Debates of June 21st, 1995

Business Development Bank Of Canada Act

[Ian McClelland, Reform, Edmonton Southwest, AB]

moved:

Motion No. 15

That Bill C-91, in Clause 22, be amended by replacing line 29, on page 10, with the following:

"any entity by any means, except an entity that is a trust company, insurance company or dealer in investments or securities;".

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

moved:

Motion No. 19

That Bill C-91, in Clause 28, be amended by adding after line 29, on page 13, the following:

"(1.1) The yield of hybrid capital instruments issued by the Bank shall not be fixed according to the profits of the Bank."

Motion No. 20

That Bill C-91, in Clause 31, be amended

(a) by replacing line 27, on page 14, with the following:

"parent of a director,"; and b ) by replacing line 29, on page 14, with the following:

"parent of a director, or d ) the father, the mother, the sister or the brother of the spouse of a director.''

[Ian McClelland, Reform, Edmonton Southwest, AB]

moved:

Motion No. 21

That Bill C-91, in Clause 32, be amended by replacing lines 30 to 34, on page 14 and lines 1 to 29, on page 15, with the following:

"32. The Bank shall not grant any assistance, whether in the form of a loan, investment, guarantee, purchase or lease, to an applicant who is an interested person or, if the applicant is a firm or corporation, to a firm or corporation where a partner of the firm or a shareholder, director or officer of the corporation is an interested person."

Motion No. 22

That Bill C-91, in Clause 35, be amended by replacing lines 38 and 39, on page 15, with the following:

"35. (1) Five years after this Act comes into force, and every five years afterward, the".

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

moved:

Motion No. 23

That Bill C-91, in Clause 36, be amended a ) by replacing line 28, on page 16, with the following:

"Tax Act;"; and b ) by replacing line 30, on page 16, with the following:

"whom the information relates; or e ) for the purposes of a committee of either House of Parliament.''

[John Manley, Liberal, Minister of Industry]

moved:

Motion No. 24

That clause 37 of Bill C-91 be amended by substituting the following:

"Except with the consent in writing of the Bank, a person must not in any prospectus or advertisement, or for any other business purpose, use the name of the Bank, the names "B.D. Canada", "Federal Business Development Bank" or "Industrial Development Bank" or the initials "B.D.B.C." or "F.B.D.B", in English, or the names "Banque fédérale de développement", "Banque d'expansion industrielle" or "B.D. Canada" or the initials "B.D.C" or "B.F.D", in French."

[Ian McClelland, Reform, Edmonton Southwest, AB]

moved:

Motion No. 25

That Bill C-91 be amended by adding after line 5, on page 17, the following new Clause:

"39. The Governor in Council may, by regulation, define "hybrid capital instrument"."

[The Acting Speaker (Mrs. Maheu)]

Group No. 2 includes Motions Nos. 7 to 11, but Motions Nos. 2 and 5 are not in that group. They were in Group No. 1 which we just dealt with.

[René Laurin, Bloc, Joliette, QC]

Madam Speaker, Motions Nos. 2 and 5 are not among the motions which you mentioned earlier. Since these are motions tabled by a Bloc Quebecois member, we expected to vote in support of our two proposed amendments.

[The Acting Speaker (Mrs. Maheu)]

Motions Nos. 1 to 6 and 26 to 33 are in Group No. 1.

A vote will be taken on Motions Nos. 2 and 5 if Motion No. 1 is lost. These motions are included in Group No. 1. You may refer to the Speaker's ruling, which explains this clearly.

[René Laurin, Bloc, Joliette, QC]

Madam Speaker, from what I gather, this means that we will not have to vote on the two motions, unless two others, before them, are lost.

[The Acting Speaker (Mrs. Maheu)]

That is correct. As I was saying, Motions Nos. 7 to 11, 14, 15 and 19 to 25 are in Group No. 2.

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

Madam Speaker, I am supposed to discuss Group No. 2 on behalf of the official opposition.

[The Acting Speaker (Mrs. Maheu)]

You are right, dear colleague. I apologize.

[Yves Rocheleau, Bloc, Trois-Rivières, QC]

We are slowly but surely getting to the heart of the matter, Madam Speaker. This important bill will significantly change the operations of a Canadian institution which has proven successful, both from a financial point of view, as well as in terms of fulfilling the federal government's role.

