EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 13, 1995

.1014

[English]

The Chairman: I call the meeting to order. I am sorry we are a little late, but we're trying to circulate some paper and several amendments that I believe are being presented.

I think the best thing for us to do is to begin. Colleagues, this morning, as you know, we are happy to receive Don Lane of the FBDB, Norman Bayne from Industry Canada, and our illustrious parliamentary secretary, Mr. Mills.

We are receiving the clause-by-clause study today for Bill C-91, which is the order of the day.

Colleagues, I want to draw your attention to something. I think it's important that we do this carefully so that if there are interesting issues we don't just run them through. We want to make sure that we are careful and that we deliberate over these items, and that's why I've scheduled this afternoon as well for clause-by-clause.

If we don't use up the time, that's terrific. If we do, it's there just to see how quickly the morning goes, or does not go.

.1015

You may remember that I had asked our research branch to prepare some information for us, and I understand that we also have received a letter from the CBA. Did all colleagues get the Canadian Bankers Association letter? I just want to be sure you are aware of these as we proceed.

The other point is that -

Mr. Schmidt (Okanagan Centre): We've had five or six different pieces of paper that have just been distributed. I wonder if it might be useful for us to just have at least a cursory look at them so we know what's being proposed before we get into it. We're hit here with a whole bunch of stuff and some of it we haven't seen until this very minute.

The Chairman: I'm with you, Mr. Schmidt. I haven't seen it either.

Mr. Schmidt: I agree. We're all in the same boat.

Mr. Dennis Mills (Parliamentary Secretary to the Minister of Industry): I've only received one.

The Chairman: That's even better. That means you'll probably be brief.

An hon. member: You probably generated the other four.

[Translation]

Mr. Leroux (Richmond - Wolfe): Mr. Chairman, you could perhaps clarify something for me. You just mentioned a letter. Have you received any others? Did only the bankers write to you or did other people send you letters also?

[English]

The Chairman: Just the bank and then the Caisses populaires letter.

[Translation]

Mr. Leroux: Alright. The Caisses populaires also wrote to you on June 7th, I believe.

The Chairman: Yes.

Mr. Leroux: I just thought I would mention that. Did everybody receive that letter?

[English]

The Chairman: We circulated the Caisses populaires letter. Unfortunately, and I apologize to English colleagues, the letter was only circulated in French.

[Translation]

Mr. McClelland (Edmonton Southwest): No problem!

The Chairman: That's not a problem for us.

Mr. Leroux: But did they receive that letter?

The Chairman: Yes.

Mr. Leroux: Everybody has it?

[English]

The Chairman: That was circulated on June 9.

[Translation]

Mr. Leroux: Very well. Thank you.

[English]

The Chairman: So we circulated the Caisses populaires letter and the Canadian Bankers Association letter.

The Federal Business Development Bank has produced a question on the issue, which is the acquiescence of subsidiaries. Mr. Schmidt asked that question. That's the first document you have. That has also been circulated in French; it is attached to the back.

I have the CBA letter, I have the Caisses populaires letter, then I have clause 2, clause 18 and clause 35 amendments that have been circulated by Industry Canada.

I have an article on gun control but I don't think you want that.

I also have one Bloc amendment at the moment, which is just called B-1.

So, Mr. Leroux, that's what I have at the moment.

.1020

Mr. Mills, when we broke last week I'd asked on behalf of the committee for the issues. Are you prepared to deal with these following issues? The complementarity issue was one issue that we'd asked for.

The second question was about the review of the act. That's the second issue I had requested you look at.

The third one was the issue of environmental liability, and I assume you may have explanations for all of these, but I just want to make sure you're prepared before we proceed.

The fourth issue is the issue of the preference shares. Those are the four issues that this committee requested.

Before we proceed, I'd like to know whether or not you are prepared to deal with those issues.

Mr. Mills: Mr. Chair, we are prepared to deal with three of those four issues this morning. We are still reflecting on the issue related to preference shares, and hopefully in the near future we'll have something to bring to the committee.

The Chairman: With the greatest of respect upon your reflection, the committee asked for it last week. We're doing clause-by-clause consideration today. I don't understand why we can't. Look, I'm trying to be helpful here, but members of Parliament -

Mr. Mills: I'm hopeful. I'm optimistic that by this afternoon we will have a position to put forward for the committee to discuss and decide upon.

Mr. McClelland: Mr. Chairman, would it be fair to leave that section till later in the day? If we don't have it, then we'll simply conclude without finishing the clause-by-clause consideration. We'll come back to the clause-by-clause at another time if at the end of the day we do not have an answer from Industry.

The Chairman: I think the problem is that we're trying to abide by the minister's agenda, not by our own agenda. We could do this in the fall, and if colleagues simply want to adjourn the meeting today, we could do that. We're trying to comply with the government's agenda, and the government had requested that this be given high priority. I think all colleagues have tried to make their schedules available to do this meeting.

Mr. Mills: Mr. Chairman, I would -

The Chairman: Should we suspend operations for a couple of hours or -

Mr. Mills: I would appeal to you and to my colleagues on the committee to bear with us for a couple of hours more. What time do we break?

The Chairman: We break at 12:30 or 1 p.m.

Mr. Mills: Then we have Question Period.

The minister, as you know, has had a lot of files on his desk this last week. This file was brought to him at the last minute. In order for us to deal with this issue in a clear and proper way, he's needed a little more time to see it through.

I'm confident that we'll have something by this afternoon. I would respectfully recommend that we carry on clause-by-clause. By the time we get to the part of the bill that deals with the issue, I'm confident we'll have something for the committee members to consider. That way we won't lose any time.

The Chairman: Colleagues, it's your committee. Before we start, I'm simply telling you what I'd asked for on your behalf. I don't want to get in the middle of it and have someone say, well, it's difficult to do this without understanding where we are on that.

Mr. Mills: I think the government realizes the committee is accommodating the bank and the government by trying to get this bill through before the adjournment. I think we're well aware that if we don't cooperate with you this meeting could be suspended, we wouldn't have this bill go through until the fall, and the bank would therefore be put into a state of limbo.

It's certainly not our intention to have that happen. I would appeal to the committee to bear with us until this afternoon. I'll make sure the minister's chief of staff is here, and I'll make sure Ms Goodwin communicates directly the committee's desire to proceed on it this afternoon.

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The Chairman: Colleagues, any -

Mr. Schmidt: That makes sense.

The Chairman: Okay. Mr. Mills, as the chair I'm going to request you to have an answer to us before the break this morning, rather than this afternoon. That would be helpful. The reason is this simple. We've got to finish this clause-by-clause and the pressure I'm getting - colleagues, you should know this, and even if we're in open session I'll tell you anyway - is from the House leader's office.

The pressure's not from the industry minister. It's the House leader and the House leader's office in fact who are giving me the pressure. I see Mr. Manley's office staff is here. Ms Goodwin, we'd appreciate having an answer within the hour, if that's possible.

Ms Marianne Goodwin (Special Assistant, Legislation, to the Minister of Industry): No, it's not possible. The minister is in cabinet right now.

The Chairman: Well, send him a note.

Mr. Mills: To be fair, Mr. Chairman, I think if we let the committee know this afternoon exactly where we stand, that still gives the committee lots of time to react in the way they see fit.

The Chairman: That's fair.

Those were preliminary matters.

Shall the bill carry?

Some hon. members: Oh, oh!

The Chairman: Shall we start with the first clause?

I'm advised that clause 1 is actually at the end, so we'll start with clause 2.

On clause 2 - Definitions

Mr. Mills: I would like to move an amendment. I'm sure everybody has copies of this amendment. Is this the -

The Chairman: Give everybody one second here, Mr. Mills.

Mr. Mills: We want to move that clause 2 of Bill C-91 be amended by adding to the definitions the following:

``complement'' means that which fills out or completes services available from commercial financial institutions;

The Chairman: Mr. Mills do you or one of your officials want to give us some explanation?

Mr. Mills: Don, do you want to give some explanation?

Mr. Don Lane (Senior Vice-President, Corporate Affairs, Federal Business Development Bank): Mr. Chairman, there's been some concern about what complementarity means. This amendment defines in the act exactly what is meant by a complement. It's right up in the definitions section.

I think there was some discussion about adding administrative procedures into the act. I think the minister said, when he appeared before this committee, that that would just add more administrative burden on the part of small businesses dealing with the Federal Business Development Bank. So to bridge the concerns in the original proposition in the bill, it was proposed to add this amendment.

.1030

The Chairman: I recollect, gentlemen, that the banks in the case were concerned for the new bank to not end up as a direct competitor to private financial institutions. Are you satisfied that this would go a distance to dealing with that issue?

Mr. Lane: Yes. If the bank were to be a competitor, then this clause wouldn't have been inserted in the bill to begin with. I think we drew attention to the Farm Credit Act and the Export Development Corporation Act, which exclude this clause specifically. It is in the BDBC bill for the purpose of making sure -

The Chairman: Not that I want to become an apologist or a lobbyist for the CBA or the Caisses, but I just wanted to ask the question so that colleagues could debate it.

Ms Bethel (Edmonton East): Agreed.

The Chairman: You're happy. Ms Bethel, you're just so used to standing up from last night that you'll agree to anything today. Is there any comment on this?

[Translation]

Mr. Rocheleau (Trois-Rivières): Mr. Chairman, we will be voting against this proposal because, as was mentioned earlier, it is a distortion of was what said here, during our proceedings, last year at about this date.

You must remember that it is the Official Opposition that suggested this idea of complementarity that implied the traditional role of the Federal Business Development Bank, that of being a lender of last resort. This term that has been put forward by the Official Opposition has been maintained, but by abusing its profound significance. It is said here that the Bank will complete services available from commercial financial institutions. We feel that this entails a new type of competition for traditional financial services because of the new mandate that has been given to the Business Development Bank of Canada.

[English]

Mr. Schmidt: Thank you, Mr. Chairman. I think there seems to be a conflict here between this particular definition and the earlier statement that the bank is not to be considered a bank of last resort. This either makes it a bank of last resort or it puts it into direct competition with other banks. I don't think you can have both of those positions.

This definition appears to give complementarity to the bank, but it in fact pits the bank, as a competitor, against the existing financial institutions. I think that's the practical application of this definition.

Mr. Mitchell: I would disagree with that, and I'll use an example. Say the bank is offering a term credit at two points higher than that of a chartered bank. It would not be a lender of last resort because the bank might be willing to make that loan. But since they're not offering it at that particular rate of interest, it's a complementary service. Therefore the person would go to the FBDB. So you can be a complementary lender and not be a lender of last resort. It simply means you're offering a product that the chartered bank isn't offering.

