Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 20 - Evidence - June 6, 2012
OTTAWA, Wednesday, June 6, 2012
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:16 p.m. to examine the subject matter of those elements contained in Divisions 2, 10, 11, 22, 28 and 36 of Part 4 of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012, and other measures.
Senator Céline Hervieux-Payette (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: The meeting is in session.
Honourable senators, this afternoon we continue our pre-study of certain divisions of Part 4 of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012, and other measures.
We have already heard from the Minister and his officials, and from officials in the two agencies affected by the legislation. Last week, we started to hear from witnesses outside the government, and this afternoon we are continuing that process.
We have the honour of having the representatives of the Canadian Bankers Association with us today, and we welcome them. With us are Marion Wrobel, Vice-President, Policy and Operations, and Nathalie Clark, General Counsel and Corporate Secretary.
Nathalie Clark, General Counsel and Corporate Secretary, Canadian Bankers Association: We are pleased to accept the committee's invitation to answer questions on behalf of Canada's banking industry about Bill C-38, the Budget 2012 implementation bill.
I would like to begin with a few points about the banking sector in Canada, particularly in light of the current global economic uncertainty.
[English]
As we all recently learned during the global financial crisis, Canada is not immune to the fallout from problems that originate elsewhere in the world. However, it is important to keep in mind that, unlike in many other countries during the crisis, Canada's banks did not require taxpayer-funded bailouts, nor did we have any bank failures here in Canada.
While no banks in Canada faced insolvency, this was a time when international capital markets were not functioning normally. As a result, the government established the Insured Mortgage Purchase Program through which the Canada Mortgage and Housing Corporation insured mortgages from banks on market terms in order to inject much-needed liquidity into the Canadian economy. These measures were taken so that banks could continue to lend to consumers and businesses to help the economy through the recession.
In fact, during the global financial crisis, our banks continued to lend while many other sources of domestic financing pulled back or pulled out of the market completely. The government made money for taxpayers on the program, and the Canadian economy benefited through the increased liquidity.
As was the case leading up to the global financial crisis, today our banks remain well-managed and well-capitalized institutions operating in a competitive market and with an effective and efficient federal prudential and consumer regulatory oversight. Because of these facts, banks continue to contribute to Canada's economic recovery and growth. A strong and healthy banking system is an essential component of the Canadian economy. It is a cornerstone to helping Canadians buy homes and save for retirement, helping small businesses grow and thrive and promoting Canada's brand internationally.
In 2011, Canada's banks provided close to $800 billion in credit to businesses, and total bank credit for consumers was $1.2 billion. Moreover, also in 2011, Canada's largest six banks paid $8.7 billion in taxes to all levels of governments in Canada. Canada's banks provided over $11 billion in dividend income to millions of Canadians, including through pension and retirement funds and in many cases directly to retirees. The banking sector helps Canada grow, generating over $55 billion or 3.5 per cent of gross domestic product. Banks were able to do all of this because they remained profitable.
Canada has been recognized by the World Economic Forum for having the soundest banking system in the world for four years in a row. Having a sound national banking system is a result of good risk management in our banks but also a streamlined bank regulatory system that consists of two primary federal regulators: The Office of the Superintendent of Financial Instutions for prudential regulation and the Financial Consumer Agency of Canada for financial consumer matters. In contrast, the United States, for example, has a complex network of different regulators at various levels of government.
A sound banking system is also based on good risk management by Canadians. While household debt is something that we are monitoring closely and certainly not something that we would ever be complacent about, there are a few key statistics that we need to consider. The first is that only 5 per cent of household debt is in the form of credit card debt. Second, Canadians have a strong track record when it comes to paying their mortgages. Less than half of 1 per cent of all mortgage holders with the country's largest banks have gone more than three months without making a payment. This number has been stable for more than two decades, in times of high and low unemployment, high and low interest rates and a strong or weak Canadian dollar.
[Translation]
As I said a minute ago, you cannot have a strong economy without strong banks, and strong banks cannot be taken for granted — it is something that we must collectively work at every day. The CBA is supportive of the provisions in the bill that are related to banking.
My colleague Marion Wrobel and I will now be pleased to answer your questions.
The Deputy Chair: I would like to get a clarification about the text you read. You talked about mortgages being bought from the banks. What is the total of those amounts, and have they been repaid? And since this was done on both sides of the border, what are the amounts in Canada and the United States, respectively?
Ms. Clark: I am going to have to refer to my colleague for the exact amount, but I know that all of those amounts have been repaid. My colleague Marion Wrobel can give you a little more detail on that point.
[English]
Marion Wrobel, Vice-President, Policy and Operations, Canadian Bankers Association: When the government put in place the insured mortgage purchase program, it was prepared to buy as much as $125 billion worth of mortgages. In the end, the banks only sold about $69 billion worth of mortgages to the government. The purchase was for the term of the mortgages. They were purchased in 2008 and 2009. If it was a package of five-year term mortgages, they would be running out in, say, 2013. If it was three-year mortgages purchased in 2008, they would have run out in 2011.
The Deputy Chair: What was the amount on the American side?
Mr. Wrobel: On the American side, I do not know exactly the number, but it was the same kind of thing. It was the provision of liquidity to the American operations of Canadian banks. There was an exchange of cash for high-grade securities. Often those securities were government securities that were traded in exchange.
The Deputy Chair: We would appreciate it if you could send the information with the exact figures.
Mr. Wrobel: Okay.
Senator Moore: Thank you for being here. You mentioned if the mortgage came up for renewal in three years. What would happen in that example?
Mr. Wrobel: In that case, the banks would repay the government.
Senator Moore: The banks took those back under their books and refinanced?
Mr. Wrobel: Yes, they would finance them in some other way.
Senator Moore: For the balance of the amortization period?
Mr. Wrobel: Yes.
Senator Moore: I was surprised to learn that our banks had received TARP money from the Federal Reserve Bank of the U.S. Were you aware of that?
Mr. Wrobel: Our understanding is that the Canadian banks did not receive TARP money. They received money under a different program that, similar to the Canadian one, was designed to provide liquidity. TARP is a troubled asset program. What we did not have in Canada with the Canadian banks was that exchange for troubled assets. Instead, it was a provision of liquidity generally to the banking system in exchange for high-grade securities. The program that the Canadian banks participated in was equivalent and analogous to the one in Canada.
