Special Committee on Cooperatives Committee on July 26th, 2012

[Rob Malli]

Right.

Yes, we will be responding formally to those, but I've highlighted a couple of areas in here and in my presentation. One would be the issue around demutualization, which we think is a big concern. The other one is around ensuring that the regulations truly are enforcing and enabling the organization. I think Desjardins spoke to some of these points in theirs, and we're consistent—

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Am I mistaken in thinking that you have 30 days to react to those? Or was it 60?

[Rob Malli]

I don't recall.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

If it were 30 days, you'd have to do so before August 7, right?

[Rob Malli]

Right. I believe it is longer.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Okay. But if you do it before August 7, we have a deadline to receiving documents that would then be distributed. It might be useful, if you're prepared to share your concerns, to send them to the committee as well, so we'd get a better understanding of some of the difficulties the regulations might be creating.

[Rob Malli]

Okay, we'll definitely look at that.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you.

I've got eleven seconds to go, so I'll just make eye contact....

[The Chair, Conservative, Blake Richards]

All right. Well, there you go. Eye contact's been made and time has been terminated.

We will move over to our second round of questioning now. First we have Mr. Boughen.

You have five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Chair.

Let me extend my welcome to the panel for being with us this morning, sharing your expertise.

A couple of questions came to mind in your presentations, gentlemen.

Rob, I'm going to ask you to look into the crystal ball and tell us when, across Canada, the financial way you're handling your credit union will be acceptable to all provinces. What do you think? Is that a future kind of dream that will never happen? Or will the credit unions eventually become the same as banks across the nation and accessible to all Canadians?

[Rob Malli]

I believe it is the situation today that credit unions do operate across Canada and are accessible to Canadians. I don't think all credit unions operate the same way, so there are uniquenesses and there are more successes in certain regions than others. I believe it's truly a decision made by consumers and by residents whether the unique proposition is offered. I believe that the values-based approach we're taking is the future. What we take pride in is if we can influence the whole system moving forward.

Just to give an example, Vancity was the first organization to introduce socially responsible investing in Canada, and even internationally it's still just starting to take hold, with the ethical funds introduction. We're now proud to say that even TD Bank, etc., are all screening their investment portfolios across the organization. That's the type of change we're trying to cause. Responsible lending, the new regulations that came out on the mortgage lending by OSFI, or even the new announcements made by the Minister of Finance, in terms of mortgage lending rules—

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

They're actually going back to where they were.

[Rob Malli]

Right—these were practices that were always established at Vancity and were entrenched in the way we do business because it's the right way to do business long term.

Even with CMHC rules around securitization, just to give you some information, Vancity has participated in securitization for funding in the past. We've always had the rule where any time our members got into delinquency, we bought back those mortgages voluntarily. We've always practised that because we believe that the fundamental relationship with a member is our commitment to the member and we don't use financial markets to let go of that risk.

So the way we do business, we believe, has always shown that it's relevant. We think it is the future. It will happen through regulations because banks have a shareholder-driven model versus a community-driven model, as stakeholders, and that's going to be the consistent rub. That's why we believe that the regulations in particular have to acknowledge the differences in the business model and be tailored to support and strengthen cooperatives because of their unique governance—they're mission-based—and their business model differences.

But we work side by side with banks. It's not about one or the other. We think that together it makes a healthy financial system; we just need to make sure we understand the direction and practices going forward. I believe that Canada and the world need more value-based sustainable banking models to protect us financially through other future crises.

[Ray Boughen, Conservative, Palliser, SK]

Thanks, Rob.

Lyndon, is Farm Credit increasing the number of young farmers returning to the land? Do you see a growth of agriculture in the prairie provinces? What do you see happening, because of your involvement and your ability to help these folks get started?

[Lyndon Carlson]

Certainly we've had unprecedented levels of lending to young farmers in the year just ended. In fact, last year we lent $1.9 billion to young farmers--that is, persons under the age of 40. And that's a good thing, for the transfer of assets. As the older generation starts to phase out of the sector, it's critical that there's a younger generation joining.

What we see is that the feed stock for future farmers is existing farmers. Basically, most new farmers are the sons and daughters of existing farmers. So we really want to make sure we're there with access to capital so that the new generation can join that family farm.

In the census of agriculture that was just released, it still shows that over 98% of all Canadian farms are pure family farms. So facilitating that transfer and the entrance of new farmers is critical, and we will continue to support that.

[Ray Boughen, Conservative, Palliser, SK]

Thank you.

Thanks, Chair.

[The Chair, Conservative, Blake Richards]

Thank you.

We're doing really well with time today. I appreciate that, everybody. We got a little bit off the rails yesterday afternoon, so I appreciate that we're making up for it today.

