AGRI Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Tuesday, October 7, 2003

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1535

The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.))

Mr. Terry Campbell (Vice-President, Policy, Canadian Bankers Association)

The Chair

Mr. Terry Campbell

The Chair

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1540

Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance)

Mr. Bob Funk (Vice-President, Agriculture, Bank of Nova Scotia)

Mr. Gerry Ritz

Mr. Bob Funk

Mr. Gerry Ritz

The Chair

Mr. Terry Campbell

The Chair

Mr. Gerry Ritz

Mr. Don Wither (Director, Market Segment Solutions, BMO Bank of Montreal)

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1545

Mr. Gerry Ritz

Mr. Brian Little (National Manager, Agriculture and Agribusiness, Royal Bank of Canada)

Mr. Gerry Ritz

The Chair

Mr. Pieter Kleinschmidt (Vice-President, Agricultural Credit, Canadian Imperial Bank of Commerce)

The Chair

Mr. David Marr (National Manager, Agricultural Services, TD Canada Trust)

The Chair

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour)

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1550

The Chair

Mr. Don Wither

The Chair

Mr. Bob Funk

The Chair

Mr. Bob Funk

The Chair

Mr. Terry Campbell

The Chair

Mr. Louis Plamondon

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1555

Mr. Brian Little

The Chair

Mr. Louis Plamondon

The Chair

Mr. John Maloney (Erie—Lincoln, Lib.)

Mr. Bob Funk

Mr. John Maloney

Mr. Bob Funk

º

1600

Mr. John Maloney

Mr. David Marr

Mr. John Maloney

The Chair

Mr. Brian Little

Mr. John Maloney

Mr. Pieter Kleinschmidt

Mr. John Maloney

Mr. Pieter Kleinschmidt

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1605

Mr. John Maloney

Mr. Pieter Kleinschmidt

Mr. John Maloney

Mr. David Marr

The Chair

Mr. Brian Little

The Chair

Mr. Rick Borotsik (Brandon—Souris, PC)

Mr. Terry Campbell

Mr. Rick Borotsik

Mr. Terry Campbell

Mr. Rick Borotsik

Mr. Terry Campbell

Mr. Rick Borotsik

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1610

Mr. Terry Campbell

Mr. Rick Borotsik

Mr. Bob Funk

Mr. Rick Borotsik

Mr. Brian Little

Mr. Rick Borotsik

Mr. Pieter Kleinschmidt

Mr. Rick Borotsik

Mr. Pieter Kleinschmidt

Mr. Rick Borotsik

Mr. David Marr

Mr. Rick Borotsik

Mr. Don Wither

Mr. Rick Borotsik

The Chair

Mr. David Marr

The Chair

Mr. Brian Little

The Chair

Mr. Bob Funk

The Chair

Mr. Pieter Kleinschmidt

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1615

The Chair

Mr. Don Wither

The Chair

Mr. Yvan Beaudin (Director, Agri-business Services, National Bank of Canada)

The Chair

Mr. Rick Borotsik

Mr. Terry Campbell

Mr. Rick Borotsik

Mr. Pieter Kleinschmidt

Mr. Rick Borotsik

The Chair

Mr. Gerry Ritz

Mr. Pieter Kleinschmidt

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1620

Mr. David Marr

Mr. Gerry Ritz

Mr. Brian Little

Mr. Gerry Ritz

The Chair

Mr. Pieter Kleinschmidt

Mr. Gerry Ritz

Mr. David Marr

Mr. Gerry Ritz

Mr. David Marr

Mr. Gerry Ritz

Mr. David Marr

The Chair

Mr. Bob Funk

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1625

Mr. Gerry Ritz

Mr. Bob Funk

Mr. Gerry Ritz

Mr. Bob Funk

The Chair

Mr. Mark Eyking (Sydney—Victoria, Lib.)

Mr. Terry Campbell

Mr. Bob Funk

º

1630

Mr. Terry Campbell

The Chair

Mr. Mark Eyking

Mr. David Marr

The Chair

Mr. Don Wither

The Chair

Mr. Yvan Beaudin

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1635

The Chair

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.)

Mr. Pieter Kleinschmidt

Mr. Larry McCormick

The Chair

Mr. Larry McCormick

The Chair

Mr. David Marr

Mr. Brian Little

The Chair

Mr. Bob Funk

The Chair

Mr. Yvan Beaudin

Mr. Larry McCormick

º

1640

The Chair

Mr. David Marr

Mr. Brian Little

The Chair

Mr. Bob Funk

The Chair

Mr. Pieter Kleinschmidt

The Chair

Mr. Don Wither

The Chair

Mr. Larry McCormick

The Chair

Mr. Larry McCormick

The Chair

Mr. Brian Little

Mr. Larry McCormick

The Chair

Mr. Gerry Ritz

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1645

Mr. Bob Funk

Mr. Gerry Ritz

Mr. Bob Funk

Mr. Gerry Ritz

Mr. Bob Funk

Mr. Gerry Ritz

The Chair

Mr. Gérard Binet (Frontenac—Mégantic, Lib.)

The Chair

Mr. Gérard Binet

The Chair

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CANADA

Standing Committee on Agriculture and Agri-Food

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NUMBER 046

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, October 7, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Paul Steckle (Huron—Bruce, Lib.)): Ladies and gentlemen and those beyond, we have our quorum and can proceed with the meeting at hand.

    We want to continue today the review of this whole issue of BSE, how the repercussions of that have impacted on our industry, and how the banks are responding to that.

    We had Farm Credit Corporation here the other day. We now have the general banks here. We want to welcome you this afternoon. We have with us from the Canadian Bankers Association, Mr. Terry Campbell, vice-president, policy; from the Bank of Nova Scotia, Mr. Bob Funk, vice-president, agriculture; from the Canadian Imperial Bank of Commerce, Peter Kleinschmidt, vice-president, agricultural credit; from TD Canada Trust, David Marr, national manager, agricultural services; from the National Bank of Canada, Yvan Beaudin, director, agribusiness services; from BMO Bank of Montreal, Don Wither, director, market segment solutions; and from the Royal Bank of Canada, Brian Little, national manager, agriculture and agribusiness. We have the main banks with us.

    Mr. Campbell, are you the leadoff person?

    Mr. Terry Campbell (Vice-President, Policy, Canadian Bankers Association): Indeed, sir.

    The Chair: We'll allow you to do that. Those who wish to can make opening comments. Of course, we are under some time constraints, and if you speak too long we won't have time to question you. I caution committee members to keep their questioning succinct and the responses to the point but succinct as possible, so we can accommodate all the questioning.