Senator Moore: What were the high-grade securities that the Canadian banks gave to the Federal Reserve in exchange for those funds?
Mr. Wrobel: It would have been things like American government securities that they held.
Senator Moore: They were put up as collateral.
Mr. Wrobel: Yes. These would have all been things like Triple-A rated securities.
Senator Moore: There was a range of monies that came to our five big banks. Did you know that? Some were obviously in greater need than others. It took some of them almost two years to pay that back.
Mr. Wrobel: Again, it would have been somewhat analogous to the situation in Canada. The intent was to provide liquidity to the banking system so that the banking system could continue to make loans.
In Canada, banks receive about two-thirds of their funding from deposits. To make the wide range of loans that they make, they have to go through capital markets to get the rest of it. During the crisis of 2008-09, it was the capital markets that seized up. The institutions, to continue to lend and to make new loans, had to get it somewhere.
That is the kind of thing that central banks and governments do in times of stress. It is a standard policy instrument that they use because they recognize that these are exceptional circumstances.
Senator Moore: Thank you for that intervention.
[Translation]
The Deputy Chair: Senator Ringuette and Senator Massicotte will now have their turn.
[English]
Senator Ringuette: Thank you. I appreciate you are telling us that the Government of Canada did not bail out the banks, but the issue before us now is the budget bill, Bill C-38.
One of the major components in this bill is the covered bonds issue. I was hoping that would have been the focus of your presentation today because we have been hearing from other witnesses on this wherein CMHC will register any Canadian financial institutions that want to issue covered bonds.
With regard to this particular issue, at least the last two witnesses have told us that there will be a greater risk component to that seeking of capital. Therefore, there will probably be a higher premium with regard to that capital. That would increase costs to the banks and, therefore, I would think that being Canadian banks, you would transfer that cost to the Canadian population that wished to renew their mortgages or begin new mortgages.
I want to hear your take on the covered bond issue that is within Bill C-38.
Mr. Wrobel: We are pleased to answer any specific questions you have on covered bonds.
Senator Ringuette: Good.
Mr. Wrobel: Let me talk about covered bonds in general and what is happening in this piece of legislation.
Right now, Canadian financial institutions offer covered bonds to the market, but they do not have a legislative framework as they do in other jurisdictions.
Senator Ringuette: Yes.
Mr. Wrobel: The legislative framework provides greater certainty to investors, and investors would look at a covered bond under this new framework as being probably a safer and less risky financial instrument because of that legislative framework. We think that is a good thing. We have worked closely with the department to develop the framework, and we think the government has done a good job in that regard.
One of the changes is that under the existing contractual covered bonds, a number of banks put CMHC-insured mortgages in that category. Under the legislative framework, CMHC-insured mortgages will not be allowed in that. For those who were able to use that, the market may react to it and say it is not quite as safe.
On the other hand, there is this legislative framework. How it actually balances out for an individual institution going forward, whether it means that for covered bonds they have to pay an extra five basis points, it remains even or they pay less will depend on the institution. Maybe in a couple of years you can ask them. I cannot predict that.
However, the legislative framework we think is a big advancement forward. It will help the covered bond market. As a result, it will help banks and other institutions that use that to get financing in the marketplace to support further mortgage growth.
Senator Ringuette: Thank you for the opinion you just supplied with regard to covered bonds.
Another major issue that appears in Bill C-38 with regard to the banking community are the public pools to invest, subject to the approval of the Minister of Finance. I would like to hear your comments on that one as well, because it does not appear in your presentation.
Mr. Wrobel: Those public pools are potentially a source of capital for banks. This is different from the covered bonds, which is a source of financing.
Right now, Canadian banks do not have access to that investor pool. Banks in other jurisdictions often do. As a result of the financial crisis of 2008-09, banks in Canada and around the world going forward will have to raise significant amounts of new capital, more capital and higher quality capital. Much of it will have to be common equity.
Because it is a global market for capital, it is important that Canadian banks have access to the same capital pools around the world as other institutions, such as banks in the United States and other jurisdictions. This provision in the bill simply offers Canadian banks access to capital just as their competitors in other jurisdictions have access to.
Senator Ringuette: I must admit, I was quite surprised to see that in the bill because I have seen Canadian banks in a time of a great depression as they have been during the past five years, wherein you were using your capital to buy foreign banks. Canadian banks have seen record profits in those depressed years, so I was surprised you were looking for more capital.
I am looking at the current national investor pools, whether it is CPP or the Ontario teachers' pool. Currently, they are investing in businesses that are not financial in nature. They seem to be doing a good thing in the marketplace, so I was questioning as to whether the market should intervene, take that capital investment from the business community and put it into the financial sector of Canada. We have been told now in two pages that the financial sector of Canada is doing pretty well. Therefore, I really do not get the logic of this government making such an intervention in the marketplace.
Mr. Wrobel: This provision in the legislation does not mean that banks will necessarily avail themselves of that capital or that those pools will make investments in Canadian banks. It just means that they have access to that, should an individual bank seek to raise capital or should an investor that happens to be one of these pools in other jurisdictions find it advantageous to acquire new shares in a Canadian bank.
It is important to remember that any such transaction will be subject to ministerial approval and subject to the ownership restrictions that are already there. It just means that there was previously a restriction in the Bank Act; that restriction has been lifted. As to how it plays out at the end of the day, what institutions will take advantage of it and what investors will make use of it, that will depend on the market.
Senator Ringuette: You must agree with me, Mr. Wrobel, that such action by the government to intervene in the marketplace with regard to financial capital is probably a result of lobbying because this does not come out of thin air. Our Banking Committee has been meeting on different issues for many years, and we have never heard of such a request.
Mr. Wrobel: Senator, we at the CBA have not advocated on this for our members on a collective basis. It is possible that individuals have. In terms of the intervention, the intervention was in the legislation previously that created that prohibition, and this just takes away a prohibition that does not exist in many other jurisdictions.
[Translation]
Senator Massicotte: In terms of the budget, there is a part that distinguishes between you and the insurance companies regarding the sale of insurance policies, and it indicates very clearly that in your branch you are not entitled to sell insurance policies.
The insurance policy issue goes back a long way. You said this was an obstacle that is not in the interests of consumers. I also note that you are not making any submissions that would show that you oppose that measure. Is your position still the same?
