THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Thursday, September 24, 2026
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 9:33 a.m. [ET] to study the subject matter of those elements contained in Divisions 1, 2, 3, 6, 7 and 8 of Part 4 of Bill C-31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025; and, in camera, to consider a draft report.
Senator Clément Gignac (Chair) in the chair.
[Translation]
The Chair: Honourable senators, before we begin this meeting, I would like to take a few moments to share with you the procedure in case of a fire alarm.
If the fire alarm goes off, we’ll immediately suspend our meeting. Please collect your essential belongings and evacuate calmly through one of the two exits and proceed to the muster point located on the bridge over the Rideau Canal on Wellington Street. Please take a moment to identify the exits closest to you.
It’s important to know that you won’t be able to return to the building, except when it’s indicated that it’s safe to do so. Don’t use the elevators and follow the emergency instructions provided by our PPS officers.
I was asked to read these instructions to you. We hope that this won’t happen, but we never know. It might happen and it could disrupt our proceedings.
I would like to welcome everyone here this morning, as well as the people following our proceedings online at sencanada.ca.
My name is Clément Gignac. I’m the chair of the Senate Committee on Banking, Commerce and the Economy.
Before we continue, I would like to invite my colleagues to introduce themselves, starting with our deputy chair to my left.
[English]
Senator Varone: Toni Varone, Ontario.
Senator Pupatello: Sandra Pupatello, Ontario.
Senator Loffreda: Tony Loffreda, Montreal, Quebec. Good morning.
[Translation]
Senator Henkel: Good morning. Danièle Henkel from Quebec.
Senator Ringuette: Good morning. Pierrette Ringuette from New Brunswick.
[English]
Senator Yussuff: Hassan Yussuff, Ontario.
Senator Fridhandler: Senator Daryl Fridhandler, Alberta.
Senator C. Deacon: Colin Deacon, Nova Scotia.
[Translation]
The Chair: Honourable senators, as you know, an order of reference was adopted in the Senate on June 10, 2026, authorizing this committee to examine and report the subject matter of those elements contained in Divisions 1, 2, 3, 6, 7 and 8 of Part 4 of Bill C-31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025. While the bill is being studied at the House of Commons, the Senate has tasked this committee with undertaking what’s known as a pre-study.
Honourable colleagues, we have a two-hour panel to cover all divisions referred to our committee. We’re joined today by officials and representatives.
[English]
From the Department of Finance Canada, we have Barbara Russell, Director, Framework Policy, Financial Sector Policy Branch; Justin Brown, Senior Director, Financial Sector Integrity and National Security, Scott Sorenson, Special Advisor, Financial Institutions Division; and Matthew Boldt, Senior Director, Housing Finance.
From Innovation, Science and Economic Development, we have Martin Simard, Senior Director, Marketplace Framework Policy Branch. From the Office of the Superintendent of Bankruptcy Canada, we have Kirti Manek, Acting Senior Deputy Superintendent. From the Bank of Canada, we have Nikil Chande, Senior Director, Payments and Regulatory Oversight Department.
And from the Canada Mortgage and Housing Corporation, we have Caroline Sanfaçon, Senior Vice-President, Insurance and Securitization; and Michel Tremblay, Chief Financial Officer and Senior Vice President, Corporate Services.
Welcome to all of you.
[Translation]
I’ve been informed that Ms. Russell from the Department of Finance will begin with opening remarks covering Divisions 1, 2, 3, 6 and 7. Mr. Simard from Innovation, Science and Economic Development Canada, or ISED, and Ms. Manek from the Office of the Superintendent of Bankruptcy will both speak about Division 8. The senators will then ask questions.
The floor is yours, Ms. Russell, and welcome. Please go ahead with your opening remarks.
[English]
Barbara Russell, Director, Framework Policy, Financial Sector Policy Branch, Department of Finance Canada: Thank you, senators, for the opportunity to appear before you today as part of your pre-study of Bill C-31.
My name is Barbara Russell. I am Director of Framework Policy at the Department of Finance. I will be speaking to Division 1 — Bearer shares.
I am joined today by colleagues from the Department of Finance and the Bank of Canada who will assist the committee in its consideration of other measures from Part 4 of the bill.
As you mentioned, Justin Brown, Senior Director of Financial Sector Integrity and National Security at the Department of Finance, will speak to Division 2 and Division 6. He is joined by Nikil Chande, Senior Director of the Payments and Regulatory Oversight Department at the Bank of Canada. He will join Justin in speaking to Division 6.
Scott Sorenson, Special Advisor in the Financial Institutions Division, will speak to Division 3. Lastly, Matthew Boldt, Senior Director of Housing Finance at the Department of Finance, will speak to Division 7.
We would all be pleased to answer any questions you have and to support the pre-study of any of these divisions of this bill.
The Chair: Colleagues, to inform the witnesses, we heard testimony from experts yesterday. Usually, we do the opposite; we have you first and then the experts after. This is different.
We propose to go division by division. We have two hours in front of us. We have five divisions. Maybe some divisions will take more time than others. We will see. What I propose, colleagues, is five minutes each on the first division, and then we will go from there. We will start as usual with our deputy chair, Senator Varone.
Senator Varone: Are there no opening statements? Are we going straight into questions?
Ms. Russell: We can provide a statement if you like. I know you heard from witnesses yesterday, so I would be happy to answer questions as well. I will proceed however you prefer.
Senator Varone: I’m happy to just ask questions. This is Division 2 of Part 4. Have we experienced an epidemic of civil lawsuits against civil servants? Is this the reason we are tightening this up? Is fraud an exception for lawsuits? At what point does this legislation place civil servants above the law as opposed to being respectful of the law they are serving?
I’m trying to find the balance with respect to why this is coming out now. Do we have an epidemic that necessitates this type of change?
Justin Brown, Senior Director, Financial Sector Integrity and National Security, Department of Finance Canada: On the “why now” question, I think this came up as a review of federal financial sector statutes, which we perform. There were also two statutes passed in the Budget 2025 Implementation Act, No. 1 — the Consumer-Driven Banking Act and the Stablecoin Act — which have similar no-liability provisions.
I believe this came about not because of some expectation of bad actions by civil servants, but just as a regular review of the financial sector statutes. There’s been a provision speaking to no liability — which is very similar to this one — in the Office of the Superintendent of Financial Institutions Act. I believe it was in there when the act originally came into force in 1987, and it was modified in 2001. So there are long-standing legislative provisions of this nature in the federal financial sector statutes.
On your question on fraud and the scope of application, the wording of the legislative changes speaks to the performance of their duties in good faith. Something like fraud, or any sort of malfeasance, would not be in good faith. It’s meant to be civil servants, the minister or other decision makers under these acts who are diligently performing their duties, but they may have a negative consequence on a third party.
If that third party is looking for recourse, it will provide ministers, civil servants and other decision makers protection from civil liability, not the administrative decision protection from, for example, judicial review.
Senator Varone: Looking south of the border at the malfeasance that is happening right from the White House on down in terms of fraud and corruption, where is the intersection between criminal and civil? What happens in terms of bad faith?
Mr. Brown: This provision is intended to protect from civil liability only, not criminal liability. Also, even on the civil liability side, the language speaks to good faith performance. So where there is bad faith performance, the protections from civil liability would not apply. It does not touch on criminal liability for these decision makers.
Senator Varone: Very well. Thank you.
The Chair: Thank you. You spent three minutes, and I propose to be three minutes rather than five. We must go to three minutes each; otherwise, we will have —
[Translation]
— we won’t have enough time.
[English]
Sorry about that.
Senator Fridhandler: Are we jumping between divisions?
The Chair: No, stay with Division 1. When we finish, we will move to Division 2 and Division 3, and maybe some will not intervene.
Senator Fridhandler: Okay. With respect to Division 1, we’re trying to get control on bearer instruments. Why did you only go halfway and not have a mechanism instituted for sunset on utilization of bearer instruments?
Ms. Russell: Thank you for the question. You are right that this is an amendment that closes a loophole for certain types of conversion privileges that are in bearer form. As a general practice, for many of our governance provisions of the Bank Act, the Insurance Companies Act and the Trust and Loans Companies Act, we follow amendments to the Canada Business Corporations Act, or CBCA, as a general model, then make adjustments as needed to reflect the different nature of financial institutions. That’s always our starting point.
The CBCA amendments that are similar to this were made in 2018, and we considered those. When those amendments were passed in 2018, parliamentarians considered things like a sunset clause or an expiry of those instruments, and ultimately those types of amendments were decided against.
I cannot speak to why that decision was made, but in the case of bearer instruments generally, these were not necessarily issued for any sort of nefarious reason and originally held for those purposes.
So with these instruments come a certain amount of vested contractual and property rights. The way this is generally done is they will gradually be phased out rather than there being a firm exit. This is something that respects those rights as well as harmonizes with the CBCA, which is generally well received by our stakeholders, who like to have a model they know well and use regularly as opposed to a different model in our financial statutes.
Senator Fridhandler: I suggest it might be better that our financial institutions, and the regulatory regime that applies to them, lead rather than follow the general corporate law. Although all corporations should be concerned about integrity, the integrity of the financial sector is at the top of the pyramid, so I don’t know that following is the right method to approach these changes.
I raised this yesterday: Even an instrument in registered form, as a solicitor — certainly when you are pledging security — if someone wants to gain control of that instrument, you couple transfer power of attorney and it makes it almost as good as bearer form, if you understand where I’m going.
So why isn’t that restricted or prohibited as well? Because it is an easy end around. You can turn a registered instrument into a bearer instrument.
Ms. Russell: I can tell you that this amendment addresses one loophole — one risk to the system. It is not intended to address other risks in the system, and certainly those would continue to exist.