    Mr. Campbell, you're on.

    Mr. Terry Campbell: Thank you very much. In the interest of time, and mindful of what you're saying, chairman, I'll make a very short statement. Perhaps then it might be best to move directly to questions, because I know you have matters you'd like to speak to.

    Mr. Chairman and members of the committee, on behalf of the Canadian Bankers Association I'd like to thank the House of Commons Standing Committee on Agriculture and Agri-Food for inviting the banking industry to participate in this discussion on BSE and its impact on the beef industry of Canada. You've met our members. My name is Terry Campbell, and I'm the vice-president of the CBA.

    The agriculture sector is very important to Canada's banks. We have a long history of serving the farm community. The beef sector is particularly important, accounting for almost 20% of authorized credit to the agricultural industry. The sector also acts as the economic foundation underlying many of the rural communities we serve through our branch network.

    The banking industry's response to the discovery of the single case of BSE and the closure of the export markets bears witness to our understanding of and our commitment to the agricultural industry in Canada. Banks have worked with their agricultural clients throughout a number of difficult circumstances in the past, such as poor yields, price shocks, trade disruptions, and so on. We've been able to support them through those trying times.

    On an industry level, within days of the closure of the export markets the CBA contacted Minister Vanclief, as well as provincial agriculture ministers across the country. We let them know as clearly as we could that the banking industry recognized the challenges faced by beef producers and affiliated sectors. We recognized that those challenges were not the fault of management, and we made it clear that the industry would work patiently with our clients on an individual case-by-case basis. The industry then conveyed similar messages to the beef industry and the general public at large.

    Subsequent to that, we've been in regular contact with ministers and senior officials at the federal and provincial levels, as well as the beef industry representatives, to share information and our insights on the BSE crisis. I think it's fair to say that the communications have been well received by the beef industry and governments, and have played a small part in fostering a sense of cooperation among the stakeholders. That's at the industry level.

    On the institutional level, banks have undertaken efforts to work individually with those clients who have been affected. My friends and colleagues with me here today will discuss the responses of their particular institutions, and provide you with more details about their specific activities in response to BSE. I imagine there'll be a good, thorough discussion over the next little while.

    The measures they have undertaken reflect what we hope is a responsive, patient, client-based approach that we've adopted throughout this crisis. We played a role in working with the beef industry during the border closure. Other players certainly have responded to the challenge as well. Most notably, the beef industry, through the Canadian Cattlemen's Association, has done a remarkable job of reassuring the public about the safety of Canadian beef products, and moving very quickly to introduce an intensive and very innovative market recovery program. As a result of their efforts, Canada is the only country in the world to have seen domestic beef consumption increase after the discovery of a case of BSE. This is truly amazing. It demonstrates the confidence Canadians have in the safety and quality of our beef products.

    We'd also like to acknowledge the very speedy and expeditious work of governments at all levels to help the beef industry cope with the negative impact of the border closure, and all the efforts they have undertaken to get the border opened.

    While the banking industry is proud of the response we have been able to contribute to the resolution of the border issue, we also recognize that the crisis is not yet over. Indeed, significant and urgent challenges remain. While it's true that the border is partially open, much of the beef industry is still shut out of export markets in general, and the U.S. market in particular. This is causing great uncertainty among our clients, and this uncertainty is having a ripple effect through the industry as a whole.

    This is the challenge we believe the federal government must continue to address. Indeed, our message today is that it is critical for the government and its agencies to continue their efforts and press ahead to resolve this issue. Lenders, suppliers, and other beef industry business partners are doing what they can to cope with the situation, but none of this is a substitute for an open border. The longer the border remains closed, the greater the uncertainty we'll all face. We believe the focus of the federal government's work going forward must be opening the border and restoring international trade in cattle, beef, and beef products.

    On behalf of my colleagues here today and the banking industry, I again thank the committee for the opportunity to share with you some of our thoughts and assessments on the impact of BSE on the industry.

    As I said at the outset, we certainly welcome your questions. I suggest, Mr. Chairman, we just move to questions, because we'd be very pleased to address them.

    The Chair: Thank you, Mr. Campbell.

    I think that sets the stage. You've given us a good premise on which to base our questions.

    Mr. Ritz, for seven minutes.

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    Mr. Gerry Ritz (Battlefords—Lloydminster, Canadian Alliance): Thank you, Mr. Chair. Gentlemen, thank you for being here today. It's great to see you again.

    My riding is in a large, agriculture-based area, and if it wasn't for the oil patch and all these off-farm jobs we'd all be broke. But the one thing I'm hearing from producers that's consistent across the spectrum is they're being nickelled-and-dimed to death by the banks when they go in to renegotiate, and so on. It's $10 for this, $50 for that, $500 for a business plan, and so on. Is there any way we can smooth that out? Is it absolutely necessary to do that?

    A lot of these guys are down to cash-crunch situations. Is there any way we can cut to the chase and just renegotiate the loans? I understand there are some costs you guys have to bear, but one guy had to spend $5,000 on a new business plan. That seems exorbitant to me, when he was in there renegotiating a loan that was in good standing. Are you hearing these kinds of stories, or are they not getting up to your level?

    Mr. Bob Funk (Vice-President, Agriculture, Bank of Nova Scotia): If I can take a run at that, each of us, and my organization in particular, has told our customers we're aware that the changes they're feeling because of BSE are nothing that management could have anticipated, so we're not laying them at the feet of management. When it comes to solving the issue, we will give it time, and from our organization's standpoint, we will not change the terms and conditions of the package the individual customer has until we have resolution of the BSE issue.

    We know that some customers are going to be so seriously changed, in a financial context, that we'll need to do something. Many, on the other hand, will be just fine. But we are going to wait until we have more information, a greater understanding of the final resolution of the problem, and a rediscovery of market pricing and mechanisms, before we make big changes with customers.

    I'm not sure if that addresses all the aspects of your question.

    Mr. Gerry Ritz: No.

    Mr. Bob Funk: Essentially, the status quo prevails with customers. We have not added a lot of individual charges to review their banking at this time because we know it's not possible to review the banking at this time. Until we know what the prices are going to be and that a marketplace has been established, we can't do that.

    Mr. Gerry Ritz: That makes perfect sense, but out there on the ground, branch to branch, I'm seeing these charges coming through. A lot of farmers and ranchers are phoning me and saying, “Man, I went in and I can just pay interest only for this short term, but it's going to cost me an extra $100 a month to do that. How come?”

    That's the point I'm trying to make here today. I'm just relaying what these guys are telling me. Is there any way you can address that? If you can, great. It's a stress these folks are facing that they don't need to face right now.