Mr. Schmidt: With all due respect, complete services are available, and that's clearly outside the point that's just been made.

Mr. Mills: The example used was changing interest rates, which is not completing a service. All that does is put a different price on the service, but the service is identical. The competition exists in the rates themselves.

Mr. Mitchell: No, it isn't identical. The interest rate is a function of the risk. It's saying that we provide a debt instrument with this kind of risk profile. That's what a chartered bank says.

The FBDB has a complementary service. It provides a debt instrument but with a different type of risk profile. That risk profile is expressed by the interest rate. So it's two different sets of services, although they're both offering a debt instrument.

Mr. Schmidt: No, Mr. Chairman, I submit that it's not the case at all. If that were the case, then this person could get that loan from a bank. The bank will incur different levels of risk. If it doesn't provide this particular level of risk, it's providing a different kind of service that the bank would otherwise perhaps provide. It is not an exclusive service that you could never ever find in chartered banks. That's the issue.

.1035

Mr. Mills: If a standard bank would offer that rate at a point and a half to two points lower than the FBDB, then why wouldn't the customer go to that bank?

Mr. McClelland: Because they may not have a banking relationship and they may have all their assets tied up in another institution.

I think the root of this problem is the use of the word ``complementary'' when in fact the word should probably be ``augment''. My left hand complements my right hand, but -

An hon. member: Sometimes they don't know what they're doing.

Some hon. members: Oh, oh!

Mr. McClelland: Perhaps in this whole question of definitions we're on the wrong track in using the word ``complementary'', because it's impossible for the bank to be in competition with the existing banks and to complement them. What it does is augment them.

Mr. Mills: I think if you looked in a thesaurus you'd see that ``augment'' and ``complement'' mean the same thing.

Mr. McClelland: I've made my point, Mr. Chairman.

The Chairman: Do you have any suggestions? Do you, Mr. Mills, or either of the officials want to comment on this?

Mr. Norman Bayne (Senior Counsel, Commercial Law Division, Industry Canada): The reason for referring to ``complement'' is that's the term used in subclause 14(4) and that's why we're seeking clarification by defining that term. To introduce a new term now would require a rewording of that clause as well.

The Chairman: We can do anything, so don't be limited. We're trying to deal with the issue. A problem has been raised, which I think is genuine. Your own department, Mr. Mills, recognizes that there's a problem and they're trying to fix it.

Mr. Mitchell: Would it not be possible to add a clause in the bill something along the lines of ``Notwithstanding anything in this act, it is not the intention that the Federal Business Development Bank'' - or whatever it's called now - ``be in competition with financial institutions in the private sector''? That would make it crystal-clear.

Mr. Schmidt: Then we would have to define ``competition''.

The Chairman: I think Mr. Mitchell has hit on something interesting. I agree that maybe it needs to be honed a bit in terms of the word ``competition'', but it might go some way toward dealing with the problem.

Mr. Lane: I'd just like to remind the committee that once this term and the definition are in the act, the bank will have to develop administrative procedures. Those procedures will be open to scrutiny by this committee. Certainly the Auditor General of Canada will be looking at that and determining whether the bank is complying with the terms of the act.

I think there is some fear that the bank will just go off and do whatever it wants. It will be subject to scrutiny by this committee, by Parliament, and certainly by the Auditor General under the special examination. As you know, the results of that special examination are deposited in Parliament.

[Translation]

Mr. Leroux: Mr. Chairman, I think it should be explained that the Federal Business Bank Act establish some very clear conditions. In order to qualify for a loan or a guarantee, one had to fulfill certain conditions, more specifically that the borrower could not find elsewhere at reasonable terms, the credit or required financing. There was therefore something quite precise. It would seem that in the bill, nothing is precise and that the bank is becoming more and more like a banker. There is nothing in the bill while the act had some very precise language on the bank's role as a lender of last resort.

Mr. Lane: Exactly. The FBDB was a lender of last resort, but what the minister presented to the Committee two or three weeks ago was aimed at changing that role.

Mr. Leroux: Yes, so that it would become a bank.

Mr. Lane: As a bank of last resort, we were forcing our clients to fill many papers and to conform to many procedures.

Mr. Leroux: As far as the other banks are concerned, they do not want the bank to compete directly with them. That was a remark that was made here. This new role is very imprecise, and the bank is being allowed this in order to transform itself into a banker. That is the crux of the matter.

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[English]

Mr. Mills: How do you see it competing directly on the same footing when it has a point and a half to two points higher interest rate?

The Chairman: Mr. Mills, I'll jump in there and say that one of the things that would worry me is that often times it's just equity, period. People are prepared to pay the higher interest rate.

But I'm not going to get into a debate. Mr. Bélanger, you're next, and then Mr. McClelland.

Mr. Bélanger (Ottawa - Vanier): Mr. Chairman, on the notion of complementarity, there is one difficulty I'd like to get some assurances on from the representatives of the bank.

The way you've been proposing to define ``complement'' - ``that which fills out or completes services available from commercial financial institutions'' - assumes that the financial sector is somewhat static. I can understand that it doesn't move at the speed of light, but it is not static. It does evolve and it does, from time to time, start to offer a different range of services. There seems to have been some reaction to the pressures brought about by this committee to observe more carefully their lending practices for small business, the kinds of services they wish to offer to complement their lending, and so forth.

As time progresses and as the banking industry or the financial industry itself becomes more competitive and more and more services are offered by these very institutions, how is the Federal Business Development Bank going to retrench from that, or will it? What mechanisms will be in place to make that happen? If the notion is to compete, I have no problems, but if the notion is not to compete, when the banks enter that field the FBDB is proposing to fill, how will they get out of it?

Mr. Mills: To use Mr. McClelland's point, I thought our intention - and we discussed this over many months - was to augment and fill the gap that exists, especially within the small business community. The big banks, the larger institutions, do not seem to be tending to these gaps with an aggressiveness that we felt comfortable with.

In other words, we've been concerned for the last few months that the access to capital for the small business spectrum had a void and that we needed this bank to have a role to try to fill that gap. It wasn't a question of being a direct, head-on competitor; it was there to be a support system of stimulus. So there is a competition factor involved here.

Mr. Bélanger: My question was that once the banks or the trusts or whomever move into the field that is currently not occupied, in your view, what role then will the Federal Business Development Bank, or whatever it's going to be called, assume?

Mr. Mills: Well, I can't answer that question. First of all, if the banks filled that void, I think we'd all be pretty happy. Maybe then we'd have to bring this bank back and retool it again, but we're a long way away from that happening. In fact, as I've said, not just here but in other places, I think that in the last 60 or 90 days the banks retreated from their campaign of helping small business 6 months ago. I think we've fallen backwards.

Mr. Bélanger: I don't share that view.

Mr. McClelland: I wonder, colleagues, if we might get around this by changing significantly the definition of ``complement'' from ``that which fills out or completes services available from commercial financial institutions'' to ``that which is not available from commercial financial institutions''.

Mr. Schmidt: I would like to add to what Mr. McClelland has said by reading from the ``Corporate Plan Summary 1996 to 2000'' of the Federal Business Development Bank. I'm reading from page 2. It's under ``Financial Services'', specifically

``Loans'':

FBDB's mandate is to provide term loans to commercially viable SME's in Canada having difficulty obtaining financing on reasonable terms and conditions from the private sector. The Bank's Loans Division must and does operate on a full cost recovery basis. In fiscal 1994, the Loans Division reported net income of $4.6 million.

The bank provides innovative and flexible financing instruments on terms and conditions tailored to meet the individual needs of SME's. Unlike private sector lending institutions, FBDB assesses each loan on a project-by-project basis instead of using security based formulas.

.1045

Mr. Chairman, we have a number of ex-bankers here, and I've dealt with bankers, and I don't know of any private sector lending institution that doesn't do exactly project-by-project analysis.

So how in the world is this different? This isn't a definition; this is in practice.

This is their proposal for the next four years and we have just heard this is not what they're going to do. This is direct competition with the financial institutions, and that's their statement.

The Chairman: That's a valid point.

Mr. Rocheleau, you're next on my list.

[Translation]

Mr. Rocheleau: Mr. Chairman, concerning again the definition of the word «complementary», if it had been intended to make the new Business Development Bank of Canada really complementary, the equivalent of paragraph 20(1)(b) would have been maintained. It says:

b) credit or other financial resources are not otherwise available to that person unreasonable terms and conditions.

That made the Federal Business Development a complementary bank. Had it been intended to also make the Business Development Bank of Canada complementary, paragraph 20(b) would have been maintained. Since paragraph 20(b) has disappeared, one cannot say that the new bank will be complementary. You are changing the rules of the game. Please have at least the courage to say so!

[English]

The Chairman: Mr. Discepola, you're next.

Mr. Discepola (Vaudreuil): Mr. Chair, there's a provision right now that any potential borrower has to advise their existing financial institution before they even apply. So it seems to me that if you're worried about competition, I don't see anybody coming to me as an entrepreneur and advising me that my competitor is providing a similar service to the same client.

I have a concern over the fact that first of all the service is being provided, and it is at a different rate. I would be concerned with the other aspect of it - that maybe the tendency would be to put pressure on the new mandate with the definition you enter for the bank, and maybe it would put pressure on them to reduce the rates for political or other reasons. That, to me, would be more detrimental than getting into the definition of complementary.

The bank is going to provide a service that's not available out there. The traditional banks have already stated this categorically. As a matter of fact, in The Globe and Mail it was again described how the banks are not able to provide traditional loans in the $25,000 to $50,000 to $100,000 range because right off the bat, once they accept one, no matter what loan-loss ratio they experience, the administrative overhead is already more than the profits they'll ever get from that.

That's the area that we're trying to target with this mess. It's true. So I don't see why we're getting into the definition aspect of it when we want to try to give the bank a new mandate to focus on those traditional areas, but the banks haven't been doing their job.

The Chairman: Okay, colleagues, I'm....

Mr. Mills: Mr. Chair, could I get a clarification from Mr. Schmidt? Do you have some sense that this is going to create a government instrument here where there's going to be real competition with the main banks?

Mr. Schmidt: Yes, it is. We're getting into direct competition with existing financial institutions. I don't think there's any question about that.

Mr. McClelland: We're going to have an asset base that's more than half of the total small business loans written on the books today. Of course it's going to be a competitor. It has to be.