We'll move now to Madame Brosseau. You have five minutes.

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

Thank you very much.

I really appreciate you being here today and sharing these stories.

I was wondering, Mr. Carlson, what kinds of training programs do you have? Do you have any training programs to help young people get involved?

[Lyndon Carlson]

One of the things we started ten years ago is what we call FCC learning programs. As we look at the success of our customers, success isn't based only on a good balance sheet; it's based on really good business skills. That's where we really want to support our customers—to increase the strength they have to run their business effectively, not only on the production side but also on the business skill side.

To that end, we started doing learning programs about a decade ago. Last year we put on well over 200 unique events across Canada, with attendance of about 27,000 people. This year we'll do the same. This will cover topics from financial statement analysis to succession planning to marketing to human resource management, all of the skills a typical business person needs to succeed. This has become a huge part of our program.

Now, more recently, we're doing the same thing online. We do face-to-face learning programs, where people can get together in a workshop of say 30 people. Now we have videos that will share these same skill sets, and you can download them online. Last year we had over 65,000 downloads of our learning programs online. This is a critical thing, which we think is unique for the offering now for our customers.

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

It's very important.

Mr. Malli, it's very nice to hear the testimony and how well Vancity is doing and how it really gives back and invests in communities. I was just on your website, and the impact investments.... You invest in affordable housing; energy and environment; local, natural, and organic food; social enterprise, social venture; social purpose real estate. And you have structured for impact.

Do you work with aboriginal communities also?

[Rob Malli]

Yes.

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

What do you do, exactly? Do you help with employment? I was just browsing quickly. I was wondering if you could elaborate a little bit more.

[Rob Malli]

Yes. We help them with a number of issues. Because of aboriginal land and the issue of entitlement and getting mortgages, etc., we've created structures to allow people to get mortgages on aboriginal land, paved the way for that, because that was an obstacle in terms of some of their developments.

We've worked with them to explore other opportunities. Right now we're exploring opportunities that would allow them to perhaps set up their own credit union, or a structure, as we did in Pigeon Park in the downtown east side of Vancouver, where we work with another partner to enable them to set up their own credit union but we handle the back office for them, to enable this to be basically owned by that community. These are examples of what I mean by different forms of cooperation and structure that aren't typical, like we own everything and open a branch there.

What we're trying to do right now is really make sure we make inroads within the aboriginal community, even on the employment side. We want to make sure our staff is representative of the communities we live in. It's an issue, because we don't quite have a proportional share of employees with an aboriginal background. That's something we're open and transparent about and we're really trying to get better at it.

However, as members, we do service them in the same way and in the same respect as any other member. We try to learn of opportunities where we could help them in their pursuit of economic viability and development or social issues.

Social housing is another issue where we help a lot in the aboriginal community as well, because of the downtown east side and social services that are provided to them.

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

It's been amazing to hear about these credit unions that really give back to the community. It just seems as if you care a lot. It's very different from what you typically see from banks. When you hear about big businesses, you don't often hear that big businesses are helping out new and emerging businesses. With co-ops it's very cooperative and you tend to help each other. It's really great to hear.

Is there anything else you wanted to add?

What do you see as the future of cooperatives in Canada with the recent cuts to the development fund and the rural secretariat? Do see it as more difficult for cooperatives to get up and going? You must deal a lot with cooperatives starting up.

[Rob Malli]

Yes.

I think what's important, and my advice to this committee and the government, is to look at other models that are operating effectively in terms of promoting, especially in the promotion of cooperative models. That's why I've pointed to Emilia Romagna in Italy, to France, and to other areas that have embedded the role of cooperatives in their constitution and have instituted legislation, etc., in a way that respects how cooperatives need to be governed, and they need to be understood and entrenched, to make them a viable alternative without issues or obstacles in the way. It also promotes the literacy of the general population in terms of the role they play.

There are certain sectors, especially the social enterprises, especially as government continues to reduce social services in certain respects, whether they're budget-constraint-related or whether it's fundamentally methodology-related. Social enterprises being cooperatives is a great example of where a cooperative model is more aligned at the governance level, at the mission level, to deliver those types of services that are truly in the interests of the people and you don't want to compromise with a shareholder model, which may provide adverse incentives and not the right level of service, etc.

Those are examples where I think it's extremely important that we understand before we develop a framework and structure.

The other thing is I think that cooperatives themselves, to be successful going forward, need to make sure they're using their governance structure and their mission in the proper way and not trying to be like somebody else. I think some cooperative credit unions are trying to be like banks, and that's not helpful to the cooperative movement or the system. With this legislation there's an opportunity to do that, which I don't think is the right thing to do. I think it has to be grounded in its roots.