    The Chair: I wonder if I can be helpful here; perhaps you can be helpful to us.

    Would you feel offended if we named the bank--not the branch, but TD, Royal Bank, whatever? We do have cases. It may be embarrassing, but these are things we have to bring to this table. It may be helpful if you could suggest.... If you feel uncomfortable with that we may have to apologize, but I think it should be done.

    Mr. Terry Campbell: We're here to answer your questions.

    The Chair: All right. Without giving the name of the town or community, I think we can do that.

    Mr. Gerry Ritz: The National Bank is the only one here that's not represented in my riding, but the rest of you fellows are. There's a cross-section, not just one.

    Mr. Don Wither (Director, Market Segment Solutions, BMO Bank of Montreal): To address that specific concern, I don't know if you recall, but last year during the disaster that was happening out in the prairies, BMO introduced the prairie disaster relief program. It entailed a number of concessions to the producers to help them through the period. Included in that was a restriction on fees for any additional funds required; deferring all principal payments for a full production cycle up to a year; and reduced interest rates. We're introducing the same program this week for BSE, but the instructions have always been out there that during this crisis you do not charge additional fees for anything. That's our policy on this. This is a cash-flow issue. This is a crisis. Bank of Montreal is fully aware of it.

    Our chairman was recently in Saskatchewan. He addressed the issue and took it back to the Canadian Council of Chief Executives that we consider this an urgent issue that has to be dealt with. Included in that are concessions to the producers, and not just the direct producers, but the industries that are also being affected by this crisis, because it's throughout the communities. Not only the producers are being hurt here--the feedlots.

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    Mr. Gerry Ritz: Exactly. Thank you.

    Mr. Brian Little (National Manager, Agriculture and Agribusiness, Royal Bank of Canada): I'd like to make a comment on that. During June, July and August, for those feedlot accounts that were experiencing some stress, we reversed our revolving funds arrangement fees and our margining fees. In addition, we set up a principal deferment program, whereby payments on principal could be deferred for three months, or a quarter, until more facts became available. We extended that to the affiliated industries, like the trucking companies, the food processors, and the packing plants--any of those that were touched by the BSE outbreak. We're also making available the same programs to our cow-calf producers now.

    Mr. Gerry Ritz: That was the problem. They didn't have them over the summer--backgrounders and so on, like that. They were cut off on day one and didn't have access to those programs. You guys targeted the feedlots and the packing plants that also had access to the government money. Some people slipped through the cracks, so you may want to go back and reassess some of what happened in June, July, and August until you catch up to the rest.

    The Chair: Mr. Kleinschmidt.

    Mr. Pieter Kleinschmidt (Vice-President, Agricultural Credit, Canadian Imperial Bank of Commerce): I'll read you the policy of the CIBC. I have it here.

The CIBC's standard approach to any situations or events like this is to address each customer's needs on a case-by-case basis and develop proposals that are tailored to each customer's specific circumstances. Among the financial measures that may be put in place are changes in frequency of loan payments, reducing and deferring payments entirely, or making additional credit available where appropriate. While all options may not be available to each customer, we endeavour to pursue all options with customers before arriving at the best possible plan.

    That's a quote directly from our employee communication that we sent out immediately after the occurrence of BSE.

    Specifically on the issue of pricing, we certainly have not changed any policy around pricing that would result in an increase in fees--not deliberately anyway. We have tried to do completely the reverse and be accommodating to the customers, in the circumstances.

    The Chair: Mr. Marr.

    Mr. David Marr (National Manager, Agricultural Services, TD Canada Trust): From the TD Bank's standpoint, explicit instructions were given to all of our account managers and branch managers to visit individual customers, to sit down and determine what their needs were through the short term.

    In many cases those were increased needs--the cow-calf people could not liquidate their livestock or move their livestock. There were no pricing increases in interest rates; they were given explicit instructions not to increase pricing. From that standpoint, it's a day-to-day thing. We have to determine when there's going to be some long-term certainty to this market before we can actually decide where some of these clients want to go.

    We're trying to leave these decisions in their hands, the same as we do with any other business when they run into tough times. Things are changing daily and weekly, so it's difficult for all parties, not just the beef producers out there.

    I was not aware that anybody was initiating any additional fees.

    The Chair: We'll allow the others to jump in as we move along.

    Mr. Plamondon.

[Translation]

    Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour): I hear what you're saying. You've outlined your policies and you say that you have held meetings and talks, that you have tried to be understanding, that you have reviewed cases and instructed your bank managers to be sympathetic and make every effort to be accommodating.

    Practically speaking, however, would each bank be willing to draw up for the committee's benefit a list of the number of transactions made, for example, the number of loans that were temporarily suspended for 12 months, the number of loans on which interest rates were lowered or the number of loans for which administrative charges were eliminated--in short, can you tell us what steps the banks took to put so many million, or hundreds of thousands of , dollars in the hands of farmers to help them better weather the crisis?

    From what I'm hearing, in particular from Quebec farmers, 60% of whom are affected by the ban and dealing with a 30% to 70% drop in prices, depending on the species, the behaviour or lack of understanding of the banks is causing them tremendous hardship. You talk the talk but, in my opinion, you are not doing enough. So then, give us some proof, if you can.

    Are you prepared to draw up a list, without naming names, to reveal the number of farmers affected and to tell us how you have helped them?

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[English]

    The Chair: Who's going to take on that challenge?

    Mr. Wither.

    Mr. Don Wither: When we introduced the prairie disaster relief program last year, we started to capture that data. I'm not sure at this point how accurate it is, but we had to keep track of it for our own internal records, from a risk management standpoint. So I assume I can provide you with something to that degree. I'm not sure exactly how accurate it is or whether I can quantify the actual interest amount, but I could certainly provide you with the number, and probably the dollar amount.

    But you have to remember that the offer was made to quite a number of producers, and they didn't all need it or want it. So the number itself--although it may be large or small--is not necessarily representative of the offer; it's only representative of what was taken up. Surprisingly enough, it wasn't taken up to the degree we thought it would be--or was necessary. But the offer was there, notwithstanding.

    The Chair: That's similar to the withdrawals of NISA.

    Does someone else want to respond to that? That's a pretty good effort, but can someone else do better?

    Mr. Bob Funk: Mr. Chairman, I didn't realize this was a bidding war. We would not be able to identify that because we don't track, on an individual customer basis, the exact value of arrangements we have made, from the standpoint of change in revenue to us, change in arrangements, foregone fees, or service charges. We would simply not be able to give you specific data on that.