However, I draw your attention to the fact that the government is not only working in secret, but is also using misleading terms. The title of the bill itself is confusing and does not adequately inform the reader as to its scope.

Indeed, Bill C-91, An Act to continue the Federal Business Development Bank under the name Business Development Bank of Canada, alludes to the new name, but not to the new purpose of the bank.

This legislation changes the role of the former Federal Business Development Bank, which will soon become the Business Development Bank of Canada. The mandate is changed because, in the past, the Federal Business Development Bank was formally recognized as a bank of last resort.

Last year, when the committee looked at the role of the FBDB, it is the Bloc Quebecois which, along with the other members of the committee, in an attempt to convey the notion of last resort, proposed the term "complementary". That term was accepted by the committee. The word "complementary" therefore defined the role of last resort bank under the act.

Today-I do not know how to qualify it, and some words may be a little too strong-but there is definitely something wrong. The word `complementary" completely changes the bank's mandate and completely obliterates the concept of last resort.

The Federal Business Development Bank is switching leagues and is more or less going into direct competition with the current network of chartered banks and the network of Caisses populaires Desjardins.

Last resort implied that the whole outlook of the Federal Business Development Bank was geared to concern about regional development, expressed through ad hoc financial aid for small and medium size businesses. It assisted small and medium size businesses which had higher than usual risk factors because of their capital outlay or the economic sector in which they operated.

Therefore, the bank's mandate, under the legislation, was to look at cases which had already been rejected by at least two conventional financial institutions. That was the last resort mandate. Consequently, the whole outlook was geared to regional development.

Today, the bank will soon be competing with conventional institutions and this may perhaps fulfil needs in the rest of Canada. Although the operation seems quintessentially political, the changing of names is a perfect example-without condemning too harshly the people from the Langevin Block and the minister's office-of the government's desire to fill existing market needs in the rest of Canada.

But, this will also affect institutions in Quebec which have already carved out their niches, which have solid reputations and have been successful in filling the needs of the market. In particular, I am thinking of the Mouvement Desjardins, which is very concerned, by the way, by the federal government's approach, and of the Fonds de solidarité de la FTQ and the Société de développement industriel du Québec, which, together with the Caisse de dépôt and the Banque nationale, worked and contributed to making it possible for businesses in need in the various regions of Quebec to obtain loans.

Therefore, we had cultivated a last resort mentality, and I am personally very upset when I hear people at the Federal Business Development Bank say that it will no longer be a bank for losers. We have to see things more objectively.

Life in the business world is not always rosy. It is difficult at times. There are nuances. It is absolutely necessary to have a lending institution like the Federal Business Development Bank with a mandate to review the situation of businesses which are different from others, out of an almost socio-economic concern to ensure that businesses which otherwise would not be backed by conventional sources will find backing in the public sector.

I often heard the president of the FBDB refer to the case of Lassonde, in Quebec, a company that today is thriving and at the time had access to funds from the federal bank when traditional institutions could not, I suppose, justify approving a loan because the risk may have been too high, but the federal bank, acting in the public interest, did, and the rest is history.

There has been one obvious change. The clause on last resort financing has been eliminated, and the new Business Development Bank of Canada will, as a result, be competing directly with traditional institutions.

There are some subtle changes as well, because the Federal Business Development Bank has a new way to raise funds. So far, the bank has been operating only with public funds. From now on, it will be able to turn to private financing as well. The private sector will be able to lend money to the new Business Development Bank of Canada through what are commonly called hybrid instruments.

The bank's mandate has changed in two ways. Formerly, the bank only had to break even. Today, when it deals with the private sector, it will have to be a good investment in terms of interest yields on investments by the private sector. So it will have to pay attractive rates which, we must assume, will be based on the bank's profits. This is no longer about breaking even. The yield will be based on profits. The bank's focus on regional development will have to change. The bank will have to change its culture, its vision and gradually become a strictly commercial bank. This is a profound change in the bank's mission.

Finally, I am worried. Let me explain. As our NDP colleague said earlier, 52 per cent of the loans approved by the Federal Business Development Bank were for $100,000 or less. Once we no longer have this philosophy that the bank should promote genuine regional development by small business but instead operate on a more commercial basis so that it can offer

attractive yields to private investors, where are these loans going to come from, those 52 per cent?