[English]
Mr. Wrobel: Our position on the ability of banks to provide insurance products to their customers in a branch is that we have always felt that provision has been not in the benefit of consumers. We think it is good to provide choice and options to consumers in a variety of ways. In many other jurisdictions, they do that. We understand that it is the position of the government. The government has not changed its position on that, so we have not been doing any active lobbying on this issue. The government, in this legislation, has clarified its position with respect to annuities, life annuities and products that look like life annuities.
[Translation]
Senator Massicotte: Previous governments have always held to that position. Your argument is very logical, but why do you think that a series of governments have held to that position? Why do they not accept your arguments?
[English]
Mr. Wrobel: Again, traditionally, we have said that the prohibition does not serve consumers well. They should have options in terms of purchasing insurance. We did advocacy a number of years ago, and the government made it clear that it did not plan on changing its policy in that regard, and we accept the decision of the government.
[Translation]
Senator Massicotte: You say that you received no assistance from the Government of Canada. In global terms, very clearly the banks have often depended on government and taxpayer assistance to survive.
The other point that has been quite clear worldwide is that the health of the banks is fundamental to a country's economic growth. A lot of countries have taken measures to ensure that the banks do not expose themselves to excessive risks in future. The Canadian and American governments are proposing new regulations that to some extent dictate your conduct and future investments.
Some of your members say those regulations are too onerous or too complex, while others very clearly understand why they are being adopted. We do not know your position as a representative of the members of your association. From a global standpoint, what is your opinion on the subject?
[English]
Mr. Wrobel: The Canadian industry supports the objectives of domestic and international regulators who want to try to ensure that the crisis that we went through in 2008 and 2009 does not happen again, to the extent that there are those kinds of pressures in the financial sector — that if there is another, let us call it a crisis, that the impact is a lot less. A number of initiatives have come out of the international community to increase capital, to improve the quality of capital, to enhance disclosure and reporting, to make sure that financial institutions' balance sheets are more liquid and that sort of thing. Again, we support the objectivities. We support a number of those initiatives.
However, in a very short period of time, we have had a large number of those initiatives come forward that banks have to put in place in a very short period of time. This takes the focus of senior management. It puts stresses on our systems. Our view is that it would be useful to stand back at some point and look at the impact of all of these to determine which regulations work, which ones are actually dealing with a risk that is out there and which ones are producing unintended consequences or are counterproductive. It is not that we are saying there should not be these kinds of regulations. However, you should recognize that the volume of new regulations that are coming forward and the volume of new requirements in terms of capital and liquidity that are coming forward to the banks is unprecedented. I think we have to worry about what might be the ultimate impact of that.
[Translation]
Senator Massicotte: In the United States, they have what is called the Volcker Rule, which prohibits banks from making certain types of investment that are considered to be risky. For the last two or three months, in Canada, RBC's shares have declined significantly because the market believes it is involved in risky investments.
Do you think the Canadian government, like the American government, should apply that rule, which would prohibit Canadian banks from making certain types of investments?
[English]
Mr. Wrobel: I will give a short answer and then turn to my colleague.
Many of the problems that they saw in the United States, for which the Volcker Rule is supposedly a solution, were not evident in Canada. Some of the institutions that failed or were under severe stress were stand-alone investment banks. In Canada, our largest investment banks are part of a retail banking structure and, as such, they are regulated by the Office of the Superintendent of Financial Institutions, because OSFI engages in consolidated regulation. In many respects, our investment banking industry is much safer, or was a lot safer, than the American counterpart, which were often stand-alones and that had very high leverage ratios.
While Volcker is a very contentious piece of legislation, and while Americans may look to their structure and say it is appropriate, we do not think it is appropriate in Canada. In fact, it has many negative consequences for Canada.
Ms. Clark: I would add, if that is part of your question, the impact that these types of measures in the United States have on Canadian banks or Canadian institutions. We have seen a tremendous amount of regulation coming out of the international scene and specifically coming out of the United States.
The Volcker Rule is part of the Dodd-Frank Act, as you probably know, and the Volcker Rule has two aspects. It prohibits proprietary trading. As Mr. Wrobel mentioned, it was aimed at those stand-alone investment banks that were involved in risky transactions. Our banks, as you know, have much more conservative practices and are typically not involved in these types of high-risk practices. The Volcker Rule also has an extraterritorial impact, so it will impact Canadian banks, and it will impact Canadian banks particularly on the mutual fund side.
There is an exception to the Volcker Rule: When the transaction is solely made outside the U.S., it is permitted. Unfortunately, solely outside the U.S. is related to the Nexus, where individuals are located, and most Canadian banks have one aspect of their mutual fund transactions that potentially could be in the U.S. For example, if a Canadian vacations for a certain amount of time throughout the year in the United States and transacts in their investment account, even though the mutual funds are with a Canadian institution or in Canadian funds and transact with Canadian counterparts, the person is located in the U.S. and so the transaction would be caught by the Volcker Rule.
These types of extreme measures have been subject to a tremendous amount of negative comments by most international jurisdictions. You might know that the American government receives 17,000 letters of comment that all take great concern with the Volcker rule, particularly here in Canada. It will have an impact because of our close connection with the U.S.
Senator Massicotte: The budget bill has a provision for CMHC. Those talks also led to some discussions and comments by our Minister of Finance, Mr. Flaherty, as to the role of CMHC. Excluding the social housing side, the argument he made and the argument that C.D. Howe made is that the insurance side is a commercial operation and there is no particular reason why Canadian taxpayers have to be involved in insuring mortgages because the old mandate created many decades ago is not currently applicable.
Do you agree with that? Would you support the privatization of the mortgage insurance side of CMHC?
Mr. Wrobel: The federal government has a number of Crown financials that it has created for public policy reasons, the idea being that there are certain things that the private sector does not do to a sufficient degree that it would like to see done. CMHC was created historically for that. Our view on CMHC, as it is with other Crown financials, is that it needs to have a well-defined public policy mandate. The government should have some sense of what it wants it to do. It should be complementary to what is happening in the private marketplace, so if it simply replaces something that could be done by the private sector, it should not do that and should be subject to a strict and robust prudential regulatory regime.
If those three characteristics were to apply to Crown corporations and the government decided to use a Crown to further its public policy, it would be its decision.
Senator Massicotte: What is the conclusion about mortgage insurance?
Mr. Wrobel: On things like the high loan-to-value mortgages, enabling households that cannot come up with 20 per cent down payment to have access to housing, to some degree the private sector would do that. The private sector players out there also have a government guarantee because they are competing with CMHC.