    The Chair: Could you provide us with the policy of the bank a year ago and the policy as it is today, as it reflects the realities of the BSE situation--just a simple statement of policy change, if there's been a change? Has there been a change in the policy? There may have been a policy that reflected a similar circumstance, but not under a BSE situation. What has changed from last year to this year? That might be a simpler way of helping us understand what the banks have done, because we have to respond to the farm community on a day-to-day basis. Can you do that?

    Mr. Bob Funk: I think we'd be able to do that. We worked that through to a certain extent as a group, so there were some common things that we agreed to do. Then if there were other things each of us wanted to provide to the CBA that they could roll up and provide to you, we could do that.

    The Chair: Would you do it collectively through the CBA?

    Mr. Terry Campbell: We will regroup after this and get something back to you, Mr. Chairman.

    The Chair: Does that answer help you, Mr. Plamondon?

[Translation]

    Mr. Louis Plamondon: It does.

    My second question, Mr. Chairman, ties in with what you were just saying, if we can't hear from these individuals. Earlier, you talked about policy statements forwarded to bank managers. Could each bank represented here today--and I hope that those not here could comply as well with the request--tell us exactly what steps it took? What was the situation a year ago and how were bank branches instructed to deal with the crisis? Could the committee get a copy of the instructions issued to each bank? That information could be forwarded to the clerk, and then relayed to committee members. That's what I'd like to see happen.

    I have another question as well. I don't know if that's something you can do. You can answer that question later. Something else that worries me is the amount of business you do with the United States. US banks have very close ties with Canadian banks. You hold joint loans, often in large projects, given that you operate branches in the United States and elsewhere.

    Have you also invested any energy or money into trying to get the US banks to understand that they should be lobbying the US government and demonstrating that the total closure of the Canadian border because of one single case of BSE was a totally immoral act? I hesitate to use the word “racist”, but the government's actions were jingoistic, to say the least. Putting it another way, did you plead your case with the Americans, acting through financial intermediaries, to try and get them to see the sheer lunacy of the situation? Five or six cases of BSE were reported in France last month and the United States didn't order a ban on French beef imports. Why did the Americans not take action against other countries that have reported cases of BSE, when they were so quick to act against us?

    As I see it, you are well positioned with respect to the right wing in the US to get across to this government the message that the embargo should be lifted and that it's a completely disproportionate response to the crisis faced by Canadian and Quebec farmers.

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[English]

    Mr. Brian Little: We have not yet had an opportunity at this level to lobby; however, we have an opportunity coming up on November 12. We have been invited to participate in the American Bankers Association conference and present a panel discussion, with all participants here, giving information on BSE and the impact it has had on our industry, with special emphasis on feedlots and cow-calf operations, and how it affects banks. That will be our opportunity to share that information with them, get feedback, and lobby them to participate.

    The Chair: Thank you.

    Thank you, Mr. Plamondon.

[Translation]

    Mr. Louis Plamondon: Thank you, Mr. Chairman.

[English]

    The Chair: Mr. Maloney.

    Mr. John Maloney (Erie—Lincoln, Lib.): One of the problems that has arisen from this beef crisis is the lack of packers within Canada. Once the borders closed, there was no place to send our stock.

    Given a reasonable business plan, would your banks either singularly or collectively be prepared to entertain the financing of facilities within Canada to process our beef? Is this an area that you think would be reasonable to move into?

    Mr. Bob Funk: The key would be whether it was a good business plan--

    Mr. John Maloney: I said a reasonable business plan. Under the circumstances I think it would be.

    Mr. Bob Funk: --and made good sense, in the context of the economy. There are probably two classes of activity that would see some support. One is what might be needed in the short term. I know, through speaking with the Canadian Cattlemen's Association, they are looking at some smaller plants that could potentially be opened in the short term to help the Canadian industry over the hump, from the standpoint of the volume of processing that needs to be done.

    In the longer term, where does the industry go, and is it envisioned that the amount of integration between Canada and the U.S. will continue at the level it has been in the past? If that were the case, then the firms that were interested in packing beef in the long term would do a kind of North American cost assessment and decide where they ought to go. To a certain extent, the Canadian industry is looking at how closely they should be tied to processing and packing outside of Canada, but at the same time it would be a business of economics, and whether it was economically feasible to build a plant here, in addition to the ones that are here and have been economically viable.

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    Mr. John Maloney: It's probably economically feasible now, but with the border opened up it would be a different situation, I suppose.

    Does anyone else have any comments on this?

    Mr. David Marr: I agree with Mr. Funk that there are two issues: the short-term need, but the long-term uncertainty. As we understand from our committee's side of it, one of the biggest challenges is the cull cow market. A lot of those animals were being slaughtered in the U.S. previously. Whatever happens with the border opening in the long term will reflect whether that operation will be viable, and what happens to the competition on that side of the business.

    As Bob echoed, the business plan would possibly make sense in the short term, but until we have some more certainty around the actual border opening and what's going to happen with cattle moving across the border, that could be a restriction.

    Mr. John Maloney: Our cow-calf operators are really heading into a financial crisis right now. The borders are closed and they have no markets for their stock. You told me what you can do, as far as delaying, but at what point does enough become enough and you have to start realizing on security, or calling in loans?

    The Chair: Mr. Little.

    Mr. Brian Little: I guess the point is that we'll continue to work with them as we have worked with the FIPA on operations, client by client. Some were experiencing difficulties prior to the BSE outbreak, and we have to deal with that.

    It's difficult to determine when you have to act. We try to work case by case. Some of them are doing creative activities, such as selling some of their calves. Some are putting up more feed, more accommodation, to winter them over. But each situation is rather unique, and there's no magic date or formula around that.

    Mr. John Maloney: Do you take security on the animals? Do you have a blanket charge?

    Mr. Pieter Kleinschmidt: Yes, we do take security on the stock. It is often revolving. It depends on the client's individual situation.

    On your previous question as to when would we finally act, I don't think any of us--certainly not CIBC--would act on a portfolio basis on thousands of customers. It's always on a case-by-case basis. Really the best situation is to come up with an agreed business plan with a customer, where they are able to repay their loans through the profits they generate.

    That really means you look at uncertainty and predictability of your current situation as it becomes more clear--the likelihood of the border opening, when it might happen, and those kinds of things. Then people can make better business decisions and plans. Either way, people can adapt if they know in what direction it's going, and that they have some time to adapt. Those are the drivers. Even if situations are looking very difficult, if the direction is clear you can help people get out of fairly difficult positions and be patient with them. So uncertainty is key.