Who will approve these loans worth $100,000 or less which represent 52 per cent of the FBDB's portfolio at the present time? We have every reason to be concerned about the future impact of these changes.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

Madam Speaker, on a point of clarification. Do I understand correctly that the government has only one opportunity to respond to the opposition's motions?. The member for Trois-Rivières spoke on basically half of the motions in group 2?

[The Acting Speaker (Mrs. Maheu)]

There are no periods for questions and comments or responses. The government can partake in the debate or lead off if the hon. members had been on their feet. On that point, I apologize to the member for Simcoe Centre.

In the case of the hon. member of Trois-Rivières, there is no precedent since he was one of the movers.

[Ed Harper, Reform, Simcoe Centre, ON]

Madam Speaker, I appreciate the opportunity to speak to the amendments to Bill C-91 we are addressing this evening. I am pleased to do this because of my small business background.

As a small businessman for many years I had many sleepless nights looking for capital. Therefore I am very hopeful that the changes we are attempting to make to this bill will improve the access to capital for those new small businesses starting up.

The amount of time spent on the correct name bothers me to some degree. I do not think the name is all that important. What is in the bill is important to small businesses which we are trying to help.

I was interested in some of the comments coming from my colleagues in the Bloc, particularly the member for Longueuil when said he had been in business in Quebec and found that Quebec businessmen had to work twice as hard as the businessmen in Ontario. I had a little trouble with that because I challenge anybody to have worked twice as hard as I did in my business. If one is to be successful in small business today one must work hard.

In my business, the tire and automotive service business, I had occasion to come in contact with people in the same business in Quebec. At no time did I get from them that they were working or attempting to work twice as hard as I was. Those in business in Quebec I came in contact with were doing very well because they were working hard. That was the secret.

I listened to the comments about the FBDB and what is happening in Quebec. I look at the 1994 annual report from the FBDB and see that some 23 per cent of its portfolio is in Quebec. Its head office is there as well. At some point during the debate earlier I was wondering if the scenario was that people were being forced at gun point to borrow from the FBDB. It is not compulsory. If businesses want to go there they go on their own volition, as it should be.

I will briefly run through the amendments in group 2 and outline Reform's position on them. The first is Motion No. 7. Reform is opposing this motion because the term financial assistance is too broad, too sweeping and too general in terms.

When I read that I thought I would have really appreciated, when I went to my bank for funding, that I could say I wanted financial assistance and the bank manager would have been prepared to take it on that basis. Whenever I asked for financial assistance, the next question was how much financial assistance. The decision was then made on that. Therefore we feel it is too sweeping and we will be opposing Motion No. 7.

Motion No. 8 deals with limiting the bank's ability to go to $18 billion rather than $23 billion as is in the bill now. We think there should be a limit there. In our estimation the limit should be $18 billion. We will be supporting Motion No. 8

We are opposing Motion No. 9. The mandate of the bank in our opinion is still not satisfactorily defined.

On Motion No. 10, a Reform motion by the member for Edmonton South, we will be supporting it because it eliminates loans to crown corporations. I do not know whether that was anticipated or thought of at the time but it might appear to the public as a form of double dipping. We will be supporting the amendment to eliminate loans to crown corporations.

Motion No. 11 restricts the role of the bank to complementary activities not already provided by the private sector. We will be supporting Motion No. 11.

Moving into the grouping of Motions Nos. 14 and 15, Motion No. 14 we feel removes some restrictions we feel are necessary in the bill. We will be opposing the removal of those sections.

Motion No. 15 is also a Reform motion and we will be supporting it. It ensures the bank is not active in trust, insurance or security companies.

Motion No. 19 is proposed by the Bloc. We will be opposing it. Yield of hybrid instruments will reflect the profit and cost of borrowing.

Motion No. 20, a Bloc motion, does not change the potential for conflict. It refers only to disclosure. We do not feel it covers that and we will be opposing it.

Motion No. 21, a Reform motion which we will be supporting, refers to the conflict of interest that changes the requirement from disclosing conflict to not doing any business with an interested person.

Motion No. 22, a Reform motion, will be supported and I see it was adopted at committee stage. Motion No. 21, a Bloc motion, we will be opposing because the motion appears to be unnecessary in our estimation. Motion No. 24 we will be opposing for the same reasons as were outlined on Motion No. 1; because it refers to the name change.

Motion No. 25 requires a definition of a hybrid capital instrument be included in the bill. Reform put forward this motion and we will be supporting it.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Madam Speaker, I will deal with the motions and then with some of the comments members of the opposition parties have put forward.