This really has been an exercise regarding harmonization with the Canada Business Corporations Act and resolving this particular loophole that has existed since those amendments.
Senator Fridhandler: Okay.
The Chair: Thank you.
Senator Loffreda: Welcome once again. My question is on the outstanding bearer instruments on Division 1. The bill prohibits new bearer instruments and provides for the replacement of existing instruments at the holder’s request. What happens to outstanding instruments whose holders never request conversion? Does that leave an ongoing anonymity risk? Should there be a deadline for conversion, accompanied by the verification of the ultimate beneficial owner?
Ms. Russell: These amendments do not address any instruments that would continue to be in circulation unless brought to conversion.
As I mentioned, those come with certain vested contractual and property rights, and these amendments do not seek to infringe on those rights. It’s really only when the shareholder brings them forward. So, until that happens, you’re correct that they continue to exist in circulation.
To the extent these instruments are options, some of the value is contingent on them being transferred to a share at some point. However, you are right that until that point, they would continue in circulation.
Senator Loffreda: Thank you.
[Translation]
Senator Henkel: Welcome. My first question concerns alignment with the provinces.
Mr. Caldera, whom we heard from yesterday, reminded us that most Canadian companies are incorporated under a provincial regime and that transparency rules vary across the country. How is the government working with the provinces and territories to prevent loopholes from simply shifting across regimes?
[English]
Ms. Russell: Thank you for the question. These amendments to the Bank Act, the Trust and Loan Companies Act and the Insurance Companies Act really only deal with federally regulated financial institutions. They would not deal with any financial institutions or other institutions that exist under provincial corporate law.
Additionally, under the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act, it is a very distinct system from those other corporate frameworks.
The Bank Act, for example, has certain ownership requirements around control and significant interest that make our framework operate very differently. I cannot really speak to the provincial frameworks, but I imagine someone would need to assess those separately.
[Translation]
Senator Henkel: I have a question for Mr. Sorenson.
Mr. Sorenson, Ms. Torrie, whom we heard from yesterday, also raised the issue of what remedies will remain available. Once this immunity is in place, what remedies will remain available to a person who believes that they have suffered harm as a result of a decision made in good faith?
Sorry, this concerned Part 2.
The Chair: We’ll finish the round and then come back to it.
Senator Henkel: Perfect. No problem.
[English]
Senator Ringuette: Regarding Division 1 — and I’m coming to the bearer issue — it has been flagged to us that it was trying to tackle an instrument that is or might be used for money laundering or financial terrorism in Canada and elsewhere around the world.
It seems that in order to really try to tackle this, we should not be moving through an incremental phase of seven years. This committee has seen hundreds of millions of dollars spent trying to fight money laundering through different departments. Yet we don’t seem to be able to put an end to at least this possible window with respect to these kinds of situations. Can you say when it will be closed — period? Are we going to see new legislation in the next budget or omnibus bill that will put an end to this bearer issue? With this piecemeal approach, if it is not closed, then it is still open for terrorism financing and money laundering.
[Translation]
Martin Simard, Senior Director, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada: I wasn’t invited here to discuss this, but another of my areas of expertise is federal corporate law. So I feel compelled to address the last two questions.
My colleague is trying to say that it’s really . . . .
I’ll back up a bit.
A number of years ago, the federal government and all the provinces committed to eliminating bearer shares from their corporate law. This was done. All Canadian provinces — if they had not already prohibited them — amended their legislation to eliminate bearer shares. Just one small loophole remained, which was federal financial institutions legislation. However, the legislation in general, such as the Canada Business Corporations Act, was amended eight years ago.
So this is just a consequential amendment. It involves a small group of companies that weren’t really at risk. We took a while to finish the work, but that’s what we’re discussing today.
Senator Ringuette: Mr. Simard, can you confirm that the amendments included in the bill will finally put an end to the possibility of using bearer shares to fund terrorist acts or to launder money?
Mr. Simard: Yes. As far as I know, all provincial corporate laws require that shares be recorded in a registry under a name. This was also changed at the federal level a number of years ago. Now, if I understand correctly, this is also the case for financial institutions.
Senator Ringuette: That’s not what we were told yesterday.
Mr. Simard: If you met with other witnesses, that doesn’t mean that every possible measure to eliminate money laundering was taken. Nor does it mean that every province has registries of beneficial owners. If we’re talking about bearer instruments here, some groups would like to . . . . The federal government has established a public registry of beneficial owners. However, this isn’t the case in all provinces. Likely some work remains on that front.
[English]
Senator Yussuff: Thank you, witnesses. It is clear that the objective here is to prevent bearer instrument use in terrorist financing and other corporate crimes. It appears that some provinces, though not all, have gone in a direction where they have grandfathered bearer shares from being issued. The bigger question is why we aren’t also doing that to align ourselves in a way that will ensure what bearer shares are out there will eventually be converted and ultimately close that loophole. The point is that you are making amendments. It seems to me if you were observing the provinces that have shown leadership in trying to accelerate efforts to prevent money laundering, why would you not have gone in the same direction — trying to match or at least reflect what they’re doing — so we have some continuity across the country and can better protect the country from being accused of still having loopholes that allow money laundering to happen?
[Translation]
Mr. Simard: I’m missing the context of yesterday’s comments regarding what hasn’t been completed.
I know that some provinces set a deadline for the conversion. Perhaps that’s what we’re talking about here. Each province and the federal government made the changes based on their own legislative frameworks. For example, the Canada Business Corporations Act never actually allowed bearer shares. So no deadline was set. Instead, the federal government took a precautionary approach.
Some provinces — such as British Columbia, where this was more prevalent — set a deadline. Each province is sovereign, and each made amendments based on its own circumstances.
I think that the policy here of the Department of Finance is to follow the approach taken for all private corporations at the federal level. So this is a consequential amendment to ensure consistency at the federal level. Of course, there are minor differences among the provinces. However, I’m not aware of any significant differences regarding bearer shares. There’s really a major difference when it comes to the existence of registries of beneficial owners.
[English]
Ms. Russell: I think there is some confusion here around bearer shares and other types of bearer instruments.
Under the Bank Act, the Insurance Companies Act and Trust and Loan Companies Act, bearer shares have not been allowed for some time. The CBCA amendments from 2018 addressed other types of instruments that evidence conversion privileges. This could be an option that gives you a privilege to turn it into a share. So under this framework, it is really dealing with the issuance of those other instruments like options as opposed to shares themselves. Additionally, under the federal regulated financial institutions statutes, like the Bank Act, we have other types of ownership restrictions. For example, ministerial approval for significant interest — which allows for approval of gaining, for example, over 10% of a class of shares — is an additional measure we have to ensure that we understand who owns shares of a financial institution. It’s for that reason that this has not been an urgent issue. The ownership framework under these statutes is quite different than with general corporate law statutes.
The Chair: Colleagues, we have already spent 25 minutes on Division 1. I have no problem with continuing, but it may restrict time for other divisions.
[Translation]
Senator Dalphond: Thank you for the clarification. I used to practise corporate law, so I understand the difference between a good scrip and a share.
We aren’t talking about the issuance of a share here, since that was already allowed. You also clearly explained to everyone that banks and financial institutions have limits in place to prohibit foreign ownership, ensure Canadian control and so on. Nothing has changed in this area.
What you’re adding here is this. Old instruments may still exist within the system. The banks would know about them, since they were the ones that issued the bonds at the time and the conversion options. However, they can no longer issue the bonds. That’s what the legislation says. As for the ones that exist, if people paid for them, they should convert them. At that point, they’ll be required to provide their names.
I gather from Mr. Simard’s remarks that this isn’t being done because of a problem with crime or money laundering, but rather to ensure that all federal corporate law remains consistent with the same structure.
[English]
Ms. Russell: Yes. That’s a very accurate portrayal of what these amendments seek to do.
Senator Dalphond: We are seeking uniformity here and not addressing a real problem. It may be a potential issue, but it was not the driver of these amendments; the driver was harmonization.
Ms. Russell: Yes, that’s correct.
The Chair: Thank you, Senator Dalphond, for your intervention. I think it is loud and crystal clear.
Senator C. Deacon: The discussion with Senator Fridhandler on these instruments prompts me to ask a question about your consultation process.
You mentioned stakeholders. Were smaller institutions and private sector corporate counsel a significant part of your consultation process?
Ms. Russell: Yes, they were. Around the time of the 2018 amendments to the Canada Business Corporations Act, the Department of Finance similarly undertook a very large consultation exercise with a consultation paper and a public consultation that looked at this as well as other corporate governance amendments.
This was considered as part of the legislative review. We do a regular legislative review of our federally regulated financial institutions’ statutes, as Justin mentioned. That was considered at that time in 2019. It was decided not to move forward for different reasons.
As part of our last legislative review in 2025, this was considered again. It was recognized that this loophole continued to exist, and that’s why it is part of this bill now.
Senator C. Deacon: I wanted to ensure that broader consultation has occurred. Thank you.
Senator Loffreda: The proposed immunity covers both actions and omissions made in good faith and extends to the Crown itself.
Could serious negligence be protected where bad faith cannot be established? If someone suffers a substantial loss because of a preventable regulatory failure, what meaningful action for compensation would remain?
Finally, what specific gap in existing protections makes this broader immunity necessary?
Mr. Brown: The question of negligence, good faith and bad faith might be a legal interpretive issue that I am unable to address. At what point does negligence cross over into a bad faith undertaking of one’s responsibilities? I am not sure I can sufficiently answer that question. It may be something up to legal interpretation at some point.