Mr. Mills: I suppose you could argue that any kind of a loan that's made by the Federal Business Development Bank is, in a manner of speaking, competition to someone else who's in that business. If you follow that through, then you know you're not supporting the bank to do anything in the small business market. Are you saying that the bank shouldn't be as active in the small business market? I'm just trying to understand -

Mr. McClelland: Philosophically, I don't think the Government of Canada should be underwriting any commercial activity that competes with the private sector, period. If I were the Minister of Industry, we wouldn't have this problem because we wouldn't have this bank. We'd be causing the commercial banks to do what they're supposed to be doing. So, philosophically, we're coming from a different direction.

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Mr. Lane: I think it's clear that if the Business Development Bank of Canada acts in a competitive way, it will be ultra vires of this proposed act, which I think would be made clear to Parliament by the auditors.

The Chairman: Does it help by moving...?

Mr. Schmidt: You don't want it to be but quite frankly, the way the language is written will put it into a competitive position.

The Chairman: Okay. Let me ask you this question. What happens if we move the definition into ``Purpose'', in clause 4?

Mr. Lane: That would mean everything we do will have to undergo some kind of scrutiny because clause 4 covers all the actions, administrative or whatever, done within the corporation. That'll just hamstring everything.

Mr. Mills: They'll red tape you to death.

The Chairman: Legislative counsel may want to comment on this.

I'm just looking for ways to solve this because I think Mr. Bélanger and Mr. Mitchell have raised a valid point. Mr. Schmidt agrees with some of it, as does Mr. Rocheleau.

The problem is that I don't quite know how to resolve it. We all agree that we want to remove the stigma of ``bank of last resort'' on the one hand. On the other hand, there's a niche market out there that FBDB has and we want to be able to complement it, to help it work, to flourish. But you know there's a....

Mr. Bélanger: There's an easy way to do that.

The Chairman: What's that?

Mr. Bélanger: It might be a little too practical. No one can get a loan or any kind of financial assistance from the Federal Business Development Bank, or whatever it's going to be called, unless it's referred to them from another commercial financial institution.

The Chairman: I'm afraid that -

An hon. member: It's too practical.

The Chairman: I see a lot of FBDB people's hair just going up.

Mr. Mills: Not only that but most FBDB clients, at least any who I've met, only go to FBDB when the chartered banks shut them out.

The Chairman: Just one second before I take some colleagues....

Mr. Ducharme, did you have a question or a comment?

Mr. Philippe Ducharme (Legislative Counsel, Legislative Counsel Office, House of Commons): Actually, it's a question.

[Translation]

If the word ``complement'' can be found only in subclause 14(4), why would we want to change the definitions in clause 2 which apply to the whole act? If we must define ``complement'' in order for it to apply only to clause 14, it should be defined in clause 14.

The second comment I would like to make is the following. When we say ``complement'', it means ``that which completes''. Why not just say in clause 14: ``the loans, investments and garantees are those that complete those available from commercial financial institutions''? In 14(4), it is quite clear and they would add a definition which would say what is in subclause 14(4), which I do not understand. It could give rise to some interpretation by the courts. It seems to me that there should be a way to do that very simply.

[English]

The Chairman: I'd like to hear from the legal counsel for the bank on that point.

Mr. Bayne: No, I don't disagree with that approach. We could equally move the concept contained in the definition and incorporate it into subclause 14(4). I agree with that.

The Chairman: Okay. That's a helpful suggestion. Let's just hold that thought.

Mr. Mitchell, you're next on my list, followed by Ms Bethel and Mr. Valeri.

Mr. Mitchell (Parry Sound - Muskoka): I just wanted to ask Mr. Schmidt a question that might facilitate our debate.

Werner, I'm trying to understand whether or not it's because of your philosophical difficulties with the concept of a government lending institution, that regardless of how we try to work out this amendment, it's not going to be able to satisfy your concerns because you're just philosophically opposed to having such an entity exist in any way whatsoever. Am I correct in that interpretation? Or maybe it was Ian who said that.

Mr. McClelland: You heard it from me, but although I'm going to come at it from this philosophical position, I'm certainly not going to be obstructive. You don't have to debate how many angels can dance on a head of a pin for nothing.

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Mr. Mitchell: Okay.

Mr. Schmidt: To answer Mr. Mitchell's question specifically, it's not so much.... Although philosophically I oppose government agencies, there is a place for government agencies when something that needs to be done isn't being done. I think that's the issue here. With this definition, whether we put it in subclause 14(4) or whether we put it in clause 2, the important thing is to make it describe that situation that is not being met now or in the foreseeable future.

I think Mr. Bélanger made the point extremely well when he said services will change. If they do change, there may in fact be no role for the FDBD in the future. But by the way this act is written, there is absolutely nothing preventing them from going into whatever area they wanted to and into direct competition. I think that's the point we want to avoid. They should not be in direct competition with any financial institution in Canada. That's the issue here.

Mr. Mitchell: Do you have a suggestion on an amendment that we could move to satisfy your concern?

Mr. Schmidt: Right at the moment, off the top of my head, no. What really triggered the thing for me was this document. It just hit me right square between the eyes.

The Chairman: All right, I'm going to go to Ms Bethel and then to Mr. Valeri.

Ms Bethel: Mr. Chairman, I'm prepared to support ``complementary''. I think what all of us want to ensure is that the FBDB is not in competition with banks. I don't see in this that they are in competition. In practice, I think what this will do is ensure this is a bank of last resort, only without all of the bureaucracy that goes with it because the percentage charged for the loan will be higher. I believe it is complementary. This really defines it quite well. It matters not to me whether it's here or in subclause 14(4), but I don't see any problem with ``complementary''. I think it's very complementary to what we want to do.

Mr. Valeri (Lincoln): The point I want to make is this, and clarification from the officials would be helpful. Does the bank have to notify another financial institution if an entrepreneur is coming in for financing? I believe it does.

Mr. Lane: This is what we do today and it will be there, at least in the interpretation of the word ``complementary''.

Mr. Valeri: Fine.

The Chairman: I'm not sure I understand. What do you mean by the word ``notify''?

Mr. Lane: It's a procedure whereby we notify the commercial financial institution where the borrower belongs. The chartered bank or the credit union of every client who comes to us is notified of the approach.

The Chairman: Okay. I didn't know that.

Mr. Valeri: So if I'm an entrepreneur looking for financing and I've gone to my bank and they've said they're not prepared to lend to me at this time, and I then go to the Federal Business Development Bank and tell them my plan and that I need some money, I need some financing, they notify my financial institution that I've come in looking for financing. If I am a competitive bank, they now know I wouldn't do that first off. They now have a second kick at the can. They may say, ``You know what? Come back and we'll take another look.'' The FDBD would then allow that to happen. I make that assumption.

Secondly, as was stated earlier, if services are evolving in the financial services marketplace, and if my financial institution is advised every time I go to the FDBD because I'm going to them for every service my financial institution has now taken on, I wouldn't get it from the FDBD because I could get it from my own institution.

So it is complementary. It does take into consideration the fact that the services industry is evolving. As it evolves, the FDBD would be backing away, and that's a point I want to make very clear. I just want to make sure that I understand it that way and that it is in fact the way it is spelled out in the bill. Maybe you could just comment so that I'll feel a lot better about it.

Mr. Lane: Exactly. The procedure you just laid out would be, at minimum, the procedure we would follow in implementing this clause, ``complementary financing''.

.1100

The Chairman: I'm just rereading the Caisses letter and the CBA letter. Not that we need to mouth the CBA point of view, but it is consistent with something you said, Mr. Ducharme, about subclause 14(4). In their letter they say:

The statement in the preamble of the Bill concerning complementarity is not echoed within s. 4 which states the purpose of the Bank. To ensure complementarity in carrying out its activities, the Bank must ensure...

- and this is their opinion -

...that it does not make loans, investments, or guarantees which are available to a customer from commercial financial institutions on reasonable terms and conditions.

That echoes what you said, Mr. Valeri. I think we all recognize the CBA is trying to protect its turf, but more importantly, there's a philosophical question, and the philosophical question is if the equity or money is available in the private sector, then should a government institution be using up its money? It's the same kind of arguments we've had before on the SBLA. In other words, would the banks be lending the money anyway, even if the SBLA weren't there as a stopgap?

I'd be interested to know either from a philosophy point of view, Mr. Lane, or from a legal point of view why you oppose complementarity going into clause 4.

Mr. Lane: I think if it's in clause 4, Mr. Chair, then we'd have to develop a whole set of administrative procedures to ensure everything we do is complementary -

The Chairman: So what?

Mr. Lane: - even internal procedures. We may have to go to internal procedures and see whether they are complementary.

To give an example, we go on markets to borrow money we relend to small business. Would we have to make sure borrowing is complementary? First of all, I don't know what complementary borrowing on behalf of the bank would mean.

The Chairman: But with the greatest of respect, I don't accept your premise that you would have to do this.

Mr. Lane: If it's in the law, we would have to do it. I'm sorry. This is my point.

An hon. member: For every loan?

Mr. Lane: Not every one, but even internal procedures; even our borrowing on the market.

Mr. Schmidt: I don't buy that.

The Chairman: I'm happy to have somebody from your bank come forward and explain to me why, but intellectually I'm having a problem with this. I don't see why you would not be able to put it into the purposes. I don't understand why, or why you need this set of administrative rules. I can't -

Mr. Lane: That's what the lawyers will tell us.

The Chairman: Well, let's hear from the lawyers.

Mr. Bayne: The other issue in putting it in with clause 4 is other functions are carried out in clause 4. There's providing financial and management services, and the nature of the activities performed by the bank is case counselling and the sort of thing provided to their customers. They may not necessarily be complementary in that respect.

By limiting the application of subclause 14(4), you're getting at the target areas of the CBA and their area of concern, because it's at the time of making the loan, the investment, or the guarantee, which is the direct, head-to-head competition with their business activity. If you limit it in subclause 14(4), you really don't need the limit in the purpose clause.

Mr. McClelland: Provided it's in there, I think the onus is going to be on the marketplace as well to keep the bank honest.

Mr. Mills: Mr. Chairman, I think Mr. McClelland has touched a very important point. You can be sure if the financial institutions get a sense that the bank is in any way competing directly with them, we'll hear from them immediately. So I think there's a double check on this bank. It's not just this bill. It's also the fact that the other banks will start speaking up if the bank is crowding the market.

Mr. McClelland: They might even come to the committee.

Mr. Bélanger: What I'm hearing, Mr. Chairman, is that in loans we want to ensure complementarity, so there's no head-to-head competition. However, in services, whether they be management services, counselling, or the like, we're prepared to go head to head with competition. Is that what we really want?

.1105

Mr. McClelland: Yes.

Mr. Mills: Those counselling services don't exist outside the FBDB right now.