We will be supporting Motion No. 20 put forward by the member from Trois-Rivières. We will also be supporting Motions Nos. 24 and 25. Motion No. 24 is ours and Motion No. 25 is put forward by the Reform Party. All other motions in this section we will be opposing.

I will deal with some of the concerns the member for Trois-Rivières put forward and some of the concerns expressed by our colleague from Simcoe Centre. Before I do, I will deal with some of the comments made by the hon. member for Kamloops.

The member said earlier the government has missed a tremendous opportunity to move this bank forward with a very specific mandate to help small business.

We will not miss that opportunity. Even though in the committee we felt strongly about the name that was on the bill-it was changed today-there is one thing we will make sure the Business Development Bank of Canada does: we will make sure that its marketing thrust will be centred around the small business sector.

Make absolutely no mistake that as sure as I am standing here, if there is one issue this Prime Minister continues to be committed to with all the energy and passion he has-and I say that straight out-it is the small business sector.

Through you, Madam Speaker, to the opposition members and especially to the member for Kamloops, who, like myself, has campaigned vigorously in this House in opposition and in government, we have not let go and we will not let go. And we will not let the executive of this government forget that we were given the trust 20 months ago due in large part to the Prime Minister's commitment and the Minister of Finance's commitment even before the red book that we were going to be the government that championed small business and we were going to be the government that took on the financial institutions of this country, the chartered banks.

There is not a member on this side of the House who will stand up and defend the chartered banks of Canada and say that they are doing a great job for small business. If anyone can find a member on the government side of the House who will stand up and say that the banks of Canada are doing a great job for small business, name them. I certainly could not find one. We talk about this among ourselves and in our ridings. We are committed to that sector.

Getting back to this bill, this Business Development Bank will be committed to small business. I want to read into the record a note from the newly appointed chairman of the board of this bank, which I just received. He has been listening to this debate. I was summoned to the phone by him and I received a letter. We are going to make him accountable for this letter by reading it into Hansard . It is from Patrick J. Lavelle, the chairman of the board of the Business Development Bank of Canada:

In passing this legislation, the House is giving the bank expanded powers and greater responsibilities. The implementation of which will test the mettle of the banks directors and its management.

This House isn't giving the bank a blank check. The mandate calls for the bank to increase its activities in the new economy of Canada, in telecommunications, biotechnology and other technologies of the future. We must not abandon the declining sectors but we must see change and progress in the new ones.

The determination of the banks portfolio should reflect the country in that all regions: the Atlantic, Ontario, as well as Quebec and the West see increases in the availability of capital; after all that is what the bank is supposed to do.

The new bank with its new name should be visible and accountable. And we are going to bring the banks management before the committee to gauge what actions they are taking to fulfil their new mandate as quickly as possible.

Make no mistake the expectations for the bank are high and it will take extra efforts on the part of the management and its directors to achieve the promised results.

I want to deal specifically with the concerns the Bloc Quebecois has. They talk-

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, I rise on a point of order. I think the reference the hon. colleague has made to the communiqué by the new bank chair is appropriate. I wonder if it would not be appropriate for my hon. friend to seek unanimous consent to append that letter to be part of Hansard today.

[The Acting Speaker (Mrs. Maheu)]

Does the hon. member have the unanimous consent?

[Some hon. members]

Agreed.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

Madam Speaker, I would just like to take some of my personal notes off it before we append it to Hansard .

I would like to deal with the remarks I put on this note to the member for Trois-Rivières. We can see what the concerns are of the Bloc Quebecois. Make no mistake about the fact that the Bloc Quebecois does not in any way, shape, or form support the Government of Canada presence in the province of Quebec. They object to this instrument. As the Bloc Canadien on this side of the House, we believe this instrument is there to help small business.

The Bloc Quebecois does not want this instrument in the province because it is going to show Quebecers, small business men and women, that the people and the Government of Canada play a vital role, a central role, an integral role in their development as a part of Canada.

Make no mistake about it, we intend to use this bank to make sure that the Government of Canada presence is alive and well in the province of Quebec.

I cannot speak for the cabinet here, but as a committee and for those of us who believe in Canada, we would be encouraging the new Business Development Bank of Canada to have many locations in the province of Quebec, just as many as we hope to have in all the other provinces across Canada.