The government would have to decide, as it does with lending, for example to small business, what the risk appetite of the private sector would be and whether the government thinks that the private sector would deliver enough of that insurance to meet its public policy objectives, and then make a decision. I do not know at this time whether the private sector would do that. It would have to be investigated and then the government would have to decide.
The Deputy Chair: I am tempted to say: if it is not broken, do not fix it.
[Translation]
I am wondering whether this is change for the sake of change or there will really be an improvement.
[English]
Mr. Wrobel: CMHC has grown enormously over the last few years. That is one of the things that the government is looking at. We have watched a number of Crown financials grow substantially over the last little while. In part, it has been the result of the financial crisis and the result of the recession and the government seeking to have those Crowns play their part. Going forward again, if there are clear principles that guide what a Crown financial does in terms of complementarity, a robust prudential regulatory regime and a clear public policy mandate, then we would have Crowns playing a role that everyone understands; and that would be consistent with the objectives of the government.
It is useful to consider the mandates and operations in that regard.
[Translation]
Senator Maltais: I am not going to talk to you about the Crown corporations; they have all appeared before us. But we are going to talk about the banks. If the government had not intervened in 2008, via the Canada Mortgage and Housing Corporation, what would have happened to your members?
[English]
Mr. Wrobel: What would have happened is that the banks would not have expanded lending as substantially as they did. In the fall of 2008, just after Lehman Brothers collapsed, global financial markets almost seized up. There was the possibility that financial institutions could not operate because they could not get financing. In the fall of 2008, business lending by Canadian banks over a three-month period went up by well over 10 per cent, I believe. That was a reflection of the robustness and strength of the Canadian industry.
Part of that growth was enabled by those kinds of initiatives. If we did not have government intervention to provide liquidity to the system, you would not have seen that robust growth in lending to both businesses and consumers. You might have seen some loans called by banks but you would not have seen a failure of banks, and that is the test. If in the absence of that banks would have failed, then you can think of it as a bailout; but they would not have failed.
[Translation]
Senator Maltais: In a nutshell, do the members of your association think it was a good, quick solution?
[English]
Mr. Wrobel: Yes.
[Translation]
Senator Maltais: So the banks are back on an even keel, and the economy is going along well. We see the banks' quarterly financial reports and everyone makes their tidy little billion every three months; there are no problems reaching that figure, give or take a few ten million.
Could some part of those profits, which are entirely reasonable, not be set aside for the future, in case of another recession, so you would not be having to hitch a ride on the government the next time?
[English]
Mr. Wrobel: I cannot predict the future. We know that economic pressures emanate from other jurisdictions, the United States and Europe. The financial sector in certain jurisdictions is not as strong as it is in Canada. We should not be complacent. We should recognize that there are potential risks out there. Should there be a replay of this kind of episode, then it would be appropriate for government institutions and central banks to react the way they have reacted in the past. The provision of liquidity to a financial sector in times of stress is the job of a central bank.
[Translation]
Senator Maltais: I understand what you are saying; my question is very simple. Could some part of the profits you make every three months not be set aside to provide for the possibility of another economic crisis? A head of household does not put all the bread on the table in one day; they keep some in the pantry. Might you be able to do that?
[English]
Mr. Wrobel: Absolutely. I think that makes a lot of sense. If you look at what happens to those profits every quarter, a very large proportion, something like 50 per cent, is retained in earnings and contributes to the growing capital base of the banks. Not all of it is distributed to shareholders.
[Translation]
Senator Maltais: I understand, but your members, not you, have a tendency, when they make profits, to go out and buy something. I have the evidence here. Laurentian Bank has just been capitalized by the financing corporation, the Caisse de dépôt, in the amount of $100 million, and it turns around and buys a trust company. The Royal Bank, as soon as it reported a profit three times in a row, buys a plaything in the United States and is in trouble as a result. Could you not plan for the future and slow acquisitions down to the same level as the interest rate you offer on our RRSPs?
[English]
Mr. Wrobel: To maintain a strong balance sheet, banks that have capital want to ensure that they employ it in a way that earns an adequate rate of return and earns, if they can, a better rate of return.
When they make acquisitions, they are looking at opportunities to get a better rate of return. Sometimes it works; sometimes it does not work. The idea is not just to expand for the sake of expansion but to find profitable opportunities. Sometimes the value of that is in diversifying your activities so that you are not just exposed say to the Canadian economy; you are now exposed to the American economy as well. That is diversification. If you are into just retail banking and then get into things like wealth or investment management, you diversify your activities to again diversify risk.
Often those kinds of acquisitions are designed to make the institution not just bigger, but safer.
[Translation]
Senator Maltais: The person on the street finds it hard to understand how you, the banks, your members, can be making record profits every three months, and next year we cannot be sure we are not going to have to pay the banks to keep our money in the vault, with the interest rates charged to small borrowers who cover all your banks. People wonder whether we have not reached a point where they will have to pay the bank to keep their money in its vault because interest rates are out of proportion to the profits you are making. The interest rate you offer to consumers, to the borrower, is out of proportion to your profits; do you agree with me?
[English]
Mr. Wrobel: Senator, we are not ashamed of the fact that we make profits. In fact, it is reflected in the strength of the industry. I think we make profits because we serve our customers well. If you look at jurisdictions where they do not serve their customers well, where they make bad decisions, they do not make profits; they make losses.
From the point of view of parliamentarians and government, you would rather have profitable banks in your jurisdiction than unprofitable banks.
[Translation]
Senator Maltais: We all agree that the purpose of a bank is to make money. No one on earth opposes that principle. The purpose of a mining company is to make money; everybody's purpose is to make money. I do not know of a bank where it says we are going to lose money here. There is no such thing. We are not going to delude ourselves; I am just asking whether you set anything aside. You tell me you do: 50 per cent of profits are set aside in case there is another recession. Bravo! But in the meantime, would it be possible for consumers to benefit from it a little?
You know, your rate on credit cards is also not the lowest. It is not as nice as people think. So I do not know how consumers can get back on their feet, without putting you in a bad position. I pity the banks, heaven help them, but spare a thought for consumers. You should think about them a little; they are the ones who make the deposits, after all.
Someday we will come back to credit card interest rates; I am not sure you are going to be happy.