Mr. Bélanger: Nonsense. We were told they exist, but the difference is that they are cheaper at FBDC than in the private sector.

Mr. Schmidt: That's correct.

Mr. Mills: You mean in the chartered banks?

Mr. Bélanger: Yes, confirmation was given by the president, actually, at the last meeting. He recognizes those services do exist; however, the difference is that they are cheaper.

Mr. McClelland: Mentoring services.

Mr. Bélanger: Mentoring, but counselling was mostly the one we're dealing with.

Mr. Schmidt: Look at the CBI and where they're moving with the export industry right now.

Mr. Bélanger: That's what we're saying. As long as we're all clear on what we're saying.

Mr. Mills: Excuse me, Mr. Chairman, can I get a clarification here? Are you telling me - and I think it's important to all small businessmen and small businesswomen to know this - that an hourly mentoring service exists within all financial institutions in this country, like CASE? Any - CIBC, the Bank of Montreal -

Mr. Bélanger: They exist.

Mr. Mills: I have yet to find it.

Mr. Bélanger: I did not say, or no one would have me say, that they are to be found in all financial institutions, but within the financial institutions the indication from the president of the FBDB was that they do exist, and they are competing, but the difference is that they are cheaper.

Mr. Lane: We're not competing. If you are a small business owner and you want to start a business, I'm sure you can go to Peat Marwick, KPMG -

Mr. Bélanger: They are more expensive.

Mr. Lane: - and get a business plan. The service we provide is cheaper, yes, because people can't afford to pay the $25,000 for a business plan.

Mr. Bélanger: I'm not making a statement one way. I just want to make sure the committee realizes what we're saying collectively. In terms of services, counselling, whatever, we're saying it's okay for the FBDB to compete head on, depending on where we put this definition. In terms of loans, it's not. That's what we're saying. Once we've agreed on what we're saying, then we can agree....

The Chairman: Mr. McClelland and then I'm going to -

Mr. Mills: Excuse me, Mr. Chairman, it's very important that we understand this point.

I just did a short consultation with our representative from the Canadian Bankers Association. About the CASE program, where you as a small businessman or businesswoman can go in and essentially rent by the hour an expert in accounting or marketing, that service does not exist in the main financial institutions in this country. They may refer you to a Peat Marwick or a KPMG, but they do not have an hourly rated service by sector that they rent out.

It's very important. This is a very unique feature in the Business Development Bank of Canada. I happen to think personally it is its biggest asset. If anything, this is an area within the bank that we should be shoring up and promoting in marketing much more than we do. So let's make that perfectly clear, that the other financial institutions do not offer such a service.

The Chairman: Thank you, Mr. Mills. Mr. McClelland, and then I'm going to try to put this to rest.

Mr. McClelland: I wanted to concur with the comments that Mr. Bélanger made, that the purpose of the bank - and to strengthen your point - is in this mentoring and development process. The bank should be free and unfettered in this area. It should not be free and unfettered in the other areas.

[Translation]

Mr. Rocheleau: I would like to make a point about the last comments of Mr. Mills. I believe that he went too far in saying that the main asset of the FBDB has historically been the CASE program. I think that it's main asset was the fact that it was perceived by business as a bank of last resort. Whenever traditional banks rejected a request, the FBDB might say yes. This is well appreciated. Businessmen in general also appreciate the CASE program with some reservations. Very often, it is also a way for the bank to promote itself to identify potential clients. This is one of the functions of the CASE program in its day to day operation.

[English]

Mr. Mills: Mr. Chairman, responding to Mr. Rocheleau, my understanding is that the CASE professionals, the counselling assistance professionals, who are out there helping small businessmen and businesswomen, do not counsel those people in a way that would take them away from the main financial institutions.

.1110

So they don't use it as a marketing vehicle for the Federal Business Development Bank. In fact, they're instructed - I stand to be corrected - to try to package and support in a way in which we're dealing with the main financial institutions.

Mr. Schmidt: I've had a chance to think a little bit about what might help. This is just a proposal. I'm wondering if this might be useful.

One could add to the definition that's here to make sure we avoid the competitive element here. One could add the words ``after institutions'' and not ``in competition with those institutions''. It's not a good definition, but it clarifies the parameters we're trying to get at here. Add to those services that aren't providing, without being in competition with them.

The Chairman: The problem we have is that I'm hearing, as your chair, around the table that there is some problem we need to address. You folks have given us your shot at trying to fix the problem, but I'm not sure it's sufficient. It's sort of like ``heal thyself or we'll heal thee''.

Mr. Mills: This is a position that we have put forward that we think meets the policy objective of the government. If there's a way in meeting that policy objective for us to get support from members to improve or refine it, fine, but if we can't get something in the end that will refine it, then we naturally will have to move forward.

The Chairman: We're in first reading. We have the luxury of making some changes. If the government doesn't like the changes, it can amend it again when it gets back to the House.

Mr. Mills: But I'm listening. I haven't heard anything yet that really meets the consensus in terms of another opinion or another shot at this. Maybe you, Mr. Chair, have something we haven't heard of.

The Chairman: No. I've listened to our legal counsel. I'm not convinced, with the greatest respect to my colleague, Mr. Lane, that introducing some additional wording in clause 4 would not go some distance in helping us with this problem. As for clause 14, we've agreed that Ms Bethel's suggestion is a valid one, and you've responded to that. That looks like there could be some change there.

Mr. Lane: The term ``complement'' could be expanded in subclause 14(4).

The Chairman: You generally agree with that. You have accepted that there is a problem because you've come forward, since the bill was drafted, with your own amendment. Let's just talk policy for a second.

Mr. Lane: It's to respond to the concerns of the committee members.

Mr. Mills: We are trying to ameliorate a view from the opposition that -

The Chairman: It's not just an opposition view, Mr. Mills.

Mr. Mills: No, but this committee has had a history of trying to get things done by consensus, so we want to continue that tradition of the last two years.

Mr. Discepola: Mr. Chair, I don't understand where the problem is coming from. To me, when you're talking competition, you're talking about a level playing field, but you don't have a level playing field here. So there are already inherent checks and balances by the mere fact that they need a cost-recovery program. It imposes already a 2% prime. In other words, that's a 2% lending rate, which, in an industry that talks about prime plus 1%, is like a 100% advantage, or disadvantage in this case, that our bank would have.

It seems to me that already inherent in those two restrictions is the fact that they have to advise the lending institution that a new person is coming on board for a loan from them. There's also the fact that the bank is at a disadvantage by having to charge almost twice what the normal, traditional banks would charge. In those two facts alone, the competition advantage is gone and out the door and we're trying to defend a Goliath against a little David. I don't understand where we're getting bogged down.

.1115

Is this the same committee that for months and months heard that the banks were not even lending to small businesses? Is this the same committee that for months and months heard from the big six, where we had, at the outset, to convince them that there was a lending problem? Now here we are, trying to defend the big Goliath who already has a 100% advantage. I don't understand the logic.

A voice: They asked for competition.

The Chairman: With the greatest respect, colleagues, we're not here to defend them. We're just trying to make sure that they do their job, that they don't rely on us, as policy makers, to say, ``Well, there you are''. The FBDB has to deal with the gap that exists in financing. I don't want to give the banks more of an excuse by us, as policy makers, creating a statute that says, ``Well, there's our answer to fill the gap. Banks, go off and do whatever you want.'' I just don't want to give them an excuse.

I don't think there's an ideological turf war going on here at all. I'm not defending the banks. I'm saying that we want to make sure they're appropriately targeting the people they should be targeting and not going into competition with the banks.

It's just like the SBLA. How many SBLA loans would the banks make anyway, without the guarantee?

Mr. Discepola: But you're compelling the new FBDB to charge twice the rates that traditional banks would charge.

A voice: No.

Mr. Discepola: That puts them at a tremendous disadvantage. So where's the competitive angle?

The Chairman: That's another issue. That's an issue separate from complementarity.

Mr. McClelland: First, I think the issue of the prime plus 2% is a red herring. No incubated or new business gets prime plus 1%. They're all prime plus 2% plus.

Getting back to our problem, perhaps we could further clarify it if we accept under subclause 14(4) the augmented definition and go back to subclause 4(1), making it read:

(1) The purpose of the Bank is to support Canadian entrepreneurship by providing complementary financial and management services

You would make the purpose match subclause 14(4).

Mr. Mitchell: It might cause a problem with management services if they have to be complementary. They would be in competition with a chartered accountant or with a management firm.

Mr. Bélanger: I'll make a proposal that may help things here.

Some of us are coming at it from a philosophical angle, that the government is not necessarily to be in the business of doing things that the private sector can do. But we're not trying to taint the bait too much with it. We're trying to be cooperative, and I think it's from both sides at the table.

Having said that, if there's a will to have the bank compete in providing services, even though they may not be against the financial institutions.... I had not referred specifically to financial institutions, but to the market - and indeed those services exist in the market, whether they be conferences, business planning, etc. The bank is competing against the market on those; whether they be banks or chartered accountants and so forth, there's a direct competition element. If we're prepared to have that, if there's a consensus on that, and to have complementarity in the financing, then the question is, is there a clause other than subclause 14(4) in this proposal that uses the word ``complement''? If not, then you can leave it in the definitions or put it in subclause 14(4) and you've attained the consensus. It doesn't matter if it's in clause 2; if you find it only once in the bill, then it applies only to that one place where you find it.

Mr. Valeri: I think I would be supportive of Mr. Bélanger.

I just want to make the point about complementarity again, and the role that the bank would take when financial institutions come in and fill the gap. I have an interest in venture capital. The FBDB has some very unique hybrid venture capital instruments they are using - non-traditional venture capital instruments. I want to paint this scenario.

.1120

If I am an entrepreneur and I come to the FBDB and I go through all of that, the due diligence, and you have now informed my bank that you are looking at my financing needs and you enrol me in one of these hybrid venture capital programs today, ten years from now when the financial institutions potentially take that product you are presently using in the marketplace and put it on their shelf, you would then be backing away from providing that product to the entrepreneur.

Mr. Lane: That's right.

Mr. Valeri: The bill does that today.

Mr. Lane: That's the meaning of the complementary role. Otherwise it wouldn't have been there.

Mr. Valeri: Again, I put the question. I fail to realize why we're spending so much time on defining ``complementary'' when we can point to examples that this bill will provide that show the bank backing away from gaps that are in the marketplace today that may not be there in the future.

I point to that as a real example of a product that's on the shelf today with this FBDB and that's not on the shelf with any of the financial institutions but will be some day, I would think, if the marketplace desires it to be there.