Quite frankly, I would find it very hard to imagine that the small business men and women in the province of Quebec would reject that kind of financial support, and not just financial support but counselling assistance. We must make sure that we understand that this Federal Business Development Bank of Canada now has another unique feature attached to it. It supplies counselling assistance for small enterprise and for entrepreneurs, both men and women. What better way to show the new and emerging entrepreneurs in the province of Quebec that the counselling assistance provided by the Government of Canada is alive and well?

This Business Development Bank of Canada I believe will play an integral role in helping to galvanize this spirit of Canada from coast to coast, including the province of Quebec. I would encourage members to support the government's amendments on this section of motions.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, again I am pleased to have an opportunity to make some remarks regarding this grouping of amendments to the bill regarding the new federal bank's name and some changes in the mandate.

I listened with interest to my colleague from Broadview-Greenwood when he said that the government will not miss that opportunity-and I suspect he is obviously implying the bank will not miss this opportunity-to provide an increased level of service to the small business sector. I am pleased when he reminded us that the new chair of the bank is listening in and is obviously getting a sense of the feeling among members of the House.

The member goes on to say that we can be assured that the new marketing thrust of this newly revised bank will be taking into consideration the needs of the small business sector. I will not even qualify it by saying probably, because I know he speaks the truth. I know this is what he wants to do. But why could we not have a little clearer direction actually in the legislation to guarantee that? We have seen tonight, in my judgment, that what the hon. member wants and what the executive wants can be two different things.

So let us acknowledge that, yes, it is good to say these great things and it is nice to comment on all the things the government plans to do, but we also remember the government's plan to abolish the GST. I suspect that probably somebody in there actually meant that at one time. They also said that they would abrogate the free trade agreement, and so on. It goes on and on.

There is some hesitation for us in opposition to become enthusiastic when we hear these commitments, verbal as they are. Mind you, the government even had the abolishment of the GST and abrogating free trade in their red book. These were actually written down, and they obviously have set those aside.

However, let us be positive this evening and assume that the member is accurate and that the new chair listening in will hear us and will take this bank in the right direction.

I listened with interest to my hon. colleague talk about the sensitivity the bank will have to ensure that adequate provision is given to small business enterprises in all the regions of Canada. We applaud that.

I just want to point out that my hon. friend refers to the west. I know he is from Broadview-Greenwood and I know that he recognizes the realities of western Canada. I want to remind my friend that the west includes two regions: the cordillera regions of British Columbia and the Yukon, and of course the prairie region. So let us be sensitive that we want to balance that B.C. and Yukon is actually a region that ought to get their fair share separate from the prairies and so on and so forth. That is just a little sensitivity from us across the mountain range.

I got a little shaky when my hon. friend was up talking about the letter from the new chair that said we must provide special consideration for the newly emerging technologies, biotechnology and telecommunications and so on. No one would dispute

that. I question whether or not this is the small business sector we are talking about here tonight in large part. It may be.

When I think of biotechnology and telecommunications, I often do not think of the person making the loan for $20,000 or $30,000. I would call for a little extra sensitivity. Yes, we would applaud that the bank ought to be leading a lot of the capital and funding initiatives into these sectors, but also we are talking about small business that is quite often apart from these two sectors.

We want to see expanded powers. Again, I will be looking carefully at the new initiatives. My hon. friend can simply nod at this, but I think he said that the chair of the bank wanted to come before the committee with his directors and meet with the committee to develop some of these ideas further. I think that is what he said. I applaud that initiative and look forward to that opportunity.

On behalf of my party we will be supporting with some enthusiasm Motion No. 7 by my colleague from Trois-Rivières. We will also be supporting Motion No. 10, by my friend from Edmonton Southwest. We will also be supporting Motion No. 20, Motion No. 21, Motion No. 22, Motion No. 23, and Motion No. 25.

I want to make a comment about Motion No. 23, and that is the addition in the legislation of the line "for the purposes of a committee or either House of Parliament" as the possibility of reviewing what the bank is doing. I do think that is an appropriate initiative if in fact that inclination is there.

Again, these are very thoughtful amendments. Some do not receive our enthusiastic endorsement. I appreciate the reasons people are bringing them forward, but I do not see the necessity and some of them I find actually rather regressive. We are being positive here tonight, so I will keep my statements on the upbeat and positive note.

[The Acting Speaker (Mrs. Maheu)]

Is the House ready for the question?

[Some hon. members]

Question.