[English]
Mr. Wrobel: Senator, if you look at the household debt of Canadians, you will find that a very small proportion represents credit card debt. It is about 5 per cent. The majority of Canadians pay off their credit card bill in full every month and, therefore, do not pay any interest. Their credit card interest rate is zero.
[Translation]
Senator Maltais: Fortunately.
[English]
Mr. Wrobel: The majority of household debt is in the form of mortgages. I would remind everyone who has a mortgage — I have a mortgage, and I have never in my life paid such a low rate of interest on my mortgage.
If you are talking about what interest rates are like for your typical Canadian, 75 per cent of Canadians are homeowners, many of them have mortgages or have had mortgages and they have never enjoyed low interest rates as they do today.
[Translation]
Senator Maltais: What you are telling me is all very well. I agree with you. But one little thing remains, and that is that everything you have told me relates to the banks. The government intervened via CMHC; people pay off their credit cards because they are afraid of the interest rate; people are paying their mortgages because the rate is low. But someone who puts their money in a pension fund with you is not all that happy as the days go by. When they look at the profits in comparison with their pension fund, they are not looking at pushing their retirement to age 67, they are looking at pushing it to age 95. At some point, they are going to do something. People who have their pension funds with you are worried. What could you tell me, to reassure them?
[English]
Mr. Wrobel: I would say that the vast majority of Canadians, either individually as stock owners or through people who have mutual funds or who are members of the Canada Pension Plan or another pension plan, a large part of their assets are invested in bank stocks. While they do not see it directly because they may not actually own a bank stock directly, a lot of their preparedness for retirement and net wealth is associated with banks and the success of the banking sector.
Maybe we have to do a better job of letting them know, but I think from that point of view, banks are actually very good for Canadians as investors. If you look at what has happened to bank stocks since the crisis, I think they have done very well. I think Canadians as investors in banks have done very well. That is a reflection of the profitability of the banking sector.
The Deputy Chair: Thank you, Senator Maltais. I think the message for you, my colleague Senator Maltais is using you to deliver the message, that even senators would like to see a better rate of return on the money they have in their bank accounts.
Moreover, what is important is to have a balance. We understand what you have said, but I think it is also important — the purpose of this meeting is to have a dialogue. It may not have a direct impact on the bill, but we have to answer these questions as Banking Committee members, such as why the rates for services are increasing. Do you understand? You are there to provide us with the answers, because we are not managing banks. We are parliamentarians dealing with legislation.
[Translation]
Senator Massicotte: I would like to make a comment. Senator Maltais should perhaps sit on this side more often.
[English]
Senator Harb: I was intrigued by your presentation, mainly when you were talking about consumer lending. You mentioned something that was very interesting, namely the fact that credit cards represent only 5 per cent of the overall portfolio of consumer borrowing.
Mr. Wrobel: Yes. Credit card debt represents about 5 per cent of household debt.
Senator Harb: In essence, now, there are some who are just running up and down the highway saying that we are over leveraging ourselves and consumers are borrowing too much. However, what I hear you saying is that that is good borrowing. In fact, most of the money that consumers are borrowing is for mortgages. Is that correct?
Mr. Wrobel: Yes. They are buying houses. They are investing in real assets. To the extent they are using other types of vehicles, like lines of credit, often they are renovating their homes and that sort of thing. When you look at household debt, it is important not to just look at it as a gross number or a gross number in relation to income, but to look at the balance sheet. You have to do both. If you look at both, you get a better perspective. That is not to say that there is no issue and that we should be complacent, but you need that overall perspective.
Senator Harb: When you say that, if I am buying a home, the chance is pretty good I have 35 to 40 per cent equity if I bought the home a few years ago. To that extent, I believe you. I have some concerns about some who are just ringing the alarm bells to the fact that we are almost on the verge of a crisis. In fact, we are not in a crisis at all. In essence, we are in a strong position because we are borrowing to buy homes, which we should be doing to help our economy. Right?
Mr. Wrobel: We are not saying there is not a problem; we are not saying there is a problem. We are saying we should take a measured look at the issue and, if we see issues, deal with them.
Senator Harb: I have a question dealing with CMHC. The government came in and took some money off your balance sheet and put it on the balance sheet of CMHC. Did CMHC make any profit off that?
Mr. Wrobel: Yes.
Senator Harb: How much?
Mr. Wrobel: I do not know the exact number, but my understanding is, through the IMPP, the government has made or will make several billion dollars.
Senator Harb: Combining the taxes that you pay to the treasuries and dividends, it is approximately close to $19 billion, I think. Are there any other sectors in the economy that pay more taxes and dividends that yours, that you are aware of?
Mr. Wrobel: I do not think so.
Senator Harb: Finally, my colleague asked you a question about CMHC, and part of what we are studying is the overall administration of CMHC. The government wanted it to fall under OSFI's supervision, which is not necessarily bad. What would you say about other financial corporations, such as BDC and EDC?
Senator Moore: Farm Credit?
Senator Harb: Yes, Farm Credit. Should we not use a level playing field and treat everyone in the same way?
Mr. Wrobel: We think it is a very good idea.
Senator Harb: We are taking notes of that in the minutes. That is a good idea. That should be extended to everyone else.
Mr. Wrobel: We are not suggesting by that necessarily that they are badly run. When we say CMHC should be subject to OFSI prudential oversight, we are not saying CMHC has done a bad job and has bad management. We recognize that CMHC is an important player in the marketplace. It is large. If it does a bad job, it has the potential to create financial instability. We were very supportive of that phrase and that the mandate of CMHC should be to contribute to financial stability. We think that is also important for other Crown corporations, especially those that are important in certain sectors of the economy.
Senator Harb: It is good to also stay at arm's length. To be honest with you, and you can share your experience with me, I think putting it under the supervision of OSFI is a good idea, but my problem is that we also have two deputy ministers who are sitting on the board of directors. That creates, to a large extent, a sense of complacency. If, for whatever reason, there is a screw up, the board of directors who are supposedly independent will say, "Do not look at me. Your two deputy ministers sit on our board, and they were there when we made that decision. " In a sense, that is a bit out of character. I think maybe the government has gone a little too far in exposing itself to a potential problem down the road, whereas they should divide between the two board of directors and OSFI, just like with any other corporation.
Mr. Wrobel: Ms. Clark, would you like to talk about corporate governance?
