to afford to give such lower fees when really they don't enjoy the economy of scale that a bank would?

[Jeremy Rudin]

I haven't made a study of the differences in fees across credit unions and banks. There may be people in the room who will have done so.

I would say two things. First of all, every financial institution has a different business model. Some of them emphasize different things—customer service, convenience, a range of products, etc.

The other thing I would point out is that in the federal sphere for banks, there is an obligation or an agreement, depending on how you look at it, to provide low-fee accounts. Each bank has an offering for a bank account that has low fees, that is quite low-cost. It's part of the federal regime to ensure that this option is available for consumers. By no means do all of them choose the low-cost option, but it's always available.

[The Chair, Conservative, Blake Richards]

Thank you. Time has expired for Ms. Gallant.

Madame Brosseau, you're next.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Thank you very much.

I have a few questions for Mr. Carrière.

The cooperative development initiative is the only federal government program for cooperatives. It has made it possible to support more than 300 new cooperative businesses since it was created in 2003. In a number of remote regions, the CDI is the only funding for cooperative start-ups.

Knowing that, why has this program been cut? In addition, what other concrete actions will the federal government take to renew its support of the cooperative movement and to make more room for Canadian cooperatives?

[Claude Carrière]

The program you are talking about was created in 2003. It has contributed to the development of expertise that encouraged the development of cooperatives. That expertise still exists today, and we believe that government support is no longer needed because the cooperatives include a dynamic model and perform excellently.

You also spoke about the rural nature of these communities. I mentioned earlier that the government thinks that all departments are responsible for ensuring that their policies and programs take into account the realities of rural communities, their opportunities and their unique challenges. Those departments must also ensure that their programs are applied in that respect.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

My constituency is rural. Just about every day, I can see that cooperatives play a very important role in the region. They are revitalizing the region every day.

In the wake of the budget cuts imposed on the secretariat, we are learning that only two people will be working with the cooperatives from now on. How do you intend to maintain the quality of the services offered? Have you done any studies to find out what impact these cuts will have? Did you have a consultation or do a preliminary study?

[Claude Carrière]

We reduced the role of the Rural and Cooperatives Secretariat to bring its role back to what it was previously, which was research and policy coordination with the provinces and other departments. We did that with the goal of working with those departments and ensuring that they explore the various avenues with the rural regions and the cooperatives.

The main function of the secretariat when it comes to cooperatives will be to maintain the database on cooperatives, which has existed now for several decades. That is one need of the cooperatives sector. It assures us that this sector will continue to be healthy.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

The government says it wants to create jobs and stimulate innovation. In this case, can you explain why the government is cutting a tried and true program, a program that costs only $4 million a year? Does that call into question the government’s support of the International Year of the Cooperatives, which Canada publicly supported when the UN resolution was adopted in 2009?

[Claude Carrière]

Canada continues to support the cooperatives movement in its initiatives and in the context of the International Year of the Cooperatives and the Quebec International Summit of Cooperatives. The government, and the department, will continue to work with the community to ensure that the cooperatives movement will continue to be healthy now and in the future.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Can you please explain what concrete role the federal government is going to play in the next few years, if it no longer provides funding after these changes? What do you anticipate will happen in the next few years, given these cuts? Do you think they will have an impact? They will surely have an impact.

[Claude Carrière]

We think that cooperatives will continue to have access to the range of existing programs. We have worked with the cooperatives movement and with the federal, provincial and territorial departments to ensure that we provide the cooperatives with information on hundreds of existing programs, which they have access to.

We have realized that cooperatives did not know that they could register for several of these programs. We distributed a copy of our guide to all the cooperatives just so they would know that they are eligible for these programs.

[The Chair, Conservative, Blake Richards]

Thank you. Your time has expired.

We move now to Monsieur Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

I’d like to thank the witnesses for being here this morning.