The Chairman: Colleagues, let's see if we can follow the logic of Mr. Bélanger, that it appears you're helping us develop a consensus here. I'm not putting this to a vote. I'm trying to do a straw poll to see where we are.

If we went with clause 2 as has been put forward by the department and we amend clause 14, I presume you wouldn't object to this clause 14. It's not one of yours, but you don't care.

Mr. Bayne: The proposed wording would be:

The loans, investments and guarantees are to fill out or complete services available from commercial financial institutions.

So it's just to insert the definition. What we have is the proposed definition in the substance of subclause 14(4).

Mr. Bélanger: So we'll take out the word ``complement''.

The Chairman: Just one second. I'm trying to deal with our legislative counsel here.

Mr. Ducharme: Subclause 14(4) could read:

The loans, investments and guarantees are to fill out or complete services available from commercial financial institutions.

The Chairman: All right.

Now, if we took clause 2 as amended and then clause 14 -

Mr. Bélanger: You don't need to.

A voice: Mr. Chairman, ``complement'' is no longer in the bill if you take this amendment, so you don't need the amendment to clause 2.

The Chairman: So you remove it. Okay.

I'm still asking the question - and don't everybody yell at once - about subclause 14(4). I understand what your argument may be. I don't buy it, but if you tell me it's an issue I accept that.

What would be wrong with adding it into ``Purpose'' to carve out the niche of where the problem might be? In other words, it doesn't deal with management, funds, or capital in support of those services, but might deal with the same issue we deal with in clause 14. What is the problem with that?

Mr. Lane: Mr. Chair, I think if you were to amend subclause 14(4) along the lines that were suggested and if you were to put ``complement'' back into subclause 14(4), the ``Purpose'', then we're not only back to where we started, but I think we're going to have bigger problems.

Mr. Mills: Yes, you're changing the whole purpose of the bank draft.

Mr. Lane: You have ``complementary'' in one and we're back to there.

Mr. Mills: Mr. Chairman, I think you have a consensus here on the proposed amendment.

The Chairman: All right.

Mr. Schmidt, I'd like to hear from you first.

Ms Bethel: Does somebody need to move it?

The Chairman: No, we're just doing a straw poll here first.

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Would the change in clause 14, and having them withdraw that amendment in subclause 14(2)...?

I'm sorry. We're putting you under the gun. But I'd like you, Mr. Rocheleau, to think about it too.

Does that help you? I see your assistant shaking his head, so I assume it doesn't.

Mr. McClelland: Mr. Chairman, it will pass on division. I am making the point, though, that when people are wondering what the purpose of the bank is, they're likely going to look under the proposed section that says ``Purpose''. If it's complementary, that's probably where they would expect to find the notion that it's complementary and the definition of what complementary is.

In the spirit of cooperation, I'm just telling you what I think. I will definitely be voting against this, but there you are.

An hon. member: Surprise, surprise.

The Chairman: I'm not surprised, because I'm almost there myself, and I'm your chairman.

Mr. Discepola: You can vote against it.

The Chairman: No, I don't get to vote. That's the beauty of it.

[Translation]

Mr. Rocheleau: Mr. Chairman, we will vote against it because it is not complementary. The former Federal Business Development Bank was complementary, in our view. It will not be the case of the new one. And in fact the clause that made the Bank complementary in the old act has been removed. It is intentional.

[English]

Mr. Schmidt: I really appreciate the work that's being done. I think we're all agonizing over this.

The difficulty I see even with subclause 14(4) is that it deals really with three classes of services. It deals with loans, investments, and guarantees. When I get into the investment part of it, I ask myself this question, because looking at other clauses of the bill... this bank can essentially invest in almost anything it wants, unless it is excluded in some other act... But this bill does not exclude it from getting involved in anything.

It can take shares in a venture operation. It can take as security preferred shares, common shares, or anything else. It can issue hybrid financial instruments. It can do all those kinds of things and guarantee... it can guarantee anything. It can guarantee a loan from another chartered institution. It can guarantee in a foreign country. It can guarantee somebody coming into this country to invest. It seems to me what it's doing here is guaranteeing whatever isn't available elsewhere, it is lending whatever isn't available elsewhere, and it is making investments that aren't available elsewhere.

It strikes me that it's a pretty big... I'm not prepared to approve this.

Mr. Mills: Mr. Chairman, with all respect to Mr. Schmidt, I think he's creating... He's taking it out of context. There's just -

Mr. Schmidt: It's consistent with the other clauses in this bill.

Mr. Mills: No, I can't agree with you. We're quite specific here when we talk about the fact that this is... in this definition, which you seemed to agree with earlier...``that which fills out or completes services available from commercial or financial institutions''. It doesn't go on and on as you've described.

Also, under the proposed specific powers of the bank, subclause 14(1), ``The bank may make loans to, or investments in, any person, or give guarantees in relation to any person''. Also, in paragraph 14(3)(a), ``the person is engaged, or is about to engage, in an enterprise in Canada''.

So this whole thing where you talk about using it as an instrument for immigration and doing all these other things -

Mr. Schmidt: No, that's not what I said. I said people who are outside Canada and who want to invest in Canada can do so. That's paragraph 14(3)(a). You have made exactly the point I was trying to make.

Mr. Mills: No.

Mr. Schmidt: It may make loans to any person and give guarantees in relation to any person:

14.(2) The loans, investments and guarantees may be made or given directly, through arrangements with other financial institutions

- which is what I said -

or by the Bank as a member of a financing syndicate.

(3) The loans, investments and guarantees may be made or given only where, in the opinion of the Board or any committee or officer designated by the Board,

Mr. Mills: What's wrong with that?

Mr. Schmidt: The point is that you can do anything.

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Mr. Lane: You have to be engaged or about to engage. The ``about to engage'' really reflects start-up situations where the business doesn't exist. It is in the process of starting up, and we can provide financing at that point in time, before they're actually in business. That's what the ``about to engage'' involves. Also, it's an enterprise in Canada.

Mr. Schmidt: It includes that group, but it's not limited to them.

Mr. Lane: Again, the powers of a statutory corporation are only those that are specified in the act.

Mr. Schmidt: But read the first phrase: ``the person is engaged''. ``Is'' means that the business is there now.

Mr. Lane: Or about to be.

Mr. Schmidt: Or is about to be. But ``or'' is a different group. There is a person who is engaged, who wants money for expansion, or is about to engage. They are two completely different kinds of operations - in Canada, but they could be people in the United States who want to do this in Canada.

Mr. Lane: Who would like to open a business in Canada.

Mr. Schmidt: Exactly, and you should do that.

Mr. Lane: Yes. Sure.

Mr. Schmidt: That's the only point I was making. It can be done.

Mr. Mills: You should be able to do it.

The Chairman: So you're applauding this. You're supporting it.

Mr. Schmidt: Don't put words in my mouth.

I am suggesting that the complementarity here means that you can virtually do anything you want to do. There is no restriction in the word ``complementarity''. You're really not restricting the issue. You can be in direct competition. That's the point I'm making.

Mr. Valeri: I want to speak to that again, Werner, because I want to get this clear.

If we look at someone from another country who is about to engage in an enterprise in Canada, who ultimately goes to this bank, they must first have gone to the other financial institutions. This bank must then have informed the other financial institutions that this gentleman has come in.

We're open for business in Canada, and if we can facilitate any sort of financing of enterprise in Canada for employment, then we'll do it. But we're doing it in a complementary fashion. That's the only point I want to make.

[Translation]

Mr. Rocheleau: Mr. Chairman I don't understand Mr. Mills' position. I don't recognize him anymore.

We could easily make it clear if we wanted to. We simply have to decide whether we agree that the new bank should compete with traditional banks, existing institutions, or not. If we wanted to compete with them we can simply keep the paragraph as it stands. If we don't approve of it, we can simply keep what was in the old legislation. It seems clear to me. But we are deliberately remaining in the vague in order to keep the door open while waiting to see how the market goes.

[English]

The Chairman: It sounds as if we've agreed to disagree. I'm just going to have to make a conclusion here as your chairman.

Then, Mr. Mills, you're going to withdraw clause 2?

Mr. Mills: Yes, and we're going to go to subclause 14(4).

The Chairman: So we'll deal with clause 14 when it comes. Is that the consensus? It sounds as if it's going to be on division. I want to make sure we have the Liberals on side here.

Mr. Mills: [Inaudible - Editor]...says it doesn't matter if it's in 2 as well.

Mr. Bélanger: [Inaudible - Editor]...the definition. It doesn't matter where it is.

The Chairman: We can bring it back.

[Translation]

Mr. Bélanger: Mr. Chairman if we are going to use the French version for the proposed definition I wonder if it might be possible to flesh it out somewhat because in English it says: which fills out or completes, while in French it says: qui complète. It requires some work.

[English]

The Chairman: So by the time we get to clause 14, we'll have a look at it. Okay.

Mr. Schmidt: So we've delayed it until clause 14.

The Chairman: We'll see how far we get. Okay.

[Translation]

Just a moment, please.

Mr. Leroux: Go join her, Mr. Chairman.

Some Voices: Ha, ha!

[English]

The Chairman: Clause 1 has been moved to the end.

Clause 2 agreed to on division

The Chairman: That's an hour per clause, like the gun control bill.

.1135

On clause 3 - Continuation of Federal Business Development Bank

The Chairman: This is the name.

Mr. Mills: This is where we got stiffed as a committee.

The Chairman: Mr. Mills, would you like to sit here and ask some questions of yourself? I couldn't resist!

Mr. Bélanger, on clause 3.

Mr. Bélanger: I need information if I may. Has the bank determined or tried to determine how much a change of name costs?

Mr. Lane: We haven't done any specific calculations, but as a note to the committee, since the industry committee put out its report last year and included a recommendation to change the name, we have deliberately kept all inventories at a low level in terms of paper supplies, and so on.

Secondly, the bank is going through a change in where its offices are located. In a number of areas, we will actually be changing some offices to more storefront locations so people will know where the bank is. So there is a natural -

Mr. Bélanger: It is not a consideration.

Mr. Lane: No, it is not a consideration.

Thirdly, the bank has always footed the bill for these kinds of changes. It comes out of our regular operating expenses.

Lastly, I don't think you will see it hit in one year. When you put up a new sign, it is amortized over a period of five to ten years. So in terms of the financial sort of hit on the bank, it will be marginal and over a period of time.

Mr. Bélanger: Thank you.

Mr. McClelland: It doesn't cost anything because you pay for it over time?