    Mr. John Maloney: We've heard some talk or concerns from producers that the cows that are perhaps still on the range are going to have to come in and be fed, but the producers just don't have the money to feed them. There were concerns about culling the herd, or a portion thereof.

    Do you envision a situation where you or someone on your behalf would become a rancher, so to speak, for the interim period?

    Mr. Pieter Kleinschmidt: CIBC's policies are very clear that we will keep farmers farming their farms, if at all possible. It's what they do best. We're good bankers, they're farmers, and we don't want to become farmers. It also gives them the highest probability of optimizing their outcomes if you keep them in charge for as long as possible.

    Again, our entire business model is built on people voluntarily and happily paying their loans back, because it makes money for them to borrow money and pay loans back. Our business model is not built on exercising security. It's a difficult time for both the bank and the customer, from a corporate reputation and image perspective, and from a community perspective, so it really is a last step.

º  (1605)  

    Mr. John Maloney: Do the favourable banking terms that you're prepared to allow the industry to have--lower interest rates, principal payment delays, etc.--also apply to other sectors, such as the feed suppliers, transportation people, machinery dealers, etc., who are also part of that integrated industry?

    Mr. Pieter Kleinschmidt: I read to you earlier what we do around frequency of loan payments, etc., and that is available. It's a standing policy of CIBC that we use in other sectors under duress: in the SARS events, for those affected by the blackout, and for those businesses surrounding the cattle complex--the truckers and so on--who are affected. They're eligible for this treatment as well.

    Mr. John Maloney: Are these favourable terms--going back to the producers--across the board? Do the producers who are perhaps financially in a better position to weather the storm get the same breaks as the fellow whose back is to the wall, as far as cashflow goes?

    Mr. David Marr: The answer to that is yes. We've been instructing our account managers to deal with all clients in the same manner. That would apply to other industries that have been affected.

    On one of the problems with some of the sectoral industries that have been affected, most of the programs have been aimed directly at the cattle industry, so their cash flows have been hurt. The time they may be able to hang on, before they have to make their own business decisions or to look at other opportunities, may be shorter than somebody who is directly in the beef industry itself.

    The Chair: Thank you, Mr. Maloney.

    Mr. Little.

    Mr. Brian Little: We also developed a program for employees of those trucking companies or affiliated companies who were impacted by the BSE outbreak, by developing what we call the skip-a-payment program. If they were having problems meeting their monthly mortgage payments, we would set up a four-month delay for them to help them through this. That included a number of feed-lot employees, packing house employees, etc.

    The Chair: Mr. Borotsik.

    Mr. Rick Borotsik (Brandon—Souris, PC): Thank you.

    My first question is to Mr. Campbell from the CBA. I don't know if you have the figure at your fingertips, but 20% of authorized credit is from the beef sector of agriculture for the banking industry we have sitting in front of us. Do we have that number in billions?

    Mr. Terry Campbell: Statistics Canada gathers this information, and the latest report we have from them shows that credit authorized--this is debt financing--from the domestic banks is $28,400,000,000. Outstanding is $18,249,000,000.

    Mr. Rick Borotsik: Is that just for agriculture?

    Mr. Terry Campbell: That's for agriculture.

    Mr. Rick Borotsik: Okay, so would 20% of that be for the beef industry then? Of that $18 billion, around $4 billion would be on the beef side of it.

    Mr. Terry Campbell: Broadly speaking, I think that's right.

    Mr. Rick Borotsik: Yes. I'm not going to take this to the bank, so to speak.

    Some of the things you track are delinquent payments and write-off contingencies. Has the banking industry, in general, increased any of your write-off contingencies in the beef sector--that $4 billion? Have you gone that far yet? It's only four months into the crisis.

    By the way, can you tell me when the border will open? We've been asking that question to just about everybody and we haven't got the answer. Can you tell us? No. Based on that, have you developed any write-off contingencies in the industry?

º  (1610)  

    Mr. Terry Campbell: I'll look to my banker colleagues.

    Mr. Rick Borotsik: So will I. Are you that far along in the crisis?

    Mr. Bob Funk: From our standpoint the answer is no, largely because we do not have factual information upon which to do an assessment.

    Mr. Rick Borotsik: That's positive.

    Mr. Little.

    Mr. Brian Little: We have not planned any contingencies. In fact, our non-accrual loans for the cattle segment are lower now than they were a year ago.

    Mr. Rick Borotsik: That's a good point in itself, and that segues into my next question. Are you finding that at your head offices--particularly national head offices--the banks are ratcheting back on capital available to not only the beef industry, but to agriculture in general? Are you finding you're not going to have as much capital available to you?

    Mr. Pieter Kleinschmidt: At CIBC I can categorically state the reverse. We've just been through our annual process, and I know that my peers do the same. I would be delighted if we were able to run out of capital, because we'd have done a huge job, so there's certainly no limitation there whatsoever.

    Mr. Rick Borotsik: So you're taking it from the tech sector and giving it to agriculture. That's positive, in itself.

    Mr. Pieter Kleinschmidt: No--

    Mr. Rick Borotsik: I'm being facetious.

    To the other banks, is there also capital available?

    Mr. David Marr: We have no shortage of capital for agriculture. It's been a very successful industry for us, even though it has been through its ups and downs.

    Mr. Rick Borotsik: Don't we know that.

    Mr. Don Wither: I think you'll find that every individual from the banking sector at this table is in a brutal war to obtain agricultural business. I can guarantee that.

    Mr. Rick Borotsik: Okay. There's a question we hear all the time about programs that come forward. I'm not a fan of the existing APF, nor am I a fan of the programs that went forward, but the term “bankable” is always mentioned.

    Of the programs you know about now that are being proposed in the APF, the business risk management program, would you gentlemen, being bankers, consider them bankable? When people come into your office and say these programs may or may not be available, do you consider that when you're doing your analysis of those case-by-case proposals? Bankable is the term. Are they bankable?

    The Chair: Let's start with Mr. Marr.

    Mr. David Marr: I don't know whether I'd use the term bankable. One of the challenges in the past number of years with various programs has been making sure your clients understand how they can be used in their operation, from a risk standpoint. If we compare it to a crop insurance program, they know that if they have 20% of their average crop yield, they can do a calculation and say, “If I have a failure, I'll get x number of dollars back.” Some of the historical programs have been challenging from that standpoint. I guess it's good any time a producer, or somebody who utilizes the programs, can understand them.

    The Chair: Mr. Little.

    Mr. Brian Little: We've looked at each of those programs, and we think of them as risk mitigation tools. They help you spread some risk around. It's important, as Dave has pointed out, that our clients and our bank employees understand them well.