Senator Harb: What do you say about that, Ms. Clark? We do not do that with banks, do we? We do not have deputy ministers sitting on banks' boards, do we?
Mr. Wrobel: OSFI has said in the past, Julie Dickson in her speeches, that corporate governance is an important part of ensuring that an institution operates safely and soundly. The government is the shareholder. I am not competent to say —
Senator Harb: You will not lecture them?
Mr. Wrobel: — it is a good or a bad idea. However, on the idea of having prudential oversight by OFSI, which is a well-respected and excellent prudential regulator, I think it is important to do that with federal Crown corporations as well.
Senator Harb: Senator Massicotte asked you if you think we should privatize the insurance portion of CMHC. You answered well with the fact that it is a measured risk. If there is an appetite in the market, we would have seen many insurance corporations up and running by now. There are one or two, and they have a small portion of the market as it is.
Mr. Wrobel: It is hard to judge, because CMHC is the dominant player and CMHC has 100 per cent government guarantee. It may very well be that no private sector player can compete as long as CMHC is there. You then say, "Well, of course you need CMHC. " I do not know but, in theory, that is the way I would look at it. Whether in practice I have a good way of actually doing that empirically, I cannot say.
Senator Harb: Thank you. Keep doing the good job you are doing.
Senator L. Smith: The bill amends the Bank Act. It has a preamble re-affirming exclusive federal jurisdiction over banking. You talked a bit with Senator Massicotte about the regulatory system that has differentiated us. Where do you see regulation going? Obviously, there are pros and cons to policies and regulation, but to preserve this value- added difference that the Canadian banking system has, where do you see our regulatory system moving?
Ms. Clark: I think it is important in order to maintain the integrity of our regulatory system to protect federal jurisdiction over banking. One of the strengths of the Canadian banking system has been that it established a national standard, not only from the prudential side but also from the consumer protection side. I think it is integral. As you know, the financial system and the Canadian banking system has been recognized many times as one of the soundest and the strongest in the world. The introduction in the preamble to the Bank Act is an assertion by the federal government to clarify the fact that it has authority over the banking system and that it has an exclusive authority over the ability to develop policy for the banking system. It is at the core of its strength. If we do not maintain the national character of the banking system, we will end up with a fragmented system. A fragmented system, as you know, introduces a number of risks, inefficiencies and confusion for consumers, who will have to look at different rules and different requirements. We applaud the government for the introduction of this clarification to the Bank Act.
Senator L. Smith: This is an open-ended question; and I am sure you have been asked this before: As you look at the U.S. and Europe and the strengths of our system, if you had a magic wand, where do you see some of these communities like the European Union moving forward in terms of regulatory actions to help strengthen, we hope, their system?
Mr. Wrobel: We have been asked many times why the Canadian banking system is so strong. Often, there are comparisons with the United States. I recall 10, 15, and 20 years ago in a forum like this one people asking why we could not be like the Americans with their thousands of banks so we could have all this access to credit. The American system is peculiar. As Ms. Clark was saying, one of the strengths of the Canadian banking system is the fact that it is national in scope and it is single. It is robust and clear. The idea of the preamble and the exclusive federal jurisdiction is to enable the Parliament of Canada to continue to determine what the banking system should look like. This committee has played a big role in shaping the banking system through policy into what it is today and into that safe system. The Canadian model is a very good one because it enables institutions to operate across the country, which they cannot do in the United States, so they diversify economic risk. It enables them to diversify across product lines. The Americans are trying to separate that.
We have a single regulator that engages in consolidated regulation, so it effectively looks at the investment banking and retail banking because it is concerned about the safety and soundness of the system as a whole. We have a legal system that says you cannot run away from your mortgage. All of those things combined, provide a system that is appropriate for the economy. It is a very good system. It is a model.
Ms. Clark: The fact that we have a handful of regulators overseeing the banking system has been a great strength in allowing the government to respond in a timely fashion in times of crisis.
Senator L. Smith: Do you see any weaknesses in the system?
Ms. Clark: I would say that the current banking system is quite sophisticated, extensive and protects Canadians extremely well.
Senator L. Smith: If there were one improvement that you would make to the system, what would it be?
Ms. Clark: Increased power.
Mr. Wrobel: I was not going to say that.
Senator L. Smith: Say that again, Ms. Clark. You said it so quickly, we did not hear it at this end.
Mr. Wrobel: One of the strengths is that the Bank Act is reviewed every five years. We keep it current. What do we want? We want the government to work with the industry to ensure that the industry is innovative, serves consumers well — I will let you read into that what you will — and evolves with the economy.
The Deputy Chair: Can you be more precise? Clause 525, which put in the new preamble, did your association have anything to do with that? Did you? That is the addition of the preamble of the Bank Act.
Ms. Clark: Our organization has been involved in lobbying.
The Deputy Chair: On this?
Ms. Clark: Yes.
The Deputy Chair: What was the concern that you had?
Ms. Clark: The objective was to clarify that the objective of the Bank Act and its extensive affiliate regulation is federal, exclusive and complete. We thought that it needed to be clarified in order to address a number of activities that we have seen coming out of the provinces in attempting to regulate some banking products and services.
The Deputy Chair: Could you give us some examples?
Ms. Clark: There have been a number of them. For example, there have been a number of pieces of legislation across the country to address security guard activities within the banks. That is one example. There have been some activities also on the consumer protection side. There are a number of examples.
The Deputy Chair: Do you think that by changing it, you will change the nature of our Constitution if it is provincial jurisdiction. It is not because we pass a law and say that consumers will be regulated only under the federal legislation and that automatically the provinces are losing their jurisdiction on consumer matters.
I ask this question because I know that some banks have removed their support for the independent ombudsman organization lately, one after the other. This was not in the major reform we did to the Bank Act. I have some concerns that they will be in a position of conflict of interest because they want to appoint and run the ombudsman, which is an appeal for some misunderstanding because they have their internal ombudsman. I understand that. However, the outside ombudsman would be under the umbrella of the banks. Do this move and this new preamble have something to do with that?
Ms. Clark: I will let Mr. Wrobel address the ombudsman aspect.
It is our position that bank products and services are under federal jurisdiction. In fact, banking power is listed under federal jurisdiction in the Constitution. I am not a constitutional lawyer, but that is what we thought needed to be clarified.