However, again, the legislative changes do speak to the good faith performance of duties. It is clearly meant to protect individuals who are undertaking their responsibilities to the best of their abilities. If actions are not taken in good faith, any sort of malfeasance would be outside the scope of these changes.
In terms of the “why now” question, I mentioned earlier there are different financial sector statutes that have similar provisions, including ones that were passed as part of Budget 2025 Implementation Act, No. 1. We regularly review statutes to have coherency between them, at least the federal financial sector statutes.
Similar language was in the Office of the Superintendent of Financial Institutions Act for some time; however, many of the decisions that are actually taken pursuant to OSFI’s mandate by the superintendent, minister and other officials are taken under the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act, so ensuring that the coverage for protection from civil liability was consistent across those acts.
Senator Ringuette: For me, the central question here is this: Who decides if it is bad faith or good faith? Who is the person or what is the entity that will make that judgment call?
Mr. Brown: Ultimately, it would be a judge. I am not a lawyer, but my understanding is no one is prevented from seeking recourse. However, a judge would have to ascertain their right to recourse.
Again, I am not a lawyer, but a situation could arise where a decision is taken under one of these statutes and the individual who is affected by that decision believes it was taken in bad faith. They could present their case to a judge. The judge would have to decide whether to pursue that inquiry further as part of a civil suit.
Senator Ringuette: Okay.
Mr. Brown: As it is important, I would reiterate that this is for the individuals involved but is not intended to affect the administrative decisions. A decision could be challenged and subject to judicial review. This would not touch that. It is about protecting the individuals involved in making that decision.
[Translation]
Senator Henkel: I want to reiterate, for the people tuning in, that you’re still acknowledging this grey area between acting in good faith while making mistakes and acting negligently.
How should the victim of this type of outcome — whether it stems from negligence or an honest mistake — go about asserting their rights? How can we determine whether the outcome stems from negligence rather than an honest mistake?
It seems as though the burden of proving one or the other is being placed on the victim. That’s where the big issue lies. Could you please clarify this? Thank you.
Mr. Brown: The legislation doesn’t define what constitutes acting in good faith as opposed to acting in bad faith or acting negligently. I’m not a lawyer. However, I believe that, generally speaking, this type of debate is a matter for the courts. A court must determine whether the decision stemmed from negligence, good faith or bad faith.
An individual will always have the opportunity to plead their case in court. The matter will be assessed on a case-by-case basis. I would also like to point out that administrative decisions are still subject to judicial review. The individual will still be able to seek a review of the decision. This safeguard applies to the civil liability of individuals, not to the decision itself.
Senator Henkel: Perhaps we come back to this topic often, and you should bring it up. We know that any complaint brought before the courts can take years to resolve, and that the potential victims may no longer be able to advocate for themselves. We’re talking about issues that matter to Canadians. In my humble opinion, this issue should be raised. Thank you.
Senator Dalphond: I understand that you aren’t a lawyer, but is there a lawyer on the team who worked on this division?
Mr. Brown: There were a number of lawyers, but they aren’t here today.
Senator Dalphond: My question is the following. Perhaps you could answer it in writing. In both common law and civil law, the distinction in liability when it comes to acts done in good faith, gross negligence and wilful misconduct is a well-established legal concept. Judges have a good grasp of it.
In this case, are we changing the state of the law, or are we simply including a provision that we consider useful in order to ensure consistency with another piece of legislation, or are we attempting to change the state of the law?
Mr. Brown: I won’t get into a legal interpretation here. There may be different legal interpretations suggesting that other legislation would provide similar protections. I’m not here to say whether this is a correct interpretation. I’m not a lawyer. However, I can say that, by including this provision in the legislation itself — right where the decisions are found — the policy’s objective becomes quite clear.
[English]
Senator Dalphond: What is the driver for that amendment? In your opinion, were there too many class actions that involved the banks, or were civil servants not regulating the banks?
[Translation]
Mr. Brown: No specific risk was identified. It was more a matter of making the legislation consistent. The Office of the Superintendent of Financial Institutions Act has been in place since the 1980s. It contained quite similar provisions. The current decisions made by the superintendent, the Minister of Finance and others are based on the Bank Act. The issue concerns consistency among the legislation that governs the same types of decisions.
Senator Dalphond: This is a standardization measure, just like the previous change.
Mr. Brown: That’s the impetus. I have no reason to believe that we will or won’t have more civil complaints in the future.
Senator Dalphond: Thank you.
The Chair: This brings us to the end of Division 2.
I’ll speak on behalf of the committee. A memo will no doubt be sent to the Department of Finance. When we must study a bill of this nature and legal issues arise, it would be helpful to have a lawyer from the Department of Finance here with you. This isn’t personal. I understand that schedules are full. However, we have former judges around the table, people with expertise.
Yesterday, we heard from experts who raised some points. There are legal issues involved. Yet we haven’t really received the answers that we would like to hear. Don’t be surprised if, on behalf of the committee, we send a brief memo to the Department of Finance. That way, in the future, for bills of a legal nature, we can have a lawyer from the Department of Finance here with you. That’s my message.
[English]
Colleagues, we will move to Division 3. We will start with our deputy chair.
Senator Varone: I need someone to take me to school on this division because I don’t know the mechanics of how it works. The stated objective is to strengthen small- and medium-sized banks’ access to funding by working to ensure that the distribution channels for brokered deposits are not unduly limited. Part of the briefing notes said that small- and medium-sized banks typically source a significant share of their deposits through the brokered channels of larger banks. How does that manifest? What are the alternatives to this? Why is this being done now? It seems as if they have been active in doing this for decades. What was the genesis for arriving at this?
I’m not sure who is going to answer that, but I leave it open to anybody who wants to answer.
Scott Sorenson, Special Advisor, Financial Institutions Division, Department of Finance Canada: Small- and medium-sized banks are important sources of competition in the financial sector. They get a lot of their funding from deposits, including brokered deposits —
Senator Varone: Could you define “brokered deposits”?
Mr. Sorenson: A brokered deposit is a deposit that is sourced for a deposit-taking institution from a third party. For example — and this is the particular example we are thinking of here — an investment dealer will sell a guaranteed investment certificate, or GIC, to one of its clients. That GIC is issued by a small bank in Canada, so that would be a brokered deposit, and the investment dealer is the broker for that deposit.
Senator Varone: Okay. What are the limitations around that taking place today? What are you trying to correct?
Mr. Sorenson: The intent here is to ensure that there is sufficient access to those brokered deposit channels for the small- and medium-sized banks. The idea is that if small- and medium-sized banks have robust access to brokered deposits, they can then provide more competition and innovation in Canada’s financial sector. That is the overall intent.
Senator Varone: Is that lacking today?
Mr. Sorenson: It could be improved. There is a lot of access. The investment dealers will tell you that they list a lot of small banks on their investment dealer shelves, and that could well be the case today. However, the important part here is to ensure that we have a robust regime where, even in the future, there is continued strong access to the brokered deposit channel for these small- and medium-sized banks to provide that competition.
Senator Varone: Thank you for that answer.
Senator Fridhandler: Mr. Sorenson, the majority of investment dealers in this country, I believe, are associated with investment dealers that are controlled by the big banks. How do you think this will require the big banks to ensure that their investment dealers will be non-discriminatory in providing small- and medium-sized bank investment instruments within their investment dealer associations as opposed to relatively limiting them? That’s the first question.
For the second question, I have no idea — though I could speculate — what non-discrimination might mean in this section. There is a proposed definition section for a couple of items, but could you help everyone a bit by adding some context as to what non-discrimination means? Is it on the basis of gender, colour, size or capital market?
Mr. Sorenson: Let me try to address both at once. The government has not communicated any intention to make regulations at the moment. The government has communicated an intention to work with the banks to develop a voluntary code with respect to brokered deposits to help ensure the small- and medium-sized banks have fair access to those brokered deposit channels.
Senator Fridhandler: So are you asking for a blank cheque in this legislation so we will never learn what discrimination means?
Mr. Sorenson: The voluntary code and the legislation in regulation would work together. The government is currently working with the big banks to develop this voluntary code, which will, ideally, set out in writing an agreement on the part of the big banks to ensure strong access to those brokered deposit boards.
The Chair: I think the important part of the answer is that the government is not communicating any regulations at this moment. That is our reading of it.
Senator Fridhandler: I think you need to work with the small- and medium-sized banks on that code, as well, because they are the victims, not the big banks who are going to protect their turf.
The Chair: This is a fight we will follow closely. It is very interesting.
Senator Yussuff: I want to come back to the small banks. There have been efforts in the last number of budgets, in terms of both the budgets themselves and the implementation bills that have followed, to allow more credit unions onto the national stage to bring competition to the industry. Would they benefit from this provision?
If so, how do we ensure that they don’t remain marginal players on the national level? How can we try to enhance the competition by giving them the support they need so they can give Canadian consumers some options?
Mr. Sorenson: That is a good question.
As I mentioned, the work on the voluntary code is currently under way with the big banks. The focus is on small- and medium-sized banks, but until the voluntary code is finalized, it is tough to say precisely what it will cover and what its scope will be.
Senator Yussuff: I understand the frustration here. You are asking the people who have the most power to volunteer to do the right thing. What world do we live in? In no other world would we allow this to happen. We would say, “We understand your behaviour is predatory. We will name it and you need to change it.”
Why can’t there be regulations that speak to that rather than saying that it would be nice if they cooperate because we don’t want to use a stick to whack them over the head and aren’t sure that is the right thing to do?
You understand our frustration sitting here, knowing full well what a challenge this is. The big banks are monopolies in this country. You are now saying that if they maybe act a little more nicely, we might be able to tell the public there is movement.