There are over 9,000 cooperatives in Canada with 18 million members. We know that, historically, it began very modestly in the early 1900s. Each community had specific people, needs and services. There were a lot of agricultural and financial groups, in particular. In Quebec, insurance cooperatives, including Promutuel, also really played an important role in our country.

There is a marked trend for cooperatives to be in small communities, but also in much larger ones, too. They competed with some services that the cities offered. If we will recall a bit of history, we know that the banks were located mainly in the cities and large communities. They did not necessarily go and provide services to small communities, like the one where the Mouvement Desjardins began, which provided more of a local service.

Then, 25 or 30 years ago, we noted the trend of cooperatives to group into federations to provide services for one another. They needed expertise and buildings to manage themselves and audit one another. In 25 years, we have also seen a lot of mergers. Previously, we often saw two cooperatives merge. Today, 10, 12, 15 and sometimes as many as 20 cooperatives merge to provide services.

Do you think that trend will continue? Or will it stop? What challenges might it present for cooperatives? People are generally proud to be members of a cooperative, to have an active share. But when they become larger, this feeling of belonging from members may be lost. We are starting to feel it in the community. Members are finding that their cooperative is becoming so large, but so far from what the basic initiative was.

[Claude Carrière]

Thank you.

I do not claim to have particular knowledge in that area. I must say, though, that I have seen the same thing that you are describing. As far as I know, there haven’t been any studies to support what I am going to say, but I think, as you do, that the cooperatives are facing competitive pressures, in Canada and abroad, in the various areas in which they operate. To deal with the external pressures, they group together to be better able to provide their members with services at a better price.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

So you are saying that those groups help with respect to competitiveness, but it is important to think about overall competitiveness. We know that the Mouvement Desjardins is very strong in the financial sector in Canada and Quebec. But how can it situate itself or orient itself against globalization? We know that the banks are very important globally. The Mouvement Desjardins is a big player in Canada. But to what extent can the Mouvement Desjardins be compared with the large international banks?

[Jeremy Rudin]

To come back to your initial remarks, I would say you are quite right about the financial sector and the trend towards credit union mergers. In Quebec, the mergers are more or less done. But we are seeing more and more of them in other provinces, and credit unions are becoming bigger and bigger. As you said, that raises the question of whether members' sense of ownership has diminished as a result. That is indeed a drawback.

However, most credit unions see the benefits as outweighing the drawbacks. Those benefits include economies of scale and especially risk diversification so they can invest not just in a single community or city, but also in areas throughout the province, for instance. It was that shift that prompted some credit unions to call on the federal government to create a federal credit union framework, so they can continue down that road.

That being said, a credit union's ability to take advantage of foreign markets may be somewhat limited, because of its structure. We do not think every financial institution absolutely has to be massive. There is enough room in the country for large and small institutions alike. I think you will always see that split in the size of these institutions, despite the current trend towards mergers.

[The Chair, Conservative, Blake Richards]

Thank you very much.

We move now to Mr. Harris.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you, Mr. Chair.

Thank you again, all of you, for being here.

Mr. Carrière, during one of your statements you mentioned that cooperative businesses tend to last longer than traditional businesses do. Could you perhaps elaborate on that? From what we've heard, cooperative business models at about five years out last twice as long as traditional businesses do. Is that correct?

[Claude Carrière]

I think we might have read the same thing. I just read that this morning. My understanding is that there is a study by the Government of Quebec. So probably it would be valid only in the province of Quebec, but yes, looking at one year out, five years out, and maybe ten years out, cooperatives have a higher survival rate than comparable small businesses do.

[Dan Harris, NDP, Scarborough Southwest, ON]

Do you know why that is?

[Claude Carrière]

No, sir. I only read that summary. I don't know what the basis for the study is, but it confirms what I think all of us believe about cooperatives, which is that the sector is doing quite well.

[Dan Harris, NDP, Scarborough Southwest, ON]

It could be an area of study for us to look at in the scheme we're looking at right now.

You also mentioned the international summit that is going to be taking place in October. As I understand it, there are some government funds going to support that. How much is the government putting into that summit?