Mr. Mills: In fairness, let's be reasonable here. Mr. Chairman, I think Mr. Lane has explained this clearly. We are very sensitive as a government to the fiscal constraints we're under, and the bank, of course, is going to follow that same discipline we've been following. But if we move into a new community, for example, if we open some new offices in Quebec, obviously we are going to need signs. Those signs are not in existence, so there's no wastage there. You only have about 75 locations in total right now. I think we heard a price of approximately $2 million if we redid those all at once.

The Chairman: Mr. Nunziata, you have a question.

Mr. Nunziata (York South - Weston): What percentage of the bank is dedicated to small business?

Mr. Lane: Last year, when we appeared before the committee, it was something like over 90% of our loans go to businesses of less than 20 employees.

Mr. Nunziata: Why then doesn't the name of the bank reflect the true nature of the bank? If in fact it is a small business development bank, why isn't that included in the title? It seems to me that if you're trying to attract business from the small business community in Canada, you would want a name to reflect that.

If I was a small business person in Canada today and I saw a storefront office that said business development bank, I would probably be intimidated by it because it's not inviting to a small business.

That's my first question, Mr. Chairman. Why not reflect the true nature of the banking activity in the name of the bank?

Mr. Mills: It's no secret to this committee that I, along with many members of the government, had a view that we should rename it the Small Business Bank of Canada to deal with precisely the issues you've raised, Mr. Nunziata.

.1140

However, we have been informed by the officials of the Federal Business Development Bank that they did a professional survey in various regions of the country and discovered that small businessmen did not like the name Small Business Bank of Canada. Some people also thought it created an expectation that the Federal Business Development Bank couldn't fulfil.

As the minister stated earlier, there was also some copyright debate. As the registrar, he felt he might be in a conflict by granting that name, Small Business Bank of Canada, to a government agency, when he probably would not grant that name to any other non-government agency. So those are the reasons.

I personally regret that we had this experience in the survey. I make no bones about the fact that I personally preferred and wanted the name Small Business Bank of Canada, but other experts have said it can't be so.

Mr. Nunziata: Who's running the show around here?

Mr. Mills: The people are running it.

Mr. Nunziata: Is that survey available to the committee?

Mr. Mills: Oh yes.

Mr. Nunziata: Has the committee reviewed it?

The Chairman: No. We've never seen the survey. I think it's a valid question. Mr. Lane, do you have that survey?

Mr. Lane: Yes, we have the report from the survey.

The Chairman: Could you make it available?

Mr. Lane: It could be made available to the committee.

The Chairman: Oh, I guess Mr. Manley's now telling us you can't have it.

Mr. Mills: Pardon me?

The Chairman: Can you have it or not?

Mr. Mills: All surveys are public information.

Mr. Nunziata: If the government is so keen on participating, or seems to have taken a keen interest in the name of the bank, why would you then give that authority to the board in clause 2?

What's the rationale behind clause 1, where it indicates it's continuing as a body corporate under the name the Business Development Bank of Canada, and then gives the authority to a board of directors, who, as you know, Mr. Parliamentary Secretary, at times become distant from government? This board could very well name the bank anything it wants to under clause 2. Why the necessity for clause 2?

If you want to ensure that the federal presence is maintained in Canada, why don't you name the bank and make it part of the legislation rather than giving the authority to the board of directors?

Mr. Mills: Members of the board of directors are appointed by the Governor in Council. I believe if we had a board whose members weren't following government policy it would be a stroke of the pen to replace them.

Mr. Nunziata: That's easier said than done, Mr. Mills. I don't have the faith you have in boards of directors. All you have to do is look at the Harbourfront example in Toronto.

Mr. Mills: But with the greatest respect, that board was not controlled by the Governor in Council. It was controlled by a not-for-profit group that had no relation to us.

Mr. Nunziata: I take it that the government wouldn't have any objection to deleting subclause 3(2).

Mr. Mills: I don't think, with the greatest respect, that's an issue the government is really concerned about. So we would just leave it as is.

Mr. Nunziata: If I could just clarify this, why would the government want to give the board the authority to change the name of the bank?

The Chairman: It's for marketing purposes, Mr. Nunziata, as I remember. It's a trade name like Canada's Housing Agency. The Canada Mortgage and Housing Corporation, for example, is a legal trade name. Then it can call itself Canada's Housing Agency or Building For Canadians or L'Habitation, or whatever. That's what the plan is, as it has been explained to me.

Mr. Mills: Exactly, and I think there are many board members who are sympathetic to the views you've expressed, in terms of having a small business marketing thrust. I think as time evolves you'll see that small business sort of signature worked into its overall plan and marketing materials.

So even though we may not have the Small Business Bank of Canada title in a trademark sense, I think the notion of it being the small business bank of Canada will be in the submarketing effort. It's very important that the board have the flexibility to meet that objective.

.1145

Mr. Nunziata: With respect, we're not talking about marketing here. We're talking about the name of an institution. Subclause 3(2) says the bank may operate under any trade name the bank may approve. It's not some special that you're having for the month, fried chicken for $2.99. You're talking about the essence of the bank itself, the name of the bank.

The Chairman: Mr. Nunziata, I'm going to jump in, and the only reason I'm going to jump in is that I'm hearing to my right that there is a strong move to change the name anyway. We may make the name change and then the government may decide to change it back in the House. So let's just hold that thought.

Mr. Rocheleau, you're next.

Mr. Nunziata: Sorry to interrupt.

The Chairman: No, it's okay. I know you want to put Canadian flags on the front page of every brochure of the bank.

[Translation]

Mr. Rocheleau: Mr. Mills, you said that the federal bank now has 75 branches in Canada.

Mr. Lane: Seventy-eight.

Mr. Rocheleau: How many are there in Quebec?

Mr. Lane: There are 17 or 18 branches in Quebec as well as a regional office and the head office.

Mr. Rocheleau: Have you already decided how many branches will be moved to give the bank a higher profile?

Mr. Lane: We do not have anything concrete yet.

Mr. Rocheleau: To be continued!

Mr. Lane: Maybe.

[English]

Mr. Mitchell: The committee had some good reasons for recommending Small Business Bank of Canada. I think those reasons continue to be valid. If we're rejecting Small Business Bank of Canada, if the department's doing that, then why are they changing the name at all? It seems it's an effort.... ``The committee recommended a change; we're not going to go along with their change, but we'll give them another change.'' I think that's ridiculous. We should either have it as Small Business Bank of Canada or leave it as FBDB.

The Chairman: Good for you, Mr. Mitchell.

Some hon. members: Hear, hear!

The Chairman: Mr. Mills, do you want to respond to that, or shall we just leave it as it was said?

Mr. Mills: As I've stated earlier, I've had my preference on this. The surveys...when we went to the people, the small businessmen and businesswomen, we got a negative response.

Let me say something else. The word ``Federal'' with a lot of small and medium-sized entrepreneurs is not as pleasing as Development Bank of Canada. ``Canada'' has a much stronger presence in an organization than the word ``Federal''.

[Translation]

Mr. Leroux: One office, 17 banks...

[English]

The Chairman: Our Canadian colleagues agree with you now: our Canadian passports, our Canadian money; our name as well.

Mr. Discepola: Mr. Chair, I would support Mr. Mitchell's motion. I'm again a bit disappointed in the French translation. If you take the French translation as proposed, the word ``Business'' is out of there totally. So not only is ``Small Business'' out of there but ``Business'' is out of there.

If we're going to change it for the sake of changing it, then let's leave the name as is. But if we're going to change it, let's reflect, as Mr. Nunziata said, the true nature of the bank. In the French translation it's totally out of there.

The Chairman: That's a good point.

Mr. Schmidt, could we get a view from your world?

Mr. Schmidt: I'd like to endorse what my colleague across the way said. If we're not going to do it the way the committee recommended, why change it at all? I see no good rationale for it.

With all due respect to ``Federal'' being somewhat different for them.... Well, that may be. The point remains that this is not supposed to be a competitive bank. This is supposed to be a complementary bank, and I think Federal Business Development Bank says that extremely well.

The second point has to do with the second part, which means to give the board the power to change the name. Does that suggest, Mr. Chairman, that in future, if this bank would ever want to change its name, all that's required is not a legislative change but simply the board makes a resolution at one of its meetings and the name is changed? I think that's wrong. I don't think that power should be given to them.

The Chairman: I think that's the point Mr. Nunziata was making.

Well, I'm hearing a consensus on this point.

.1150

Mr. Mills: No, I don't think you did.

The Chairman: Mr. Mills, you'll get your chance to speak, but you're sitting in the wrong chair today.

Mr. Bélanger.

Mr. Bélanger: Have surveys been done by whomever about the current name, and have there been surveys testing any confusion that might arise from Bank of Canada versus Business Development Bank of Canada? Has that been surveyed?

[Translation]

Furthermore, if we want to talk about the Small Business Development Bank, as our colleagues do, we will have to find something equivalent in French, such as ``Banque fédérale pour la petite et moyenne entreprise''. We would have to agree on that. We should also discuss that aspect of it.

[English]

Mr. Mills: Has that been surveyed? I don't know.

Mr. Bélanger: Since we're naming from surveys, we might as well find out what the survey says.

Mr. Lane: First of all, there was a small focus group, so we just polled the opinions of Canadian entrepreneurs, small business owners.

Mr. Bélanger: They were focus groups, not a survey.

Mr. Lane: They were focus groups.

Mr. Bélanger: I see. How many focus groups?

Mr. Lane: Three were done.

Mr. Bélanger: Where?

Mr. Lane: In Toronto, Montreal, Calgary.

The Chairman: None were done in Atlantic Canada?

Mr. Bélanger: None at all were done in smaller municipalities or communities?

Mr. Lane: No. You get back to prices and the cost of doing this type of work.

I must say, the results were very consistent.

The Chairman: In Toronto, Montreal, and Calgary they would be, but in North Bay or Kelowna or Saint John, New Brunswick -

Mr. Lane: We didn't conduct the census.

The Chairman: Mr. Bayne.

Mr. Bayne: The problem I was going to raise was that the French version of Small Business Development Bank, which would be Banque de la PME, is already a registered trademark for the Royal Bank of Canada.

The Chairman: But not Banque canadienne de la petite entreprise.

Ms Bayne: No.

Mr. Bélanger: Banque canadienne de la petite et moyenne entreprise, no. They couldn't possibly do it.

Mr. Bayne: The problem there is it may be too similar to be able to -

The Chairman: Government can do anything. It could name a man a woman.

Mr. Bélanger: It is too similar, just as Business Development Bank of Canada might be too similar to Bank of Canada.

Mr. Mills: On the specific point, the reason why we as a committee wanted to have Small Business Bank of Canada was that there would be no confusion with Bank of Canada.