I’m not accusing you of anything.
Mr. Sorenson: No, thank you for the question.
One of the advantages of a voluntary code is that it gives the opportunity to work with all the relevant parties to devise a code that addresses all the nuances and issues involved in that particular market.
As I mentioned, the voluntary code and the legislation regulation can potentially work hand in hand, but the focus is on the voluntary code at the moment.
Senator Yussuff: Is there a time limit for the voluntary code to be adopted?
Mr. Sorenson: I believe the stated intention is to have the voluntary code adopted later this year.
The Chair: The good news is that this is a pre-study. We will have some observations we can share that might be in the bill. We will see.
Senator Loffreda: Division 3 is welcome. Improving smaller banks’ access to deposits should ultimately benefit Canadian savers and borrowers.
Getting more technical, how will the proposed non-discrimination rules address practical barriers, such as platform fees, product visibility and eligibility requirements? How will you distinguish legitimate risk management from practices that favour a bank’s own products?
Mr. Sorenson: Thank you for the question.
Those are precisely the things we need to work through with the proponents. Those are precisely the issues we are discussing with the big banks in terms of working together with them to develop a voluntary code that is practical and addresses the relevant issues.
Senator Loffreda: So, are you relying on the big banks to dictate what legislation will entail as opposed to the smaller banks? I’m not making any sense of that, but maybe you can explain it to me.
Mr. Sorenson: There was a public consultation in September 2024 that covered a wide variety of financial sector competition issues, and this was one of them. We heard from the big and small banks during that consultation.
We continue to work with all parties to develop a voluntary code that works for everyone. The important thing here is to ensure that the small- and medium-sized banks that provide competition and innovation do, at the end of the day, have that fair access to the broker deposit boards.
Senator Loffreda: Will they be part of that conversation?
Mr. Sorenson: We have been discussing all these issues with them, and they’ve been very helpful in that regard.
The Chair: Is it fair to say that 95% of all deposits are controlled by the big banks or brokers? It is a rough guess from my side.
Mr. Sorenson: I don’t have precise numbers, but I think it is quite reasonable to say that a large portion of deposits are —
The Chair: Based on my experience after 30 years in the banking system —
Mr. Sorenson: Yes.
The Chair: Thank you.
Senator C. Deacon: Thank you, Mr. Sorenson. I will keep going down the same road. I want to know if you remember back in summer 2021 when the Know Your Product rules came in. Immediately, within hours — I thought it was weeks, but it was within hours — our big banks decided the only mutual funds they could sell were the bank-owned mutual funds. They tried to cut off the entire independent mutual fund industry from being available to customers of the big banks. That pro-consumer rule was immediately turned into an anti-competitive action that would have destroyed the independent competition in the Canadian banking industry. There was an uproar that eventually caused some pushback on that.
I’m not at all comfortable — and I think you are hearing around the table that there is not a lot of comfort — with the fact that the consultation is led by the big banks in this situation, where we are trying to be generous to small financial institutions by having a level playing field that properly serves the banks’ customers, not the banks.
I think we need to see something more from you on this.
Do you know about that instance? Do you remember what happened in summer 2021?
Mr. Sorenson: I wasn’t involved, but I’ve heard of that issue. That’s something that is not the objective of this; the objective is quite the opposite: to ensure strong access to those broker deposits. I would suggest that by working with the participants in this market to develop a practical voluntary code, it seems likely that would not be the outcome.
Senator C. Deacon: Shutting down the independent mutual fund industry was not the purpose of the Know Your Product rule changes. I would suggest to you that there is no evidence that leaving the foxes in the hen house to make the final decision will work toward your intention.
I think I am reflecting the concern we are hearing around this table. I would just offer that.
The Chair: That is more an assessment than a question, but we understand.
Senator C. Deacon: The question was whether he knew of that instance; it was very bold.
The Chair: It is okay.
Senator Ringuette: We have a unanimous point of view around this table.
I’ve been on the Hill for 33 years. This concept of a voluntary code from the Department of Finance Canada — I don’t know if it is from a group or an individual — has an expiry date. It has not been efficient. It has only been a delay practice.
I’ve been witnessing this voluntary code of ethics put upon credit card emissions and a slate of the Superintendent of Financial Institutions. It accomplished nothing for the consumer and for Canadians wanting to develop this economy. We don’t need this kind of barrier. We need transparency and equal access.
You know what we are all saying around this table. Maybe it is time to remove from your construct this voluntary code because it is accomplishing nothing at the end of the day.
Senator Dalphond: When I look at Division 3, it says in the first provision:
A bank must not directly offer or sell in Canada a deposit product of another Canadian financial institution unless the bank does so in a non-discriminatory manner.
So that means if go to my bank and want to get a GIC — and they have their GIC at a 3% return for 12 months — they don’t have any obligation to offer me a GIC from another financial institution. But if they offer me a GIC of another financial institution, they cannot be discriminatory. They have to offer all the other large and small banks. Is that what it means?
Mr. Sorenson: That particular provision relates to deposit products offered in-branch. It is my understanding that the banks typically do not offer other banks’ deposit products within their branches. Instead, they offer them through their investment dealers and perhaps other channels. So if you go into the branch, you will have available deposit products from that particular institution. If you are looking for a deposit product from another financial institution, you would simply go to the investment dealer of your bank.
Senator Dalphond: That’s not targeted by the first provision. It is the bank directly.
Mr. Sorenson: The first provision is related to what is sold in the branches directly.
Senator Dalphond: So we have to go to the third one.
Mr. Sorenson: Yes, section 463.3.
Senator Dalphond: It reads:
An institution must not offer or sell one of its deposit products in Canada through any of its affiliates unless the affiliate offers or sells the deposit product in a non-discriminatory manner.
So if I go through the broker firm, which most banks do, the broker has to offer me the GIC of the bank and the other banks, including small banks, where small banks are trying to attract markets by offering 3.5% instead of 3% like my bank.
Mr. Sorenson: Broadly, yes, that is what this paragraph would say. It says that the affiliate, the investment dealer, in order for that institution to sell one of its own deposit products through its investment dealer, that investment dealer must also sell other financial institution deposit products in a non-discriminatory manner.
Senator Dalphond: That’s where you’re working really on the code there, mostly in the branches; it’s really through the investment office in the branch, maybe, but not the bank at the counter.
Mr. Sorenson: That is the main channel, yes. Agreed.
Senator Dalphond: If the code doesn’t come into effect or you cannot get an agreement, that’s why the government gave itself the power that is provided in section 463.4, which reads, “The Minister may make regulations respecting what constitutes offering or selling a deposit product in a non-discriminatory manner . . .”
So you’re trying to get a code. If it doesn’t work, you will impose a definition.
Mr. Sorenson: Indeed, the voluntary code and the legislation regulation work together.
Senator Dalphond: That is why you force the actors a bit.
Mr. Sorenson: The code and the legislation regulation will work together.
Senator Dalphond: Thank you.
The Chair: Colleagues, that division is important because we are conducting a special study right now — people who follow us are well aware of it — on access to capital and credit for SMEs. If we increase the competition and the small regional banks have access to a bigger pool of retail deposits, because it is a cheap cost of capital compared to others, we will increase access to capital for SMEs at a cheaper price.
We will follow this voluntary code that the finance minister will have with the big banks very closely because I think it will be important down the road to provide more competition, not only for the retailers who have a better yield on their GIC but also to reduce the cost of capital for the SMEs if they have more competition. You know what I mean. I want to make a bridge here. Stay tuned. Our special study will be released in the coming weeks, and I think it will be interesting.
We move to Division 6.
Thank you for your testimony.
Senator Varone: This is a question that is probably more hypothetical than anything else: What happens when a payment service provider is not domestic but international and the government where it resides requires financial disclosure that we would otherwise consider to be personal and confidential?
As a follow-up question, should we be allowing foreign-controlled payment service providers in Canada?
Mr. Brown: I apologize. I may have missed the first part of your question. The second part on what payment activities are allowed, that’s —
Senator Varone: Well, let me put it this way: If you have a U.S.-based service provider offering services in Canada and the Internal Revenue Service asks them, “We want this information on these Canadians,” do they really care what our domestic laws are? And the follow-up question was this: Should we be allowing any foreign-owned payment service providers in Canada?
Mr. Brown: My apologies. I feel this is a much broader policy question than the legislative changes that are proposed as part of this act.
I can say that the Retail Payment Activities Act, or RPAA, is designed to regulate payment service provider activities in Canada. Whether it is Canadian-based or an international-based payment service provider, it is intended to supervise those payment services and provide things like standards for data protection and ensuring end user funds are protected. There are also national security protocols as part of that legislation. That’s the intent of that. Whether there is a policy question around the scope of what activities should be permitted in Canada is a broader question than I can answer today.
Senator Varone: Okay, then let me get to the heart of the matter. Should we be allowing foreign-controlled service providers in Canada? The question is this: Do we believe them when they say they will be confidential in the manner in which they conduct themselves here in Canada when they face other scrutiny? Right now, I think we have a payment service provider that is looking to sell to a U.S. conglomerate. How do we deal with that?
Mr. Brown: These are big questions of data sovereignty and payment system sovereignty. I could speak to what the act does. Before the Retail Payment Activities Act, these types of activities were not specifically federally regulated. With the RPAA coming online, it does introduce supervision by the Bank of Canada for data protection, control of user funds and national-security-related issues. If there is a calibration on what services should be allowed and questions on sovereignty and concentration, that’s beyond my ability to speak today.
Senator Loffreda: Protecting sensitive payment system information is understandable. With the proposed access-to-information exemption, what information will remain available so Canadians and Parliament can assess whether supervision is effective? Could aggregate information on operational incidents — safeguarding of customer funds and enforcement outcomes — be published regularly without compromising confidential information?