You also have heard the minister and his various officials appear before you stating the same. It is the position of the CBA as well that this power is federal in nature and has allowed Canada to establish a national standard. It is one of the strengths of our financial system, and we believe it is important to clarify that and to ensure that it is maintained going forward.
I will let my colleague address the ombudsman aspect.
Mr. Wrobel: On the issue of consumer redress and protection, there is a robust consumer protection regime at the federal level. There is the FCAC and the multitier consumer redress.
It is true, and you are absolutely right, that a couple of banks have moved away from OBSI on the banking side. Our understanding is that the federal government will be introducing regulations that define what kind of characteristics a third party consumer complaint handling mechanism will need to have. Within that framework, OBSI and some other options will be available to the banks. Those regulations will define what will be the characteristics of that redress. We support a strong consumer redress complaints and handling system.
The government is willing to allow choice in that regard. We are awaiting the regulation to see what that will require of both OBSI and the third party dispute resolution system.
The Deputy Chair: The rumour in town is that you are close to the new regulations and that it will be less protective for the consumer because it will be less at arm's length. I do not see how you can reconcile a conflict between two parties when one party as dominant and powerful as the banks has a disagreement with a consumer. This is the organization that would help settle that before they go to court. Of course, if they go to court, that means the bank has won right from the start because for the consumer, it is not necessarily a matter of a large amount of money; they simply cannot afford to go through the judicial system.
If there is a new regulation, we will have a look at it. I think the banks' reputation would be damaged if in fact the consumer does not address an organization that has a balanced approach. This is my message. I was there when we —
Senator Tkachuk: Can I ask a question?
The Deputy Chair: Yes, you can. I will finish my sentence first. I was there when we did the first review of the law and when we created the external ombudsman organization. I would have liked to know over the years what the faults were in that thing because we never heard about any difficulty with the size of the request and, of course, the cost of this mechanism. We are now looking at changing things without much consultation from consumers. That is my preoccupation.
Senator Tkachuk, do you have a comment on what I said? Senator Moore was before you.
Senator Tkachuk: I was just concerned that we have another witness and I cannot ask questions of this witness. I will wait.
The Deputy Chair: We do not have any other witnesses today.
Senator Moore: I wanted to follow up on some of the questions that Senator Massicotte asked. What is the mandate of the Canadian Bankers Association?
Ms. Clark: The CBA's mandate is to represent the interests of Canadian banks that are members. Currently, we have 53 members: the large banks, the small domestic banks and the foreign branches and subsidiaries.
Senator Moore: Do you have a role in encouraging and monitoring the banks in their observance of the law?
Ms. Clark: No, we do not play a regulatory role.
Senator Moore: You do not tell your members that the law dictates that they should do this or stop doing something improper?
Ms. Clark: No.
Senator Moore: I find that very interesting. Mr. Wrobel, in response to a question from Senator Massicotte, he was asking you about banks selling insurance. You said traditionally the banks offer choice to consumers, and that differs from government policy.
Many times government policy is enunciated in law on regulations, and whether or not you have a difference of opinion, let me suggest to you that you should be following that law. I personally do not feel that in terms of the banks selling insurance it is a level playing field. You get a customer in there and you are giving them a mortgage, you are going to offer insurance. The man or woman will say, "If I do not get it from you, I might not get my mortgage, so okay, I will do it. " That is not the same as those customers having an opportunity to canvass independent brokers for their coverage needs.
More than that — here I am defending Mr. Flaherty — by way of an order-in-council of September 22, 2011, the minister set out regulations with regard to amending the insurance business, banks and bank holding companies regulations. That came into force on March 1, 2012. It clearly sets out that certain things should not be on bank websites. It is pretty clear that the banks should not be dealing in certain types of insurance packages or coverages.
This morning I happened to look at the Royal Bank of Canada's website, and there is a heading called RBC Insurance. If you click on that, you go to personal insurance: car, home, life, health, travel, retirement. Go to your branch, find out how to do this. What do you have to say about that?
Mr. Wrobel: I have not looked at the website, and I cannot give you a determination as to whether they are actually in violation of that.
When the regulations were put in place, up until then, banks were doing certain things on their websites. I know the question was raised with OSFI, whether a website is a bank branch or not. OSFI concluded that a website is not a bank branch, and the conclusion was what banks were doing was fine. The government decided it wanted to ensure they could not do that, and it therefore had to change in the regulations. Clearly, under the existing regulations, they were not in violation of it. That is why the regulations had to change.
Similarly, with the provision in this bill, where the government is clarifying an annuity and annuity-like product, the existing wording does not stop an institution from doing what they were doing, and the government felt it had to change the wording to clarify that. There may be a difference of opinion.
Senator Moore: No difference of opinion. The government, you said, changed the law by way of regulation, so the law has been changed and they cannot continue to do what they are doing. You either believe in the rule of law or you do not.
Mr. Wrobel: My understanding is if they are in violation of the regulation, there is a process by which they can be held accountable. I am not aware —
Senator Moore: You want someone to take legal action against a bank to get them to live up to the law? That does not make sense.
Mr. Wrobel: I am not aware that the minister or the department feels that any member right now is in violation of the regulations that have been put in place recently with respect to Internet promotion and sales of insurance products.
Senator Moore: That is a very circuitous response that does not help me at all. You know that the regulations were changed for that purpose. I would think that someone in your industry would look at that and say, "Okay, people, we were doing it this way, the minister does not want us to. Policy has changed, so get on side. "
However, you are saying, "No, let the minister come tell us. " He has already done that; he has put it in black and white. You now want someone to sue the bank or take legal action against the bank to get you to live within the law. I think that is preposterous.
Mr. Wrobel: That is one of the roles of the Superintendent of Financial Institutions.
Senator Tkachuk: You are accusing them of things they cannot defend themselves against.
Senator Moore: The law is there and they are not adhering to it.
Senator Tkachuk: That is fine, but you cannot throw it in his face and expect him to answer you. He does not know the facts of the case. You are stating the facts; he has never seen the facts.
This is not what the Banking Committee should be doing, Madam Chair. You have a responsibility to govern us accordingly.
The Deputy Chair: He quoted from a document that is current.
Senator Moore: It is right there.
The Deputy Chair: He may not have the answer, and what witnesses usually say —
Senator Tkachuk: The witness said he did not have it, so leave him alone and get on to the next question.
The Deputy Chair: We usually say to a witness, if they do not have the answer to a question, to please get back to us and send it to the clerk. That is how we will conclude this.
