Thank you, Chair. We are pleased to accept the Committee’s invitation to answer questions on behalf of Canada’s banking industry about Bill C-38, the 2012 Budget 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.

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’s 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.

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 bought safe, 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 benefitted through the increased liquidity.

As was the case leading up to the global financial crisis, today our banks remain well-managed, well-capitalized institutions operating in a competitive market, and within 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, help small businesses grow and thrive, and to promote 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 trillion.

Moreover, also in 2011, Canada’s largest six banks paid $8.7 billion in taxes to all levels of government in Canada. And 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 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 Institutions (OSFI) for prudential regulation and the Financial Consumer Agency of Canada (FCAC) 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 very closely and certainly not something that we should ever be complacent about, there are a few key statistics that we need to consider. The first is that only five per cent of household debt is in the form of credit card debt. Secondly, Canadians have a strong track record when it comes to paying their mortgages. Less than half of one 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.

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.

It is against this backdrop that we are discussing the 2012 Budget Bill today. The CBA is supportive of the provisions in the bill that are related to banking and we welcome your questions this afternoon.

Thank you.