Nikil Chande, Senior Director, Payments and Regulatory Oversight Department, Bank of Canada: Thank you for the question. My name is Nikil Chande. I’m from the Bank of Canada and involved in the supervision of these payment service providers.
We intend to publish aggregate, non-confidential information about how our regulatory regime is evolving and how our supervision is occurring. If there are trends that we see in the marketplace around cyber risks or other operational types of risks, then we do have a long-term plan to publish those and bring that information and knowledge to the Canadian ecosystem.
We are trying to balance that general information against a desire to have protection against the really confidential, sensitive information that payment providers give to us through our regular supervision. These changes here will not stop us from publishing aggregate information and trends. That is part of our plan.
Senator Loffreda: Thank you.
Mr. Brown: In addition to what Mr. Chande mentioned, the Bank of Canada maintains a public registry of payment service providers, so Canadians can go on the website to see which payment service providers are allowed to operate in Canada and even those who have been refused or have had their registration revoked. There is a measure of public accountability for individual institutions as well.
[Translation]
Senator Henkel: Division 6 introduces a significant change regarding access to certain information held by the Bank of Canada.
Of course, we know that transparency is extremely important to Canadians. What type of information is obtained under the Retail Payments Activities Act but could be disclosed under this bill? What type of information should be treated as confidential?
Mr. Brown: The goal would be to protect the personal and commercial information that’s provided to the Bank of Canada and the Department of Finance. An example would be information on individuals who are in a position to control a payment service provider and the beneficiaries of that company’s activities. Another example is the nature of the data that payment service providers can access and that they have used in the course of their business. That information is provided during registration with the Bank of Canada. It’s also provided to the Department of Finance and shared with national security partners to make it possible to conduct a national security review. By definition, that personal or commercial information would be protected by these amendments. The Access to Information Act already includes other provisions on information provided by other parties, such as advice, that could be exempt from disclosure. It’s just to simplify the process and recognize that, by its nature, that information would be protected.
As my colleague said earlier, the bank intends to provide public information to explain the program. The decisions on the registration of each payment service provider would be published, so it would be possible to know whether a provider is registered. All of that would stay publicly available. However, the data and the details won’t necessarily be available.
Senator Henkel: Thank you.
[English]
Senator Ringuette: I have a quick question, Mr. Chande. Is the Bank of Canada data repository located in Canada?
Mr. Chande: To ensure I understand your question, are you referring to the information we receive from these regulated entities or are you referring to our registry?
Senator Ringuette: I’m referring to all data managed by the Bank of Canada.
Mr. Chande: We have an IT system we have built, which draws on payment service providers to input their information and give that to us. We are confident that that information is protected securely and safely.
Senator Ringuette: The question is this: Is all your data that you use on a daily basis — the transfers, the payment systems and so on — within Canada? I want to know if that data is within Canada.
Mr. Chande: We use a cloud-based repository of this information. So some of that could be held in the U.S. if the cloud provider has their data centre there.
Senator Ringuette: So you have no idea, in essence. You know it is in the cloud, but you have no idea where the information is located. That’s fine and nice, and I would even be tickled pink to have this section in front of us, but in essence, the data is not in Canada. We are not controlling anything here. I’m sorry, but at the end of the day, colleagues, as we have been saying for many years, we need data sovereignty. If we are not even getting data sovereignty from the Bank of Canada, we have a big issue. Thank you.
Senator C. Deacon: Building quickly on the questions from the last section, with regard to challengers and incumbents, has work been done to ensure this is balanced in terms of not being discriminatory? The Retail Payment Activities Act, or RPAA, brought in a whole bunch of new fintech payment providers. Is there any difference? Is there any way this could be discriminatory toward new ones in ways that on a relative basis could be an issue for the big banks as well?
Mr. Chande: The payment service providers in our regime would be pleased to have these protections in place. That will open the lines of communication with us and ensure that even if there are access-to-information requests made of their information, when that information is sensitive, confidential and potentially pertaining to national security issues, it will not be released. That supports the good supervisory relationship between the Bank of Canada and these regulated entities.
Senator C. Deacon: Thank you very much for that confirmation.
Senator Yussuff: I’m curious whether the Office of the Privacy Commissioner of Canada was consulted with regard to both changes and what the commissioner may have suggested that could strengthen the responsibility of oversight as to the information that is collected and how it is protected.
Mr. Brown: I’m not aware of the Office of the Privacy Commissioner of Canada being consulted on this specific legislative change.
In terms of protection of information, as in the actual electronic and physical protection of the data, that may be broader than the change itself. This is more about what can be disclosed to the public, for example, in response to an Access to Information Act request, which is clearly information provided by these payment service providers. Information derived from that should not be disclosed under that act.
Senator Yussuff: So there wasn’t any conversation with the Privacy Commissioner on whether this was enhanced in terms of his responsibility of assessing Canadians’ privacy protections.
Mr. Brown: I’m not aware of such consultations. This would enhance the protection of the information from payment service providers. It would not necessarily be information held by Canadians. We are not talking about individual transaction data, for example. It is really, for example, the application information. So there may be Canadians involved in the personal information of Canadians if a Canadian is an owner or director of one of these payment service providers; that information would be in scope. But for an individual using a card to make a transaction, for example, we don’t collect that information as part of an application.
[Translation]
Senator Dalphond: I understand that the Bank of Canada is a government institution within the meaning of the Access to Information Act.
The bank has someone in charge of access to information, and this amendment will mean that they don’t have to provide information on businesses that are carrying out retail payment activities and that had to get the bank’s authorization to be able to operate in Canada.
Under the Bank Act, businesses have to report a lot of information, including their corporate structure, who the directors are and so on. Why shouldn’t that information be public?
I understand that the bank has to publish two lists, one for authorized entities and one for refused entities, but why is it impossible to know what the entity submitted, regardless of whether it was authorized or refused?
Mr. Brown: The legislative amendments specifically target access to information requests made to the government under the Access to Information Act, and they apply specifically to information provided to the government by payment service providers. Personal and commercial information is provided to the Bank of Canada for registration or monitoring, as well as to the Department of Finance.
The provisions in other acts that require payment service providers to publish certain information themselves are not affected by this. The amendment strictly targets information that’s held and retained by the government.
Senator Dalphond: It’s the entire act that doesn’t apply. Section 24 of the Access to Information Act states that the act doesn’t apply to the provisions set out in Schedule 2, and that schedule will include the entire act in question.
Mr. Brown: It refers to two specific provisions in the Retail Payment Activities Act, and those two provisions specifically relate to information obtained by the government, the information used, as well as the proceeds derived from that information.
That means that if there are other types of information, if there are laws that require a business to provide certain information, or if there’s another reason, this measure shouldn’t affect that information.
Senator Dalphond: There are two types of information that the Bank of Canada can require: either as part of registration or as part of an investigation in which it asks questions. For the latter provisions, I understand that confidentiality must be protected, for example, when an investigation is ongoing or even if the file is closed.
However, in terms of registering with the Bank of Canada, why wouldn’t all the information provided be made public?
[English]
Mr. Chande: We do publish on our website, in our payment system registry, some basic tombstone information about those companies: their owners, their location and the payment functions they provide. For companies we have refused registration, we provide the reason that occurred. If we have done an investigation into a payment service provider and there is a violation that occurred, we also explain, at a high level, the nature of the violation. We have some of those on our website today, for example, companies that did not register on time and have received a violation. So we are bringing that level of transparency to benefit Canada. I think that needs to be balanced against the more sensitive information around how they are managing cyber risks and operational risks and how they’re safeguarding the funds of Canadians. That level of detail is something that we don’t think should be in the public domain and requires this additional protection that we’re seeking through this act.
Senator Dalphond: So the effect of the amendment is to remove access to information but to say, “Trust the bank. The bank will provide the necessary information.”
Mr. Chande: We will provide the information to help Canada and the Canadian ecosystem understand what payment service providers are registered, the basic functions they do and whether they have been involved in any violations of our law. In addition to that, we will, in time, provide information on the trends and analysis we are seeing in the sector. We also plan to put out a mandate report to report to Canadians on how we are doing as a supervisor of payment service providers. That is something we have planned for next year.
Senator Dalphond: Thank you.
The Chair: Colleagues, before addressing Division 7, I suggest we go to Division 8, hoping I will not offend our friends at CMHC. The reason is simple: Ms. Manek and Mr. Simard have opening remarks for Division 8, and that would provide more time to address that division correctly. I also think that Division 7 is less controversial than Division 8. Now, Ms. Manek and Mr. Simard, I know you have some opening remarks.
[Translation]
Mr. Simard: Thank you, Mr. Chair, for the opportunity to speak on the Bankruptcy and Insolvency Act amendments that are included in the bill and to answer the committee’s questions.
Budget 2024 included commitments to strengthen consumer protection and do more to crack down on predatory lending, including predatory practices in the consumer insolvency marketplace.
[English]
Across Canada, a significant number of unlicensed individuals and companies market debt relief services and purport to advise indebted consumers about formal bankruptcy or proposal processes under federal law. Some of these “debt advisers” and “lead generators” provide inaccurate information and charge insolvent Canadians millions of dollars annually for services that provide little value or duplicate work that will later be performed by a regulated Licensed Insolvency Trustee, or LIT. They can also make misleading claims about the insolvency process or about the outcomes they can achieve, leaving people with fewer resources, delayed access to legitimate assistance and even greater financial stress.
The Office of the Superintendent of Bankruptcy currently has limited statutory powers to protect the public from unauthorized insolvency practices and misleading representation on insolvency.