Senator Moore: They knew they had to fix their site and they did not do it. It is irresponsible.
Senator Tkachuk: Thank you, Madam Chair. Welcome to the committee. I want to thank you for your opening statement. As many have stated here, the banking system depends on confidence, and without confidence, you do not have a banking system, frankly. Witness what is happening in Europe: People are worried about the banks. They are withdrawing their money and sending it to American banks.
There have been a number of politicians in this town who have said that our banks got bailed out and we are awash with TARP money in the United States and have been sending out that signal, which is not good for bank confidence, so I am glad you clarified it. This will help perhaps enlighten certain political members of the City of Ottawa as to exactly what happened.
Senator Harb: They are not senators.
Senator Tkachuk: I did not say they were senators and I did not say they were members of Parliament. I simply said politicians in this town.
I want to go to the CMHC and OSFI looking at how CMHC will be governed. Like all things that are government run, OSFI will be governing a government institution which, by itself, fails on the governance side, I think, but it is a good first step. It is not a complete step, because you are getting criticized because the banks are governing the ombudsman, but here the government is governing itself by using OSFI at CMHC, and perhaps other banking institutions.
Is there any way we can overcome that or do you think it requires maybe a special committee or further study to see how we can get over that hurdle so people have more confidence in not only this branch, but I think we should extend governance to Farm Credit and perhaps the Business Development Bank and other institutions that are out there lending money to Canadian citizens.
Mr. Wrobel: I think ultimately you have to have confidence in OSFI that it is an independent regulator and that it follows its mandate and is not subject to political interference. I think OSFI has demonstrated that it is a very reputable organization, that it is a high-quality organization, and that in that regard it would do its job well.
Similarly, we have roles for the Bank of Canada. The Bank of Canada is a government Crown, but it is independent of the government in its day-to-day activities. If you have confidence in the institution, confidence in OSFI, confidence in the Bank of Canada, then you have confidence in the role that it plays in overseeing Crown corporations like CMHC.
I think you have confidence in the Auditor General. The Auditor General does the same kind of thing. It is not a prudential regulator, but if you have confidence in the Auditor General then you have confidence in the activities that it engages in.
Senator Tkachuk: As the Banking Committee we lobbied the government quite hard a number of years ago to change the regulations to allow for easier access to the marketplace for new banks. I think it has been a successful policy, and the Banking Committee of the Senate was one of the leading lobby groups to make that happen.
Perhaps you could tell me how many banks there are now in Canada, how many belong to your organization and a little bit about what is going on and how it has changed over time.
Ms. Clark: I can tell you that we currently have 53 members. You know six of them are the large Canadian banks. There are quite a number of new banks in Canada. Small domestic banks, you have heard about some of the oldest ones like Canadian Western Bank, for example, but we have relatively new banks like Canadian Tire Bank is an example. President's Choice Financial is another example.
Then we have a number of foreign banks that have entered the market in Canada and are doing quite well. Capital One, with its monoline credit card business is a very good example. ING is a very good example of a group that also plays in the mortgage market.
It is safe to say that the Canadian banking system is competitive and allows for new entrants to be competitive. It also allows for our bigger institutions to have strong competition in the marketplace.
I would say, from that perspective, it is quite healthy.
Senator Tkachuk: I want to thank Mr. Martin, who actually listened to us and implemented that policy. It was good for the country.
Senator Massicotte: You can thank him for our financial stability also.
Senator Tkachuk: Our financial stability has a long history. We can go into some past, but we will not do that.
The government announced that it would eliminate the penny and stop distributing pennies this fall. What have you been doing to get ready for it? I understand that there are charities that are interested. Are you working with them? What programs do you have in place to eliminate that?
Mr. Wrobel: We have made sure that our members are fully aware of the intent of the government, what the government would like to see in terms of the elimination of the penny and that the consumer experience is a good one. We understand very well the focus of the minister on using this as a means of increasing donations to charities.
A number of our members have relationships with specific charities and they are already engaging in those kinds of discussions as to how they would put together programs to help them. We are talking with the mint to find ways to facilitate taking pennies out of circulation and providing them to the mint. We are actively engaged with our members. We want to ensure that the elimination of the penny is done in a smooth manner, that everyone involved has a good experience and that, at the end of the day, the charities can benefit from it.
Senator Tkachuk: That is another positive result. We have to always commend the Senate, but another positive result of a Senate study and the Finance Committee, and I think it is a good move for the Canadian economy.
Senator Oliver: I missed your opening statement but I have read it, and your last sentence says that against this backdrop we will discuss the 2012 budget today. The CBA is supportive of the provisions of the bill that are relating to banking.
I would like to follow up on a couple of questions that Senator Harb asked about corporate governance, because normally major institutions today are trying to reduce the size of their boards, not add to them. A number of them are finding it is a much more efficient and effective way to run the business of their companies. In the case of CMHC, they are increasing it from 10 to 12.
Second, there have been suggestions from two senators today that perhaps these two new people who are being appointed to the board under this legislation, should it pass, would not be independent. One thing, in good corporate governance today, is that a number of companies are looking to put people on their boards who are free and independent and can use independent judgment in making the tough decisions that have to be made.
If you are a deputy minister of a major government department, how independent will you be? In terms of increasing boards rather than decreasing, and in terms of the lack of independence in certain proposed appointments, I would like to know what you think of the principles of corporate governance that are reflected in the budget in relation to this.
Ms. Clark: We have not looked at the provisions regarding CMHC from that perspective.
Senator Oliver: You did not look at corporate governance?
Ms. Clark: We have not looked at it in detail from that perspective, but we would be happy to provide you with additional comments at a later date.
Senator Oliver: That is fine.
[Translation]
The Deputy Chair: There being no other questions, I would like to thank our witnesses, Ms. Clark and Mr. Wrobel. I would also like to thank my colleagues for asking questions that enlighten us and the people who are interested in our work.
As well, please do not hesitate to send us further comments, because I think you were a little sparing with your comments, specifically with respect to the clause-by-clause study.
For example, on the preamble, I would have liked you to submit a written opinion to us, to tell us about all the components.
You mentioned some problems relating to shared jurisdiction with the provinces, but we did not go into the details. It is important to tell us if there are other issues relating to this, that is, whether there are other products or other circumstances that would mean that having dual jurisdiction would interfere with good performance on the part of the banks.
(The committee adjourned)