    We think that some of them are quite bankable.

    The Chair: Mr. Funk.

    Mr. Bob Funk: We look at those programs and at individual customer participation. Whether it is required participation or not would probably depend on the financial strength of the individual customer.

    The Chair: Mr. Kleinschmidt.

    Mr. Pieter Kleinschmidt: There are two important points here. First, as my peers have said, clarity and predictability are very key in policy. I'd like to focus on the feedlot program we just went through this summer. In my opinion, it had a material impact on stabilizing the industry. The fact the government was prepared and willing to step forward with that program is a general indicator of the government's general willingness to support the industry. In turn, when we're crafting policies that are bigger than individual programs themselves, and looking at the industry in the long term, that is material. It certainly helps us create policies that are patient and accommodating.

º  (1615)  

    The Chair: Mr. Wither.

    Mr. Don Wither: I don't know if there's much to add. We all pretty well have the same approach to dealing with the industry. There's no question we value it.

    The Chair: Mr. Beaudin.

[Translation]

    Mr. Yvan Beaudin (Director, Agri-business Services, National Bank of Canada): The approach as such is similar to the one taken by my colleagues. Obviously, programs differ according to province. Programs in Quebec, where the National Bank is primarily involved, are totally different from those in place in other provinces. I would even say that these programs have some rather interesting features when compared to others, but overall, we work with the programs we have to educate our clients and the agronomists who work for us to ensure maximum program efficiency and effectiveness.

[English]

    The Chair: Mr. Borotsik, you have more time. You had a short question and a long answer.

    Mr. Rick Borotsik: Perfect.

    I have one question. It may not be short, and I may have to come back in my second round. I know the gentlemen at the table really don't concern themselves with this, but particularly in small rural areas like ours, a lot of the agricultural loan portfolio has been going to the credit unions. I know you have some care for them, but that's another area.

    One of my concerns is that a lot of those loans, on a client-by-client basis, have gone to the credit unions. I know they're all over the map on liquidity and strength, but in general, do the credit unions have the same opportunity to live through this kind of a crisis as the major banks? This may need a CBA answer.

    Mr. Terry Campbell: I'll invite my colleagues to comment on that.

    I think you've touched on part of the answer. There's a wide range of credit unions. Some are very big, and some are very small. We're here in the best position to talk about our own capacities, and see this through. I hesitate to speculate on a competitor in the industry. There are many, and they really vary widely in size, structure, and so on.

    Unless my colleagues have some specific comments on the credit unions....

    Mr. Rick Borotsik: The banks' capitalization is certainly a lot greater than a lot of the credit unions. But it's in the industry; this isn't something you can hide from. You've given a lot of those loans to the credit unions. Does anybody have any comments?

    I'm concerned, to be perfectly honest. If it's over tomorrow, then the concern will obviously be a lot less. If it's six months down the road, there's not only the individuals to be concerned about--the producers themselves, the ranchers, the farmers--but a lot of the spinoff. We've talked about trucking and retail, and the credit unions are part of that spinoff. I don't want you ragging on them, but I'd like to hear if there are any concerns in the industry, that's all.

    Mr. Pieter Kleinschmidt: I really don't feel comfortable speaking on behalf of the credit unions, but I will say that the market for financing in agriculture is liquid. There's a lot of competition. We're all friendly with each other right now, but when we go back home we compete hard with each other. There is a lot of capacity within the financing market in agriculture in Canada for financing to shift between institutions.

    From a distance I see that happening among the credit unions, certainly within my peer group. When you get larger deals where it is customary to syndicate, all of those vehicles and mechanisms that are part of the national marketplace will be able to remedy, or certainly buffer, a very negative outcome, in the unlikely event something like that happens.

    Mr. Rick Borotsik: Thank you.

    The Chair: Mr. Ritz.

    Mr. Gerry Ritz: Thank you, Mr. Chair.

    Gentlemen, it's a very interesting discussion here today. I'm actually pleased to hear that the chartered banks want to get back into agriculture. It wasn't that many years ago you were backing out. We saw that on a town-by-town basis across rural Canada, and now you're saying there's money there. Are you talking about money for primary agriculture, or are you lumping agribusiness in with the agriculture portfolio? Do you keep them separate, or do you lump them all together and call it agriculture?

    Mr. Pieter Kleinschmidt: Certainly from our perspective at CIBC it's primary agriculture, so with respect to my previous comments, it's directly agriculture. In our operating definition of agriculture we layer in those companies that are near the farm gate, because we believe there's logic in managing them together; they're related industries. That's the approach we take, but clearly the focal point is primary agriculture.

º  (1620)  

    Mr. David Marr: We look at our portfolio in the same way as the CIBC. The businesses that are near the farm gate are dealt with by the same people. As you mentioned, we're looking to expand our role in agriculture. The banks feel it's been a good solid business over a number of years, even through the ups and downs.

    To be honest, one of our challenges to the industry is keeping good people in agriculture at the front end. As with some other sectors, keeping people in rural communities and being able to offer them things to keep them there is a challenge. But we are definitely looking for--

    Mr. Gerry Ritz: Do you, as banking groups, track overall farm debt sector by sector? You know, the dairy industry is here, the other supply managed sector is here--the beef industry, the grain sector, the pulse. Do you track debt load and historical data sector by sector?

    Mr. Brian Little: Yes, we track all the major commodity groups sector by sector. We started doing that extensively in the last number of years. We compare them to the overall Statistics Canada debt that's provided annually in their reports.

    Mr. Gerry Ritz: Is that something you can share with us? I'm seeing farm debt increase. Farms out there are getting larger, so the debt per farm is higher, too. Are there numbers like that you can share with us to get back to our folks with?

    The Chair: Mr. Kleinschmidt.

    Mr. Pieter Kleinschmidt: One of the great things about Statistics Canada and Agriculture Canada is the wealth of information available to all of us. In fact, it's easier to study those dynamics within agriculture than in some other industries in Canada. Within our bank, we often go to Stats Canada for some of that. We can tell how we're doing in cattle, and so on. If you want to look at the specific question of whether the debt-to-equity ratio in the beef industry has been changing over the last 10 years, Stats Canada has that very nicely broken out. It's a great resource that I know we all use.

    Mr. Gerry Ritz: On the $600 million in transition money that went out in spring 2002, did you notice a significant impact on your farm debt in your farm files? No? Another $600 million is coming and is just days away, so if it didn't register....

    You say that the farm programs are bankable and you really enjoy them. Then when I ask you about the $600 million that went out, you kind of draw a blank. So how significant was that?