Budget 2025 amendments address these enforcement gaps with new legal tools to better protect vulnerable Canadian consumers in financial difficulty from predatory practices.
In particular, the Superintendent of Bankruptcy will be able to commence civil court proceedings for injunctions, damages, restitution orders and other appropriate relief against those who hold themselves out to be Licensed Insolvency Trustees or make false and misleading representations regarding insolvency proceedings and services.
The amendments will also significantly increase penalties for certain offences to deter predatory misconduct and protect consumers. The maximum fines under current law for unlicensed insolvency trustee practices and wrongful solicitation or canvassing of persons to commence insolvency proceedings will increase from the current $5,000 maximum to $100,000 for individuals and $1 million for corporations.
[Translation]
These amendments will help ensure that Canadians receive reliable financial advice and will prevent predatory companies from exploiting vulnerable people through false claims about their services.
The availability of new civil enforcement tools for the superintendent of bankruptcy will strengthen public confidence in the insolvency system as well as consumer protection from predatory practices in the insolvency marketplace.
Thank you for listening, and I would now be pleased to answer any questions you may have on these amendments.
The Chair: Thank you.
[English]
Kirti Manek, Acting Senior Deputy Superintendent, Office of the Superintendent of Bankruptcy Canada: Honourable senators, I will deliver my remarks in English to avoid any translation challenges, but I would be pleased to answer questions in either English or French.
Thank you to each of you for the important work you do on behalf of Canadians and for the invitation to appear today to discuss the proposed amendments to the Bankruptcy and Insolvency Act contained in Bill C-31, Part 4, Division 8.
I am Kirti Manek, Acting Senior Deputy Superintendent, Operations, at the Office of the Superintendent of Bankruptcy, or OSB. While the OSB is functionally part of Innovation, Science and Economic Development Canada, it operates at arm’s length from the Government of Canada. The OSB is responsible for supervising all aspects of the insolvency system in Canada in order to ensure that it operates fairly, efficiently and in accordance with the law.
Until about a month ago, I served as the Deputy Superintendent, Integrity and Enforcement, at the OSB. In that role, I led both civil and criminal enforcement activities aimed at protecting the Canadian insolvency system. A significant portion of that work involved matters related to debt advisers, which I’ll speak to a bit more.
The Canadian insolvency system exists to provide honest but unfortunate debtors with a fresh financial start while ensuring that creditors are treated fairly and consistently. It is based on a carefully balanced framework that provides transparent, regulated and court-recognized debt relief options.
The OSB has long been concerned with the growth of the debt advisory marketplace. This includes debt advisers and lead generators, both of which operate outside of provincial and federal regulatory frameworks. Debt advisers and lead generators often market their services to financially vulnerable Canadians searching for relief from unmanageable debt.
Certain debt advisory practices may harm consumers by misrepresenting the adviser’s authority or ability to provide debt relief; adding to a person’s debt load by creating the misleading impression that paid advisory or referral services are necessary; charging debtors thousands of dollars for services they may not need; delaying access to appropriate, regulated debt relief services; and interfering with the effective administration of insolvency proceedings.
These practices may also deprive creditors of better returns on their debts, as money paid to debt advisers could have gone to these creditors for the debts owing.
Over the past eight years, the OSB has taken a multi-pronged approach to tackle the debt advisory marketplace. Our efforts have included public awareness activities, increased regulatory oversight, engagement with provincial and federal partners and the issuance of cease-and-desist letters. Our efforts have yielded results, including a reduction from $21 million to $12 million in fees reported to have been paid to debt advisers.
However, the problems persist, and the OSB’s existing authorities have limitations. The proposed amendments would address these gaps and provide the OSB with additional tools to continue to address a serious problem for the Canadian insolvency system.
It is important to note that the OSB has attempted to have this conduct pursued criminally; however, feedback from our partners at the Public Prosecution Service of Canada suggests that the referred cases had a low public interest element and outcomes were more aligned with civil remedies.
Allowing the OSB to pursue civil remedies is expected to have a meaningful deterrent effect on these practices. Civil remedies would also enable us to follow up on cease-and-desist warnings with concrete court action. In addition, more serious criminal consequences, befitting of the harm, may increase the chances of prosecution.
Mr. Chair, Canada’s insolvency system is recognized internationally for its fairness, accessibility and effectiveness. In fact, some of our international counterparts have emulated the OSB’s efforts to address the debt advisory marketplace. The proposed amendments would ensure the system continues to serve Canadians as intended. These amendments support the integrity of the insolvency system and better protect consumers who are often facing some of the most difficult financial circumstances of their lives.
[Translation]
Thank you for listening. It would be my pleasure to answer your questions.
The Chair: Thank you for your opening remarks.
[English]
Colleagues, we will start, as usual, with our deputy chair.
Senator Varone: I asked this question yesterday and received a bit of an advertising answer: Is there room for regulated debt adviser groups that are not LITs?
Mr. Simard: I can take this one. We are trying to do the maximum we can under federal jurisdiction. That would be the short answer.
Senator Varone: What does that mean?
Mr. Simard: It means we have power over insolvency policy, but there is a line between financial services and providing advice on insolvency. We therefore stay within our constitutional power, so to speak, and do the maximum we can.
However, under the Constitution, a regime to regulate any debt advice would have to be provincial.
Senator Varone: Okay, but, again, even if it is provincial, is there an ability to regulate them, as opposed to this group of individuals who have been proven to be bad actors in this area? I’m looking to see if there is a meeting point between provincial and federal regulations in helping Canadians understand their debts and paths forward in terms of reconciliation with their debts. Does everything have to go to LITs?
Ms. Manek: I will take that one. Thank you for the question. Right now, everything has to go through LITs because they are licensed, accredited and have the appropriate training and tools to provide these options to consumers who are already in a financially vulnerable state.
Our concern right now is that there are people who are unregulated and, let’s say, more profit-driven; it’s a turn. If your driver is to increase business for your company by selling a product you can’t even access legitimately, you’re not serving the consumer anymore. The consumer is in a worse situation by going through these debt advisers. They’re getting delayed access to the federal system, which is the only system that can provide them this debt relief, and it’s at an additional cost.
Senator Varone: Are you suggesting there’s no room for regulated debt advisers?
Mr. Simard: I think that’s long-standing. There is a requirement to bring them under federal jurisdiction. We say that with these acts — providing advice about insolvency processes and advertising — we are being clearer and fleshing it out: You have to be licensed, so we create the licensing regime. We say these acts are exclusive to those who are licensed. That undercuts the ability of these actors to do anything in that box.
Now, beyond that, it is beyond the scope of the legislation. In my introductory remarks, I talked about Budget 2024. The federal government has taken other actions under federal jurisdiction, such as criminalizing interest rates that are too high. I think combined, these are already a significant step toward improving things using the tools the federal government has available.
[Translation]
Senator Henkel: I’m going to ask a question about companies that are based abroad. Many of these services today are available online. If a company operates its website from abroad but targets Canadian consumers, are the new powers in Division 8 really applicable?
Ms. Manek: If I may, I’m going to answer in English.
[English]
This is simply because it will flow more easily.
Senator Henkel: No problem.
Ms. Manek: The internet is a big place. A lot of these services are provided online. If you “doomscroll” your own feed, you may even come across some of these advertisements.
There is a possibility foreign actors are involved. At this point, with the amendments being proposed, we feel it would give us a huge tool in our tool kit to allow us to explore that further and use it to its full potential, because we don’t have this tool right now, obviously.
From what I understand, other regulators have used similar provisions with much success. We are looking forward to the opportunity to do the same and testing it out to see if it works.
I am not able to answer the question of whether it will eliminate all the problems that exist with respect to debt advisers.
[Translation]
Senator Henkel: How will the new powers in Division 8 enable you to more quickly detect consumers who have paid significant amounts to intermediaries before they even have access to a licensed trustee? How do you detect them, and using what tools? How does Division 8 give you more tools?
[English]
Ms. Manek: The tool being proposed here is not necessarily for speed regarding detection. We already have sufficient detection of when this exists. The OSB collects a fair amount of data as part of the insolvency process as a whole. This is more a tool on the tail end. It gives us enforcement authority we don’t already have.
On the front end, we already have quite a few things in place to detect this kind of activity. I can go into more detail about how that information flows through when an insolvency is filed in Canada, but there are means to get this information aggregated and tackle the issue.
[Translation]
Senator Henkel: Do you think that Division 8 now gives you more tools, more powers, or do you have any recommendations? Do you think there are still gaps that would enable you to act more effectively, and if so, can you list them?
Ms. Manek: I can give you an example, if you’ll indulge me.
[English]
Regarding the criminal space, let’s use a criminal example.
I can personally speak to cases where a debt adviser was advertising and presenting themselves as a licensed trustee and we put together a criminal file. We went through the investigation process, the production orders and so on.
Then we go to the Public Prosecution Service of Canada. They tell us, “Yes, there is possibly a case.” But the Public Prosecution Service of Canada has too much work — as many regulators do these days — and it doesn’t meet the test of public interest, which is part of their guidelines. They are also saying this is not going to create a deterrent based on our current limits, which are $5,000 or one year in prison. So increasing the amounts to $100,000 for individuals and $1 million for corporations will be a game changer for us.
Senator Loffreda: From experience, when a corporation is experiencing financial difficulty, it becomes twice as difficult. Why? Because the first reaction of the bank is to say, “We will mandate insolvency experts who will perform a case study, an analysis, on you.” The corporation is already experiencing financial difficulty. All of a sudden, depending on the size of the corporation, it is $2,000 or $3,000 a month. These are licensed.