Mr. Bélanger: I agree with that.

Mr. Mills: I just wanted to support your opinion.

The Chairman: Mr. Mills, I want to remind you of where you're sitting today. Stop arguing for them.

I'm going to hear a final comment from Mr. Rocheleau and then I'm going to have a proposal for you, colleagues.

[Translation]

Mr. Rocheleau: Mr. Chairman, I would like to see the same transparency on the government's political intentions as can be seen in clause 3. The same transparency as to the government's intentions must be maintained throughout the bill. Our work would be easier if there were more transparency because we could then see the government's intention.

Mr. Discepola: Which is?

Mr. Rocheleau: The Business Development Bank of Canada.

[English]

Mr. Mills: Could you be a little more specific, Mr. Rocheleau; the intent?

[Translation]

Mr. Rocheleau: It is easy to see what the political intent of the government is in this change which, by the way, goes against the committee's recommendation. It was a recommendation, wasn't it? This shows how difficult it is to know what is the true intent of the government with this bill.

[English]

Mr. Mills: We're consistent, Mr. Rocheleau. There's no hidden agenda here. We've been up front all along in saying that this bank is meant to complement and support small business in every region of the country and it's meant to enhance the Government of Canada's presence and support for small business wherever we can and as much as we can without competing with the banks. So that's not a new objective.

.1155

The Chairman: Mr. Discepola, do you have a proposal?

Mr. Discepola: Yes. Based on recommendation 10 from the small business act and capital report that we produced, I'd like to move an amendment to subclause 3(1), which would be to -

The Chairman: Just read what you want to call it.

Mr. Discepola:

The Federal Business Development Bank established by the Federal Business Development Bank Act is continued as a body corporate under the name Small Business Bank of Canada.

The Chairman: And the French would be?

Mr. Discepola: The French translation would be la Banque canadienne de la petite et moyenne entreprise.

The Chairman: Is there a seconder for that?

Mr. Discepola: No.

Mr. Iftody (Provencher): I'll second that.

Mr. Mills: Mr. Chairman, may I please react to that motion?

The Chairman: Hold on for a second. You're just the witness today. Before we hear from our witness, I want to understand a procedure here.

This amends it then? Is that right?

The Clerk of the Committee: The amendment would be to clause 3.

The Chairman: So clause 3 is now on the table, and we have an amendment to it.

Mr. Mills: I would appeal to all members of this committee to consider the fact that the bank has done extensive focus group testings on these various names that we put forward, including the name the committee suggested. I was a part of the committee and supported the name, Small Business Bank of Canada.

I'm sorry that we don't all have them in our hands right now, but the results of those surveys showed that the small business community did not react in the way we, as a committee, had expected. So now the cabinet has made a decision, based on these focus groups - and I stand to be corrected here - that a better name, to meet the policy objective, and the committee's objective, is Business Development Bank of Canada. I just want it to be very clear to all members from whence this alteration came.

The Chairman: With the greatest respect, Mr. Mills, we hear you.

Ms Bethel: I call for the question.

Amendment agreed to

Mr. Bélanger: You need to delete clause 2.

Mr. McClelland: That's a trade name.

[Translation]

Mr. Bélanger: One moment, Mr. Chairman, concerning clause 3.

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[English]

The Chairman: Just a second, okay, Mr. Bélanger?

Can we get unanimous consent to go back to clause 2 because clause 2 now has the wrong name? We can go back and reopen clause 2, where we have a Mexican standoff. Can we go back to clause 2? Are we agreed to that?

Some hon. members: Agreed.

On clause 2 - Definitions

The Chairman: Clause 2 would need to be amended and the amendment on clause 2 would be for the definition of ``bank''. I need a motion for the definition of ``bank'' on clause 2. Do I have a motion for this, that the bank definition would be as we would have adopted it in clause 3? Is that agreed?

Do we have a motion for that? So moved.

Are you ready for that question?

Yes, Mr. Rocheleau?

[Translation]

Mr. Rocheleau: I would ask for a recorded vote.

[English]

The Chairman: All those in favour please raise their right hand.

[Translation]

Mr. Leroux: If it is a recorded vote, Mr. Chairman, it must be one after the other.

[English]

The Chairman: Okay. Can you carry that out?

Mr. Mitchell: Read the motion too.

The Chairman: The motion would be to change the definition in clause 2 under ``bank'' to ``the Small Business Bank of Canada'', la Banque canadienne de la petite et moyenne entreprise.

Amendment agreed to: yeas 6; nays 3

Clause 2 as amended agreed to on division

The Chairman: Shall clause 3 now carry as amended?

Mr. Bélanger.

Mr. Bélanger: I have a question for the legal minds in the room. If subclause (2) is not in that clause, does that prohibit the bank from doing what it wanted to do in the first place? Do they need subclause 3(2) to use trade names? That's the question.

The Chairman: No.

Mr. Bélanger: So why put it in?

Mr. Mills: Excuse me, Mr. Chairman. I think we should answer Mr. Bélanger's question.

Mr. Bayne: In my opinion, it's not an absolute requirement. The bank can still adopt the trade name it wants to use.

Mr. Bélanger: I move to delete that clause because of the uncertainty as to what it really means.

The Chairman: Well, hold on. Just one second. Clause 3 has already been amended and now you're proposing an additional amendment.

[Translation]

Mr. Leroux: On a point of order.

Mr. Rocheleau: We are still on clause 2.

Mr. Leroux: Yes, but I want to raise a point of order.

Mr. Rocheleau: Yes. We adopted...

[English]

The Chairman: I'm sorry; clause 2 has been covered.

[Translation]

Mr. Rocheleau: We voted on the name change...

Mr. Leroux: On the amendment.

Mr. Rocheleau: On the definition of the amendment...

Mr. Leroux: It was a recorded vote.

Mr. Rocheleau: We already voted on that. Now we would like to have a recorded vote on the new clause 2 as amended.

.1205

[English]

Mr. Discepola: They're right. They just want a recorded vote on the amended clause 2.

The Chairman: Okay. That's fine.

[Translation]

That is fine.

[English]

Back to clause 3.

Mr. Discepola: We have a recorded vote on the amendment, Mr. Chair. Now they want a recorded vote on clause 2 as amended, which we don't have yet.

The Chairman: Oh, all right.

[Translation]

Mr. Leroux: We will have the recorded vote on the amendment, then on the clause.

[English]

The Chairman: Can we all unanimously agree to apply that vote to this vote?

Some hon. members: No.

Mr. Schmidt: It's on division.

The Chairman: We can apply the same vote as if we had recorded it. They're asking for that, instead of being on division, to be a recorded vote. So I'm just requesting unanimous consent for us to just apply it the same way.

Some hon. members: No.

The Chairman: You want it recorded. All right, we'll vote again. So now we're recording the vote. Otherwise, we lose the vote, or the chair will have to cast a vote.

Mr. Nunziata: Why are they voting against the definition?

The Chairman: No, they're not voting against the definition.

Mr. Discepola: Yes, they are.

The Chairman: Oh, they are.

Mr. Discepola: That's why they want a recorded vote.

The Chairman: You mean you don't vote for the bank name.

Mr. Nunziata: They don't believe in defining anything.

Clause 2 as amended agreed to on division: yeas 5; nays 4

On clause 3 - Continuation of Federal Business Development Bank

The Chairman: Mr. Bélanger, you have a further amendment.

Mr. Bélanger: I move to amend clause 3 of Bill C-91 by deleting subclause 3(2). It's superfluous.

The Chairman: Mr. Bélanger has put a motion to delete subclause 3(2). Is there a seconder for that?

Mr. McClelland: I second the motion.

Amendment agreed to: yeas 5; nays 4

Clause 3 as amended agreed to: yeas 5; nays 4

On clause 4 - Purpose of Bank

Mr. McClelland: Mr. Chairman, just for the sake of greater clarity, I would like to revisit the suggestion that we include the notion of complementary financial services, period, and make a distinction between financial and management services.

.1210

Mr. Mills: I will ask our legal counsel.

Does that in any way cause problems for us when we're talking about management services? We don't want to -

Mr. Bayne: There is a problem there, that financial services need be broader in scope than loans, investments, or guarantees. It was the issue raised by the CBA as the problem with clause 4.

Mr. McClelland: Mr. Chairman, I don't want to belabour the point. I wanted just to bring that up again. If there's no consensus, don't worry about it.

The Chairman: Okay. So can we leave that as it is?

[Translation]

Mr. Bélanger: I'd like to put a question to the legal counsel. Wouldn't the English term ``entrepreneurship'' in clause 4 be better rendered by ``entreprenariat'' rather than ``esprit d'entreprise''? I don't want to split hairs but I wonder about it.

Mr. Discepola: Perhaps it should be ``esprit d'entrepreneurship''...

Mr. Bélanger: I don't think that entrepreneurship is considered a French word. What about entreprenariat? What is the appropriate term?

Mr. Ducharme: There is a shade of difference between the English and French but I don't see any problem. The concept designated by esprit d'entreprise is slightly different but the expressed purpose of the bank is basically the same.

Mr. Bélanger: Entrepreneurship and spirit of enterprise are not exactly the same thing.

Mr. Ducharme: Explain to me what the difference is.

Mr. Bélanger: The spirit of enterprise is displayed in any individual initiative. It's shown in the way one works or plays whereas entrepreneurship does have a business connotation. That's the difference as I see it.

Mr. Ducharme: I agree with you but in the context of this clause, if you bring together...

[English]

The Chairman: Mr. Bélanger, if you feel strongly about it, we're prepared -

Mr. Bélanger: I don't feel strongly about it. I just want to make sure the two are equal.

The Chairman: He's speaking only from the pure point of view. Your colleagues from the bank, if they don't have a problem -

[Translation]

Do you have any opinion on the matter, Mr. Rocheleau?

Mr. Rocheleau: On the use of ``esprit d'entreprise'', yes, but not along the same lines.

Mr. Leroux: The question of semantics comes up in relation to the translation. In any case there is always a big problem. We see it in the House every day. We also see it on Canadian products adopted by the Department of Industry where the translation is atrocious. We'll let it go by, we don't have any energy for that sort of thing.

Mr. Bélanger is worried about the exact connotation of the term ``esprit d'entreprise'' and I commend him for it. But that's not the sort of thing that bothers us.

[English]

Mr. Bélanger: I'll wait, then.

The Chairman: Mr. Bélanger is your advocate, so you keep supporting him.

[Translation]

Mr. Leroux: Certainly.

[English]

Mr. Bélanger: We are waiting to see what their preoccupation is, Mr. Chairman.

[Translation]

Mr. Rocheleau: There's room in the PQ.