    Mr. David Marr: Can you clarify what you mean by the impact on the files?

    Mr. Gerry Ritz: On your farm portfolios, did you notice the farm debt go down? Were people able to come back and use that to lever, to diversify? Was there an impact on your agricultural sector?

    Mr. David Marr: A lot of those funds were probably used by clients to keep those operations viable, keep food on the table, and in other ways. There are many people who are involved in an individual client's operation.

    Mr. Gerry Ritz: They were done through NISA accounts that had to be in banks, so you would have seen the money come in. Someone would have had to trigger it back out to be used to put food on the table.

    Mr. David Marr: When you use the NISA example, that would be the case. But as it came in through some of the other funding programs, I suggest those funds were used to pay feed suppliers and other suppliers to the industry. So they kept the producers afloat and current with all of their creditors.

    The Chair: It seems like a responsible reply, but does someone else have a different viewpoint on that?

    Mr. Bob Funk: When you asked the question, I wondered if you were referring specifically to the amount that was made available to the beef industry at the outset.

º  (1625)  

    Mr. Gerry Ritz: No, this was a stand-alone.... There was $1.2 billion available in transition money. The first $600 million went out in the spring of 2002, and the second $600 million was to go in July this year. It hasn't gone yet; it's still being held. It's to go out momentarily.

    Mr. Bob Funk: In that context, I agree with what my colleagues have said.

    Mr. Gerry Ritz: So you didn't really notice it?

    Mr. Bob Funk: I don't think that's what they said. They said they saw it come, and they saw it being applied to keep customers' accounts in good order.

    The Chair: Thank you, Mr. Funk.

    Mr. Eyking.

    Mr. Mark Eyking (Sydney—Victoria, Lib.): Thank you, Mr. Chairman.

    Gentlemen, I'm also a farmer, besides being a member of Parliament. I have a pretty good grasp of the industry.

    Farming is a very volatile industry. We're dealing with weather, employees, and what not. It's also very competitive. We're dealing with millions of other farmers across this world, and other treasuries in other countries. But if we're on a level playing field it's not too bad, I guess.

    We're finding in the agriculture industry that we're dealing with amalgamations in every different form. There are fewer plants, buyers of our products, and suppliers, whether of boxes, fertilizer, or chemicals. There's amalgamation going on, so there seems to be a tendency to have less competition out there, and you're kind of stuck with who you have to deal with.

    There's also a move afoot by the bankers to amalgamate some of the banks. If it's going to be the same thing that has happened with the other people we're dealing with in this business, I'm trying to look at the advantage of that for farmers. Most farmers, of course, are in rural areas. Maybe there are two banks in the centre of town, and there's an amalgamation. That affects how far you have to go to do your deposits, get services, and what not.

    Can you tell me any advantages to the farming community of you people amalgamating some of your banks?

    Mr. Terry Campbell: That's an interesting question. First of all, when you talk about amalgamation and mergers of banks, there's a process in place that is intended to sort of vet all of those sorts of questions. The Department of Finance now has a whole consultation on this, and there's a time line. The government has indicated it's not interested in entertaining proposals in this area until September next year, until a lot of the process issues get sorted out. But the fundamental process involves the kinds of questions you're asking: what the public impact will be, and what the consumer impact will be.

    If a merger proposal is going to come forward, the proponents have to set out what the impact is going to be. Until you actually see a specific proposal, it's kind of hypothetical. But they have to put that out and respond to it. The House finance committee, the Senate banking committee, and the Competition Bureau all have to have their say in it. At the end of the day, public interest is a fairly important part of assessing that. That sort of stuff will come out in the wash.

    The other issue is that there's been a lot of discussion. There were parliamentary hearings earlier this year where a lot of those issues were talked about. It sort of led into all this discussion about what the tests would have to be, and what the process would have to be to put it on the table and have parliamentarians and others talk it through. In the absence of a specific model or a specific proposal, which the timetable has made very clear will not happen for some time, we have to sort of fall back on what the process will be to sort of flesh that out.

    That's probably all we can tell you at this point, unless my colleagues have other specific points to comment on.

    Mr. Bob Funk: From the standpoint of our organization, I'm not the person, or at the level in the organization, to speak about whether or not this would be a good thing. Being a farmer's son, my interest over the course of time is to make sure people who are out there farming have access to the banking resources they need, wherever they come from.

    I remember when my dad went to town there was only one bank, and he didn't see anything wrong with that. Then there were three, and all of a sudden now, 40 years later, there is only one bank again. His response was that maybe it took that long for people to figure out whether or not the town could really afford three banks.

    From the standpoint of what all of us are trying to do, we went from one bank, to three, and then back to one again because of the perception in the marketplace that service was needed, and it becomes a question of how service is provided. Bricks and mortar are one way, but we've all seen the development of services that can be obtained through the banking machines, computers--I don't remember the last time I stood in front of a teller--and telephones.

    I think we're looking at access being very strong and available, and the discussion of mergers probably doesn't have much to do with that. The goal for us at the level we're at will be the same in that regard.

º  (1630)  

    Mr. Terry Campbell: If I can just add to Bob's remarks, while the banks are obviously very important players in the community, if you look at Statistics Canada--and we've talked a few times today about the range of suppliers of credit and financing of various sorts out there--the banks have about 52%. There are credit unions, finance companies, the FCC, government financing agencies, leasing companies, and vendors that will take back financing. There's a range of competitors out there, so all taken together it's a fairly competitive marketplace.

    The Chair: I'll give you another short question.

    Mr. Mark Eyking: We did the Prime Minister's task force on agriculture and went across the country. One of the biggest things was concern about young people getting into farming. To get into a half-decent dairy farm now you need almost a million dollars in the blink of an eye, between quota and what not. So it's not that young people don't want to get into agriculture; it's that whole financial wall they have to overcome.

    In some other countries they've set up something called perpetual mortgages. Somehow the government is involved, and the farmer does not have to undertake that whole responsibility of paying. It's almost like continuous payment of the mortgage.

    Do you see any other scenarios that we should be looking at as a government to deal with financing farms, or is it just inevitable that farms are going to get bigger, there are going to be more shareholders, and maybe different share structures?

    Mr. David Marr: Any time we can figure out a way to encourage or keep young people on the farm, I think you'll find that all of the banks will work with the government to formulate some sort of program.

    You talk about farms getting bigger, and we see larger family operations these days. As you mentioned, it is a challenge, but I would have to say that goes with any industry. It's harder and harder for a young person to get involved in any capital-intensive industry.

    The Chair: Mr. Wither.