We don’t have enough time now to get into whether that is necessary. From the experience I’ve had, many times, it wasn’t necessary. The corporation could sit with the lender. I am saying that for future legislation. It could sit with the lender and iron out these facts without having a licensed professional walk into the corporation.
Relationships are important. Those licensed professionals have relationships with the banks. Many would call me and ask, “Why are you not sending me any business?” I was thankful and grateful that I wasn’t.
I wanted to make that statement before going to my question.
Higher fines and restitution powers are useful only if misconduct is detected and action follows. If misconduct is not detected or action doesn’t follow, they are useless.
What additional investigative capacity will support these provisions? How quickly could misleading advertisements or improper referral practices be stopped?
More importantly, how will the money actually be recovered for affected consumers, particularly when an operator closes the business or reappears under a different name? What protective measures do you have against all of that?
Mr. Simard: Maybe I can speak to it on a high level, and then I will pass the question on. It is like solutions flow problem statements.
When we consulted the Office of the Superintendent of Bankruptcy, or OSB, and when they consulted the partners, the problem identified was not that they didn’t know who the bad guys were; the problem was they didn’t have the tools to tackle them.
My understanding is that the biggest problem, the priority problem, is on the tail end, not in the detection. This is why the government is addressing this.
In terms of restitution, it is the general court tools, right? You have orders to freeze assets, for example, or injunctions. We will enter the civil realm and be able to use the general tools of regulators in that area. Will it be easy? No. But it opens all those tools that are presently not available.
Ms. Manek: I will answer the question on investigative capacity.
The Office of the Superintendent of Bankruptcy has three distinct criminal investigation teams. The capacity is there. I would be remiss if I didn’t say they would love more resources, but that’s another conversation.
We have two teams dedicated to conducting these kinds of investigations. I’m sorry to use very plain language on this, but we are champing at the bit to have these tools available because we do have files where we are eager to use these tools.
Senator Loffreda: Thank you.
Senator Yussuff: I have a number of questions. Because you told me you are collecting a lot of data, maybe you can share with us regarding the bad actors who have led to these amendments being put forward. That will provide a bit of context.
Second, the most vulnerable people are those who are very poor and go to predatory lenders in the provincial jurisdiction. Some of it is just criminal, from what I see. A person is already having difficulty and paying a loan at a level that can only be described as criminal activity. Yet in many cases at the provincial level, this problem is persistent. It has been persistent for decades now. I know we can’t fix that. It is not in our jurisdiction.
At the end of the day, given the new powers you will have, if you don’t have additional resources, how will you be able to enforce these measures? Ultimately, bad actors need to be held responsible for their behaviour if we’re going to change the system in this country.
By the way, this is very profitable for those engaged in this activity. That’s the reason why the predatory loan actors still remain at a provincial level. They can easily close up shop knowing full well that there are prosecutions available to them to stop them from doing what they are doing; yet they haven’t stopped.
I can see them. I live in Toronto. I drive around and see these places pop up as quickly as hamburger joints — or maybe even quicker — yet nothing is ever done to shut them down. Maybe you can shed some light on that.
Ms. Manek: I will not speak to the lender in itself because that’s outside my realm of expertise.
If I can speak to the bankruptcy element of it, we’ve been creative in terms of building capacity. We’ve actually engaged heavily with our provincial partners to work with them and see if we can help them and compel them to enforce.
Recently, there was a case in Alberta where Service Alberta and Red Tape Reduction issued a director’s order against one of these debt advisers. We’re now collaborating and have an MOU going to enforce that director’s order. These are baby steps, but we are seeing some traction with the provinces to enforce this.
Senator Yussuff: Given the scope of the changes in the legislation, what data exists to inform the public of how bad the problem is so that at least they appreciate why these changes are necessary?
Ms. Manek: Thank you for that question. There is a host of things we have been doing to inform the public.
We partner with other government organizations for Financial Literacy Month to put it out there. We are on social media. We have a debt solutions portal that gives debtors the ability to look at what their best options are. Licensed professional directories are available on our website. There are a few consumer awareness campaigns as well. There are quite a few engagement efforts to get the word out and empower Canadians on this.
However, you are absolutely right that these are people who are already financially vulnerable. There might be financial literacy issues. That’s why we are trying to partner with other organizations to push the message through.
Senator Dalphond: My question is about the lack of resources and the discipline of the profession.
Yesterday, I asked other witnesses about lawyers, doctors and accountants; they protect their fields of exclusive practice and will sue those who claim to be those types of professionals. Here, I don’t know if the problem is maybe that the trustees don’t have a group as such. I’ve forgotten about that. Maybe you will know better than I do.
Here, the way it is drafted, if, on the application by the superintendent, a court determines — and I’m not talking about criminal or quasi-criminal proceedings but civil proceedings — was it contemplated to give the power to the superintendent or the association representing the trustees to initiate these proceedings? That would relieve you, with limited resources, of having to do the civil part of these things and allow you to focus on the criminal part of it.
Ms. Manek: To confirm, there is a group. Yesterday, you heard from Wesley Cowan from Canadian Association of Insolvency and Restructuring Professionals, or CAIRP.
Senator Dalphond: Yes.
Ms. Manek: So there is a group.
I cannot speak to whether that conversation about giving those powers to the associations happened. We can circle back with you on that.
I can confirm that there is an eagerness from the association for us to have these powers. They are equally eager to see this go through, largely because all this puts their professions into disrepute.
Senator Dalphond: It is the same for lawyers, accountants, doctors and psychiatrists, but they handle it themselves at no cost to the public.
Ms. Manek: Right.
Mr. Simard: If I can add a bit of context, unlike the professions you have listed, this is not really a self-regulated profession. That’s the key difference. Here, we have a regulator of the profession. It is a different set-up. For example, their code of conduct, although I’m sure it is developed in collaboration with the professionals, is built in a regulation that is approved by the Governor-in-Council, so it is a different model. That may be why it didn’t immediately offer itself, but it is a very astute observation that these are different models.
The Chair: Thank you.
Senator Pupatello: I would like to follow up on Senator Varone’s question. Is there any middle ground here so that a company or individual going to the extreme measure of a bankruptcy would have an adviser that could potentially have a different outcome? Once you go with a trustee, that is the route you are going. That’s the most extreme route for a company or individual, as opposed to the potential of an adviser — a good actor, because there are some good ones — who would advise on how to get around that and not go to that final step of bankruptcy, which is the worst outcome. Just like for paralegals, lawyers, bookkeepers and accountants, is there any room at all for a middle ground so that they are not going that final route?
As was mentioned yesterday, ultimately, the creditors would prefer to deal with resolutions other than a trustee, because it means they are not getting all their money. I wish there were some opportunity to recommend a path for a middle ground.
Mr. Simard: My only point would be that, setting aside the issue of businesses — which I think was a good point raised by Senator Loffreda earlier — consumer proposals are an option under the Bankruptcy and Insolvency Act, or BIA. In fact, in the vast majority of outcomes with a trustee on the personal side, you would have a consumer proposal. When we talk about individual bankruptcy, within the sandbox of the BIA, it is not necessarily the extreme outcome of bankruptcy. In fact, it is more likely that you would have a legally binding consumer proposal with your creditors.
Senator Pupatello: I am assuming that the cost associated is much higher when you are dealing with a trustee.
Mr. Simard: The fees are regulated and capped.
Senator Pupatello: Is it much higher than it would be if —
Mr. Simard: It is very affordable compared to the international benchmark.
Ms. Manek: I would add that when a debtor walks into a trustee’s office, it doesn’t mean that they will declare bankruptcy or file a consumer proposal. As I said, Licensed Insolvency Trustees are held to high ethical and professional standards. When someone visits a trustee, all options are on the table, whether they are court-driven options like bankruptcy or consumer proposals, but non-insolvency options must be on the table as well. I want to reaffirm that visiting a trustee does not mean that you will be filing for bankruptcy, because the requirement is to discuss all options.
[Translation]
Senator Henkel: I have a very quick comment. I’d just like to say that what matters to us here are Canadians. Based on the question that Senator Pupatello just asked, it’s important to note that Canadians don’t understand the true role of a trustee. It’s extremely poorly perceived. It’s as if the trustee is just there to put us out of business.
Ms. Manek, I think you were saying earlier that you work with organizations and on a way to communicate. With all due respect to your institution, I think you should maybe consider how to make it clear today that the trustee isn’t there for bankruptcy, but for advice before bankruptcy. Trustees should be consulted long before it comes to the final stage of bankruptcy.
The Chair: Thank you for that.
Senator Dalphond: I would like to pick up on the discussion we had earlier, just to clarify things for everyone. A consumer proposal is what a normal individual who is neither a business nor a company can use. Could you explain to the committee members how the trustee is paid and how that’s regulated? I know the answers, but I would like everyone to know just how regulated it is.
[English]
Ms. Manek: You will have to forgive me. I will have to circle back with you on this question.
Mr. Simard: Yes. If you had asked this question to the Canadian Association of Insolvency and Restructuring Professionals, or CARP, yesterday, they would have told you — as Senator Dalphond said — that their fees have not been raised for more than 20 years. I’m not sure that it’s the case that it’s more expensive to go see an LIT than a lawyer.
In fact, there is a regulatory project to adjust their fees to inflation because they have been maintained and are very low. I would give two thumbs up to the points made by Senator Henkel. Those services have to be accessible, and people need to understand that they are not only for bankruptcy.
There is another twist to this. There is a stigma associated with bankruptcy. I wish we could remove it socially because for some individuals, formal bankruptcy is the best outcome.
