Special Committee on Cooperatives Committee on July 10th, 2012

[John Taylor]

Yes. We're provincially examined, through FSCO. We have a financial examination committee that reports to FSCO directly, and essentially our risk assessment, our solvency assessment, is done based on the standards that have been in place over the years.

We don't require independent actuarial assessment necessarily, but we do publish audited statements and have full examination.

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

In terms of investment instruments, how is the reporting done to rating agencies so they can determine the legitimacy or value of an investment instrument?

[Frank Lowery]

Are you speaking about purchasing shares in us or are you speaking about the investments we hold?

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

I mean the investments that you hold, specifically going back to the situation that did not necessarily involve The Co-operators or the mutuals. We had the asset-based corporate paper issue in which the ratings agencies did not give the proper ratings to these risk vehicles; in fact, they were believed to be no-risk vehicles by many.

So we know what the banks or the investment companies are required to do. What is the process for The Co-operators and the mutuals? Do they use the same ratings agencies, or is there a different reporting agency to which you're responsible?

[Frank Lowery]

In the case of The Co-operators, our structure as a cooperative—because it's at the holding company level—doesn't relate to the prudential regulations. So we're subject to the same prudential regulation as any other insurance company, on exactly the same basis, with no difference.

With respect to rating agencies, I'm sure you know how the process works. The rating agency comes in and meets with senior management, the CFO and that sort of thing. They go over the books and the financial statements of the company, and they get disclosure from management, including with respect to any investments they make. Federally regulated insurance companies are required to have a prudent investment policy, so we have to manage our funds as a prudent person would. That's all regulated and observed by OSFI. All of that is provided to the rating agencies, and then they go off and work their wonders, I suppose.

I think the issue of rating agencies and whether or not they should be regulated is a separate question.

[The Chair, Conservative, Blake Richards]

Thank you very much, Ms. Gallant. Your time has expired.

Mr. Marston, the floor is yours for five minutes.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you, Mr. Chair.

Mr. Lowery, I was listening to your testimony back and forth with our Liberal friend here, and you were talking about the letter your organization sent. Do you feel that you and your organization have been censored?

[Frank Lowery]

I don't really want to get into the politics of the current Parliament.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

I wasn't asking you to get into the politics. I asked for your genuine—

[Frank Lowery]

We sent it in. I've expressed my view as to what should happen with it. I think it's at the discretion of the chair to deal with it.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you.

Mr. Gazzard, the NDP has expressed grave concerns here regarding the impact of the Conservatives' austerity cuts on the cooperative sector, including the $4 million taken out of the CDI. Of course, we've heard as well about how with the cuts to staffing at the rural and cooperatives secretariat, they've gone from 100 to 15.

Can you explain to the committee what you would see as the impact on your sector, as well as perhaps on the Canadian economy?

[Nicholas Gazzard]

Well, I suppose I could have an opinion about the impact of that on the Canadian economy, but the actual impact on our sector would be pretty much nil.

As far as the effect on the Canadian economy is concerned, I return to the remark I made toward the end of my presentation, that if we view cooperatives as a vehicle for jobs and growth, then we need to consider massive amounts of money put on the table by levels of government to be investments rather than corporate handouts.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

The other side obviously felt my first commentary to Mr. Lowery was political. It wasn't. It's a matter that, from this perspective, a committee is required to fundamentally work with due diligence and to take into account the expression of all witnesses and their organizations. We think that's been impeded. The other side has the right to disagree with that.

We have a sector here that employs 150,000 people, with 100,000 volunteers acting on their boards.

One comment I'd like to hear is on the upcoming international cooperative meeting in October. We've been recommending to the committee that they attend, and that it would offer significant information for this committee to consider before they do a report.

Do you think that would be beneficial to the outcome of the report?

That's for either of you or both of you, actually.

[Nicholas Gazzard]

I'd have to say yes. I think there will be a tremendous amount for all of us to learn at the Quebec summit. There will be speakers from all over Canada and all around the world on different aspects.

I find, doing the international work that I do, that having an international perspective and looking at international good practices is tremendously valuable, and I think the committee would find it extremely useful, too.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

We're saying basically the same thing that you just did, and expressing some disappointment, so I am interested to hear that.

I'm going to end my questions there, because my time must be very close to up.

[The Chair, Conservative, Blake Richards]

You have time for a response.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Oh, have I?

Go ahead, please.

[Frank Lowery]

I think cooperatives, mutuals, credit unions, and fraternal benefits—all these organizations—are not well understood by people generally. Because there's sort of a low level of understanding of these organizations, we've definitely expressed our view that more study should be done on this than just today's hearing. Not that we don't like the fact that we were allowed to come to the hearing, but we definitely think that more time should be allowed.

The other issue, to the earlier question, is that cooperatives have historically been non-partisan, so you will find people from every political persuasion who are members of cooperatives. In fact, many of the original founders are members of cooperatives. At The Co-operators we have a political involvement policy that really came about because one of our former agents ran for the Progressive Conservatives many years ago in Ontario.

So they're non-partisan. It's really more in that context—I know I speak for myself, and I suspect that I speak for my fellow speakers—that we came here. We really want to talk about a form of enterprise, a democratic form of enterprise, that deserves broader recognition and about why it's valuable. Really, that's our point. Yes, we would agree on more study, and we think there would be a benefit from the Quebec summit.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Along the same lines of adding information for the benefit of this committee, we had witnesses who talked about the fact that they felt that some of the people involved from the government side didn't understand this. I'm not talking about members here; I'm talking about workers. It's along the lines of what you were saying. They didn't really understand it, and it would be of true benefit if they were there as well.

Thank you, Mr. Chair.

[The Chair, Conservative, Blake Richards]

Thank you very much.

This has come up a couple of times. It is regarding a letter. I believe The Co-operators sent it. I have received a few letters. As I indicated earlier, I haven't had a chance to review those letters yet. They came in very recently. I hear from The Co-operators that they certainly wish to have their letter distributed. If that request has been made, which they certainly have done verbally, and if I have it from the organization in both official languages, I will forward it to the committee. I just want to make that clear, because as I said, I haven't had a chance to review, but I do hear from this organization that they wish to have that. As long as I have it in both official languages, I would be happy to follow that standard practice.

We'll now move to Mr. Boughen, for five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Mr. Chair. Let me add my voice of welcome to the two panel members we have with us this afternoon.

I just have a couple of short questions. First of all, I noticed that in your handout from the CHF of Canada, the voice of Canada's housing cooperatives...I don't see Saskatchewan or Alberta listed. I see Ottawa, Toronto, Vancouver, Manitoba, and Nova Scotia. What happened to the prairie provinces? Did they miss the cut on submitting for print?

[Nicholas Gazzard]

They're still there, as far as I know.

That merely lists where we have offices. We have members across the country, including in all the prairie provinces, but we don't have offices.... We have an office in Manitoba. Alberta has its own regional federation. In fact, it has two small regional federations. We work with them. Saskatchewan has a sort of fledgling local association, but really, any direct services that are needed by co-ops from a federation are supplied by us. So what you're seeing is where we have offices, not where we have members.

[Ray Boughen, Conservative, Palliser, SK]

Mr. Lowery, what impact will the downturn in the restructuring of the whole co-op organization have on your business? Do you see it as a very threatening turn of events or as something you can deal with?

[Frank Lowery]

Do you mean the economic crisis from 2008 to date?

[Ray Boughen, Conservative, Palliser, SK]

Yes.