Some hon. members: Oh, oh.

An hon. member: With all due respect...

[English]

The Chairman: On clause 4, there's the French issue, the translation issue, and I think it's a valid one. If we can get some small change there, that would be more accurate. I think we should look at that as an amendment. I don't even know if that's an amendment. It's really just a translation issue.

The other point, Mr. McClelland, you've made.

Do colleagues wish to make any other comment on clause 4? Mr. Rocheleau.

[Translation]

Mr. Rocheleau: I'd like to make a comment, Mr. Chairman.

We intend to vote against because it does represent a change in the purpose or vocation of the former Federal Business Development Bank whose purpose was to promote and develop business in Canada. Here we have a very vague reference to supporting Canadian entrepreneurship. That is what I call non-transparency, namely the use of vague language that doesn't give us any idea of where the government intends to go. We do have some guesses about its intentions.

[English]

The Chairman: As your chair, I'm going to have to say I also agree with you, Mr. Rocheleau. That's been one of my problems with the way this has been drafted. It does start to change what the purpose of the bank was and what the purpose of the bank is and will become. I agree with you. But I'm just your chair.

.1215

Mr. Mills: I would like Mr. Lane to respond to that. He is on the ground, working with the bank in an operational sense daily. I don't share Mr. Rocheleau's views.

[Translation]

Mr. Lane: I'd like to talk about business development. We often get requests from institutions for support in a range of conferences, for example. That is not a business development activity but a regional conference.

We do have a mentorship program for students and something known as the Junior Achievement awards. These activities cannot be considered business development as such. That's why the Bank's purpose has been broadened.

Mr. Leroux: Your explanation isn't quite in keeping with clause 4 itself which says that the purpose of the Bank is to support Canadian entrepreneurship by providing financial and management services and by issuing securities or otherwise raising funds or capital in support of those services.

Entrepreneurship is directly linked to these operations. When we look at development initiatives as a whole, we realize that there must be objectives.

With respect to economic growth and development, this must be associated with similar operations rather than seminars or workshops. The clause clearly indicates what entrepreneurship involves.

Mr. Rocheleau: This is the kind of reasoning that leads to clause 21 where it is no longer just a question of entrepreneurship but also the administration of any program supporting entrepreneurship.

It is certainly very political. It goes far beyond the previous role of the Federal Business Development Bank and fits in perfectly with the planned intrusion in regional development...

Mr. Leroux: Nonetheless it does have the advantage of clearly setting out the aims.

Mr. Rocheleau: ...and setting aside the existing institutions. That's what's underneath it all, Mr. Mills, and you know it perfectly well.

[English]

Mr. Mills: Mr. Rocheleau, there's no hidden agenda here. We are not creating any new program or new design here. We're basically just building on and complementing what we've been doing in the past.

[Translation]

Mr. Rocheleau: We're still dealing with clause 4. What causes me to doubt your statement, Mr. Mills, is clause 2 which gives me the impression that an attempt will be made, incidentaly, when it is possible, to act through small and medium-sized business. Small and medium-sized business will no longer be the exclusive focus, as was previously the case.

The Federal Business Development Bank concentrated on economic development through small and medium-sized business. Now it is just a secondary objective. That makes all the difference. Entrepreneurship development programs in Canada will be possible without necessarily focusing on small and medium-sized business.

[English]

Mr. Mills: I don't see the difference from what we were doing before. Please explain it.

[Translation]

Mr. Rocheleau: It will become clear in the coming months.

Mr. Bélanger: You've already drawn your conclusions?

Mr. Leroux: You don't create an instrument if you don't intend to use it.

[English]

Mr. Mills: Maybe Mr. Rocheleau could give us an idea of what he would expect to see, because I don't understand the concern.

What would you imagine the bank could do that would be dramatically different from what it's been doing in the past?

[Translation]

Mr. Rocheleau: Your advisor has just referred to programs in the schools to develop entrepreneurship . It so happens that in Canada under section 93 of the Constitution, education is an exclusive provincial jurisdiction, notably in Quebec. He spontaneously gave this example.

[English]

Mr. Mills: It's only when we are invited that we do these projects. It is not an imposition, and that's a very small part of the -

[Translation]

Mr. Rocheleau: It's just the tip of the iceberg.

.1220

[English]

Mr. Mills: Look, there's one basic fact of life we have all had to deal with on this committee. Even though we have a great sort of feeling and respect for our colleague, the industry critic for the Bloc, there is one fundamental difference. Anytime there is any discussion about the federal presence, the Government of Canada presence in the province of Quebec, Mr. Rocheleau gets edgy.

I can understand that, because it's all of a sudden sort of working our way and I know this probably causes you some concern. But I don't think you should count on the bank giving you any or too much difficulty over the next four or five months. It will take them a little longer than that to get up and on their way and active in the province of Quebec.

The Chairman: Your decision will have been made by then, so don't worry, be happy.

On clause 4, colleagues, how do you want to deal with this?

[Translation]

Mr. Rocheleau: We would like to have a recorded vote.

[English]

The Chairman: Yes, Mr. Bélanger.

[Translation]

Mr. Bélanger: As the term "entrepreneurship" will come back later on, in clause 20 or 21, can we ask our legal counsel to look into what the best words to use would be? Perhaps he could have that for this afternoon?

The Chairman: That's a good point.

[English]

So we've agreed that we'll look at where that word appears in the bill. You'll give us an answer for this afternoon, and we would adopt it for the French translation everywhere, presuming the committee were to agree to it. But that would be the intention as to the way we'll proceed.

Mr. McClelland: May we have a recorded vote? We're requesting a recorded vote on clause 4. That's the only one we're going to ask for.

Clause 4 agreed to: yeas 5; nays 4

On clause 5 - Membership of Board

The Chairman: On clause 5 there's a small change, colleagues, that involves the composition of the bank's board of directors.

[Translation]

Mr. Leroux: Mr. Chairman, at what time do we adjourn? At 12:30 p.m.?

[English]

The Chairman: It's up to you - 12:30 p.m., 1 p.m., I'm in your hands. Okay, 12:30 p.m. I want to remind you, though, that we're not really moving along here very fast.

[Translation]

Mr. Leroux: Let's hope that we will hit some parts where we can go faster.

[English]

Clause 5 agreed to on division

On clause 6 - Appointment of Chairperson

The Chairman: There's an amendment on clause 6, colleagues.

An hon. member: Where is the amendment?

.1225

The Chairman: That's the Bloc amendment, I think. Mr. Rocheleau, do you wish to speak to it?

[Translation]

Mr. Rocheleau: Paragraph 6(1.1) would read as follows:

(1.1) No appointment shall be made under subsection (1) without the prior approval of the standing committee of the House of Commons that normally considers matters relating to banking.

[English]

Mr. Discepola: Why wouldn't that be approved by the new council of ministers after the referendum?

[Translation]

Mr. Leroux: After the referendum, you will continue working in a vacuum. It is in your interest that we want to do that!

[English]

The Chairman: Colleagues, you've heard the amendment.

Mr. McClelland: Am I to understand that this is to suggest that any future chairman of this new bank, whatever it's going to be called -

The Chairman: Small Business Development Bank.

Mr. McClelland: - would have to come before the finance committee?

The Chairman: He doesn't say which committee it is, but it would be the industry committee.

Mr. Schmidt: The way it's worded, it would be the finance committee.

The Chairman: Banking would be finance.

Do you mean industry, Mr. Rocheleau?

[Translation]

Mr. Leroux: It does not make any difference, Mr. Chairman. At the end of the day, it must be dealt with by a committee dealing with banking matters. Whether it is the finance committee or the industry committee, it must be one dealing with banks. This is what counts.

[English]

The Chairman: That answers your question, Mr. McClelland.

Liberal colleagues, do you wish to comment? Do you have a problem? Do you like it? Do you not like it?

Perhaps the witness would like to comment.

Mr. Mills: I would just want to say that this normally is a decision reserved for the cabinet. Presumably their choice is always subject to public scrutiny, and so not in any way, shape or form demeaning the role and responsibility of the committees, but this is a position that the government would not alter.

Mr. Bélanger: I tend to side with the witness on this one.

I want to understand, for my own edification in deciding here, what is the current policy or approach to reviewing Governor in Council appointments of a certain nature. I understand that some do go back. What's the difference?

The Chairman: I can tell you only what my very brief experience is. Any appointment that deals with the subject-matter under which appointments are made comes to the committee and it goes to committee members. If, for example, the new chairman....

Mr. Rocheleau, I wonder if the new chairman automatically comes here anyway, because you're given an opportunity....

The legal counsel might know. Once an appointment is made to the Federal Business Development Bank, the chair of industry and every committee member get the name. If there is a review, you automatically have that right anyway. You could request it.

Am I not correct?

Mr. Mills: Not only that, but the committee has the power to invite the chairmen of any of these institutions to come before the committee as a witness to discuss with them any of the pertinent issues about which members may be concerned.

[Translation]

Mr. Rocheleau: First of all, we would discuss the appointment of the bank's chairperson here, and, in the spirit of the amendment, committee members would be informed ahead of time and asked to give their approval before, and not after, the fact. By so doing, we would be reinforcing the role of the committees, which conforms with the current trend.

[English]

The Chairman: Personally, I have a problem with it being done. It is not part of the Canadian tradition of having a confirmation hearing, if you will. In other words, prior to it going to cabinet, if I understand you correctly, what you're saying is that it would go to our committee and then it would go to cabinet.

.1230

[Translation]

Mr. Leroux: It flows from one of your government's objectives, stated in its Red Book, which was to guarantee more transparency in official appointments, and to have MPs and committees play a greater role. And now, we have the opportunity to act accordingly, and you do nothing about it.

We have a hard time understanding why, while you set up detailed objectives in your Red Book to change some things, you do nothing when you are given the opportunity to act. We have a hard time understanding your rationale.

[English]

The Chairman: Spare us the rhetoric.

Mr. Mills: Well, excuse me, Mr. Chairman, but Mr. Leroux has sort of missed the essence of the red book. The red book never stated that the Governor in Council was going to abdicate its responsibility in terms of appointing key positions to the government. We said they would stand up to scrutiny, but we're not going to give up -

The Chairman: Okay. Are you ready for the question?

We have an amendment. First let's vote on the amendment.

[Translation]

Mr. Leroux: Let us have a recorded vote, please.

Mr. Rocheleau: On the amendment.

[English]

Amendment negatived: nays 5; yeas 3

Clause 6 agreed to: yeas 6; nays 2

The Chairman: We're out of here until 3:30 p.m. The meeting is adjourned.