However, because of the stigma, they may enter into a consumer proposal that will, in the end, cost them much more money. That is a conflict of interest for people who are not licensed. They are using that stigma to push people into consumer proposals, and they are getting a kickback from the creditors to push people in that direction. That’s something an LIT cannot do. If it is honest advice that it is best for you to go fully bankrupt, we hope that they will give that advice.
[Translation]
The Chair: Thank you for that. The perception of bankruptcy in Canada is completely different from that in the United States. In the United States, it’s not the same thing.
We’re going to wrap up this division with Senator Ringuette.
[English]
Senator Ringuette: I have a brief question: Where are the debt consolidators in this? Many advertise themselves as debt consolidators. Where do they lie?
Ms. Manek: Thank you for the question. They run through various titles and names that they give themselves. So I would rather not focus on the names that they give themselves but instead the predatory nature of what they are doing. If there were a debt consultant who had predatory tactics, this would cover it.
Thank you.
[Translation]
The Chair: Thank you very much.
Honourable colleagues, we will invite our friends from CMHC to come forward. We welcome Mr. Tremblay, Chief Financial Officer, and Ms. Sanfaçon, Executive Vice-President. We’re going to cut a bit into the next hour, which will be in camera.
I don’t think you have any opening remarks, Mr. Tremblay or Ms. Sanfaçon. Don’t be offended if the session is shorter with you. When it’s shorter, that’s a sign that everything is going well and that there’s no issue.
Honourable colleagues, let me know if you wish to speak on Division 8. Thank you to the other witnesses.
[English]
Senator Varone: I have a variety of questions. Let me put them on the table. With respect to Ms. Sanfaçon, the Canada Mortgage and Housing Corporation, or CMHC, has a new partner in housing called Build Canada Homes. They also have the ability to issue loan guarantees as part of the act. Does the raising of this limit take into account what Build Canada Homes will be doing on that side with respect to loan guarantees or is that separate and apart?
The second question I have deals with terms and amortizations. I had the privilege of addressing the National Apartment Council on Tuesday. One of the active topics of discussion was the 50-year amortization for that industry in building market rentals, only because the costs associated with putting them up and the rental restrictions in terms of affording those rentals to Canadians. The disparity could only be matched by lengthening the amortization. Right now, a 50-year amortization is not a CMHC-insured product.
The third question is this: The U.S. has products like a 25-year term, 25-year amortization or a 30-year term, 30-year amortization. We have resisted those kinds of products in the Canadian landscape forever, and the rhetoric from the banks is that they have trouble matching funds with that kind of lending. Why is the U.S. successful with this and we cannot get started with it?
Those are the three questions I wish to table.
The Chair: Before continuing the discussion, I want to highlight the presence of Mr. Boldt from the Department of Finance for this division.
Matthew Boldt, Senior Director, Housing Finance, Department of Finance Canada: Thank you very much for the three questions, and CMHC will hopefully expand on some of these if you don’t mind.
The CMHC guarantee limit is distinct from anything that Build Canada Homes is doing. The reason that the government is proposing to increase the guarantees-in-force limit to $1 trillion is largely a consequence of a measure that the government took a year ago to increase the annual issuance of Canada mortgage bonds. So CMHC is guaranteeing and supporting the securitization of more mortgages every year, which is causing the total stock of guarantees in force to increase more rapidly. That is why they are going to hit the legislative limit soon unless we take this measure.
So it is completely distinct from the activity that Build Canada Homes is doing. CMHC’s mandate is more focused on the market housing space, whereas Build Canada Homes is primarily focused on the non-market housing space.
On the rental apartments and the 50-year amortization, CMHC does have an insured mortgage product that does go as far as offering a 50-year amortization, but maybe Ms. Sanfaçon could talk about that in a moment.
On the last question, it comes up a lot: Why do we not have longer-term mortgages in Canada? Why do we have to renew after five years or three years? People are also increasingly choosing variable-rate mortgages, whereas in the United States, it is true that borrowers are able to lock in a rate for 30 years.
The previous government did indicate that the Department of Finance was going to consult on long-term mortgages. We did talk to some stakeholders about that. If I could, I would say that’s a broader policy conversation; it’s not really central to these measures that are on the table right now. However, I would love to have a longer conversation about that question at some point.
[Translation]
Senator Henkel: One of the things that Division 7 tackles is the increase in CMHC’s guarantee capacity, particularly to support securitization, which means that it helps lenders obtain new funds to continue issuing mortgages.
How do you expect this additional capacity to affect Canadians? Will it result in better rates, better access to financing or more housing?
Mr. Boldt: I can start by saying that these measures increase the limit in the act.
[English]
It is going to permit CMHC to continue ramping up the annual issuance volumes of its securitization programs. The Minister of Finance and CMHC work together to set the terms and conditions around those programs. This doesn’t really affect how we are doing securitization, but it permits larger volumes.
[Translation]
Caroline Sanfaçon, Senior Vice-President, Insurance and Securitization Canada Mortgage and Housing Corporation: I would like to add something. The funds that go through securitization are very beneficial funds. It’s the best source of funds after deposits. Technically, that means it translates into lower costs for issuers, which issuers can then pass on to the consumer.
[English]
Senator Loffreda: My question regards housing supply and taxpayer exposure on Division 7. The bill, as we have noted, increases the CMHC’s guaranteed limit to $1 trillion and raises the protected limit for privately insured mortgages to $500 billion.
What stress testing supports these increases? How will Parliament be informed about the resulting exposure to potential losses? Stress testing is always extremely important when we are setting limits. Further, what evidence shows that existing limits are constraining housing construction? How much additional rental supply do you expect to generate from these changes?
Mr. Boldt: Those are great questions. I will start by saying that all of the mortgages that go into CMHC’s securitization programs are insured mortgages. So you have CMHC and two private insurers that provide that mortgage insurance and share that market among the three of them. The two private mortgage insurers — Sagen and Canada Guaranty — are supervised by OSFI, the banking regulator. They are required to meet capital requirements set out by the banking regulator. Regarding CMHC, there is a bit of nuance there. They are not formally supervised, but there is a requirement in the National Housing Act that OSFI go in and look at what business CMHC is doing and provide reports to the Minister of Finance and the Minister of Housing at least annually on the risks and how CMHC is managing all that. Effectively, they are being supervised by OSFI, and they implement the same capital requirements that OSFI is putting on private insurers.
Apologies, but could you remind me of your second question?
Senator Loffreda: It regarded what evidence shows that the existing limits are constraining housing construction and the additional rental supply that these changes would support.
Mr. Boldt: Ms. Sanfaçon, maybe you could build on that. I would say CMHC has supported the vast majority of rental housing construction that has taken place in the past few years, and a lot of those volumes are being securitized through the guarantee programs.
Ms. Sanfaçon: According to our studies, 85% of what has been built has been supported by one of the CMHC products, primarily the mortgage and loan insurance products.
In the case of rental financing, it is very common to see 5- and 10-year terms and have securitization supports during the time of the term. Having more than 10 years actually accelerates what could be the outstanding balance of guarantees in the books. This is an important measure because it ensures that we can continue to support the rental construction financing on the mortgage and insurance side.
Senator Loffreda: Thank you.
Senator Ringuette: In essence, we are talking about the cost of providing mortgage insurance. The concept of mortgage insurance was constructive after the Second World War, but actually, when you look at it — and I would like to have your honest answer — how much does this mortgage insurance protect our big banks and what is, in reality, the cost to our mortgage holders to have this additional organization in the process of acquiring a mortgage?
Mr. Boldt: That’s a very important question. I take it as a bit of a given. It starts from the Bank Act’s requirement that on a homeowner mortgage, if the borrower has less than a 20% down payment, the Bank Act requires mortgage insurance. There is no discretion.
Senator Ringuette: I know. It’s a guarantee we have given to the big banks in another time and another space. I don’t expect that you can provide the information, but ultimately, what is the cost to the mortgager of having to subscribe to this infrastructure of CMHC in comparison to only dealing with a competitive banking system?
Mr. Boldt: Yes, borrowers pay a mortgage insurance premium to access mortgage insurance. The question is this: Without the mortgage insurance framework, would those borrowers have been able to access homeownership? These are the riskiest borrowers in the system.
Senator Ringuette: I think your question is premised on a non-competitive banking system and non-competitive loan access.
Senator Yussuff: I have two brief questions. I recognize the important role that CMHC plays in the ecosystem around home ownership. We are going to $1 trillion now, which is a significant amount. It’s almost half the GDP of the country. What is the current limit that CMHC is able to access based on parliamentary authorization?
Mr. Boldt: Currently, the guarantee’s enforced limit is $800 billion.
Senator Yussuff: So they just need $200 billion more in that regard. Does the department anticipate this will meet the gap that they say exists currently, so it doesn’t have to come back to Parliament again?
Ms. Sanfaçon: Based on our forecasts, it should cover it, yes.
Senator Yussuff: Thank you very much.
Senator Fridhandler: I want to ask Mr. Sorenson about Division 3. He mentioned there has been public consultation that would have included the small- and medium-sized banks and other players in the sphere relative to harmonization. I would like a written response on what consultations have taken place and a reference in case we want to pull those records to understand, whether it is the 2024 consultations that I think you mentioned, prior consultations or recent consultations relative to these amendments. Could that be provided to the clerk?
The Chair: Mr. Sorenson, can you take note of this request?
Mr. Sorenson: Are you looking for written documentation of the consultations that have taken place with small- and medium-sized banks in respect of the broker deposit issue?
Senator Fridhandler: Yes, and the development of your voluntary code.
The Chair: To all our witnesses, on behalf of my colleagues, we thank you for being here this morning and for your public service. We are lucky to have people with such expertise with us this morning. We appreciate your time.
(The committee continued in camera.)