    Mr. Don Wither: I share your concern. I think this is a huge issue that is roaring down at us all. You look at the average age of a farmer in Canada nowadays. There's a huge amount of debt--and a huge amount of assets, granted. There's a number of reasons why those assets are becoming largely used. In dairy, for example, the further you extend the amortization of the purchase of quota, the more people can afford to pay for it, and the more the debt is.

    There's a whole number of factors that are causing that. It's a very large real estate play, it's a huge equipment financing play, and it's got to be addressed. As a country, we have to develop some sort of mechanism to deal with it, because the numbers are going to force the issue. The last thing we want to do is change the farm community, the way it is.

    We're seeing some evolution in it now, and you're starting to see larger and larger companies. But this is the culture of Canada--the small farm communities--and we're going to have to resolve that. We're going to have to identify some process, and it's going to have to happen soon.

    The Chair: Mr. Beaudin.

[Translation]

    Mr. Yvan Beaudin: There are a number of factors to consider, such as farmers retiring and young persons taking over. There's the question of taxes, of the father transferring ownership to the son. Various programs are in place. Even with the programs in place in some European countries where life mortgages are quite common, the fact remains that the person assuming the mortgage will also be in debt. Inflation comes into play and that person won't be able to do certain things. Eventually, he'll be forced to transfer ownership of the farm to his children and he won't be any further ahead in so far as his retirement is concerned. So, while there are many programs out there, at some point, all stakeholders need to sit down together and decide on a positive approach to take with governments and private institutions. In my view, that's the only way to make some headway on the issue of mortgage transfers.

º  (1635)  

[English]

    The Chair: Mr. Borotsik, do you have any more questions? No. I'm surprised.

    Mr. McCormick

    Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you, Mr. Chair, and thank you, gentlemen, for being here.

    My questions aren't in any particular order. I know of at least three of the majors here that have agricultural specialists that cover several branches. I'm not just thinking about eastern Ontario, where I am; they also do this in some other provinces where I've been lately.

    I just wondering if I can hear from each of you whether you use this system, rather than the local bank manager who may not be very much aware about the business of agriculture. I'm just wondering whether you have used this idea of farm specialists or agriculture specialists, to visit and provide that service.

    Mr. Pieter Kleinschmidt: At CIBC we actually refer to the specialist-to-specialist approach, which is maybe one step further. In the front line we employ a team of specialists coast-to-coast, led by our national director who is based in Winnipeg. Their primary focus is on working with customers and the branches to make sure the customers' needs are well understood and responded to.

    Internally, we just recently created a new team, which I lead, called the agriculture credit group. All our portfolio management and adjudication is done by agriculture specialists. Many of them are agronomists, and most of them have farm backgrounds. So you have the specialist at the field level speaking to the specialist at the credit level. Our belief is that you do a much better job of meeting the customers' needs and really discerning between what I call perceived risk versus real risk, in making good decisions.

    Mr. Larry McCormick: Perhaps we could shorten the answers a bit, Mr. Chair, because it cuts into our time.

    The Chair: Just get on with your questions.

    Mr. Larry McCormick: I was hoping I could hear from each of the majors. I know the Royal Bank, TD, and BOM have that. I'd just like to hear from the others.

    The Chair: Mr. Marr.

    Mr. David Marr: From the TD Bank standpoint, we have specialists. Our structures are slightly different, depending on exactly what province, but we make sure the people in front of the customer understand their business.

    Mr. Brian Little: In the Royal Bank we have specialists located strategically around each province, and we also have specialists within the risk management team. So everybody understands well, and they provide great expertise to our customers.

    The Chair: Mr. Funk.

    Mr. Bob Funk: We approach it in a similar fashion, but perhaps also with some differences. We have teams of people who manage geographic areas. In the agriculture industry we form teams, and by and large, the leadership of those teams are people who have formal training in agriculture. In addition, we have a small number of specialists who provide industry background and marketing support.

    The Chair: Mr. Beaudin.

[Translation]

    Mr. Yvan Beaudin: Almost 90% of the people we hire to work at the agricultural centres are agronomists. They are all experts in their field, even in the area of farm credit.

[English]

    Mr. Larry McCormick: I appreciate that, because I don't get as many complaints about the banks from the farmers. They talk about the good service, with the banks going to the farms. But on the service charges, I still get complaints.

    One time I was here in this building with one of your VPs--and there's a thousand of them--and mentioned a specific case and what they paid. A gentleman said, “Well, that's not possible. We would never charge anybody that much.” I tell this story because they were charging that much, because the local branch didn't realize.... You know, they can't be specialists in everything.

    When you people talk about all you're doing--and I'm sure you're doing a good job--and that you can do this or that, you're quite vague. I'm not sure, when this gets down to the branch level, that you're doing all you say you are. That's been our experience with banks before.

    I understand that the BDC, which I've often damned as much as a bank, when there was the SARS condition, automatically went out to their clients and offered them a period of three or four months, which is just wrapping up, when they could all have the option of paying interest only. So I'd like to hear more specifics from you on whether you're offering this to all of your agriculture clients, just the ones you pick and choose, or whatever.

º  (1640)  

    The Chair: Mr. Marr, are you going to start?

    Mr. David Marr: I think every individual client's situation is different. While some may choose to take advantage of a principal deferment, others may choose not to. It may be in their interest to continue to pay the loan if they have the wherewithal to do so. It's their choice, but we do offer it.

    Mr. Brian Little: Regarding our principal deferment program, our experience has been that the affiliated industries, spinoff industries from BSE, have taken up the principal deferment program much more vigorously than our farm clients. Our farm clients have decided to try to make the payment, keep on going, and carry on until things return to normal, so the take-up with them hasn't been as vigorous.

    The Chair: Mr. Funk.

    Mr. Bob Funk: We find the same thing. If we drive something out to the customer and they say it doesn't necessarily fit them, we essentially go through a consultative process. So it is truly one by one.

    The Chair: Mr. Kleinschmidt.

    Mr. Pieter Kleinschmidt: I would echo those comments. For those customers who are truly in distress, we have a process in place that governs any of the remedies you might take in the more serious cases, so there is no case of somebody falling through the cracks and not getting the benefit of our policies.

    The Chair: Mr. Wither.

    Mr. Don Wither: The programs have been put in place to help the people who require them, which is pretty well the whole industry right now. The reason it's on a case-by-case basis--and I can state this categorically because I developed our disaster relief program last year for the prairies--is that last year the crisis was nowhere near as complex as this one. Every industry, every segment here is hitting the wall at different times. One size doesn't fit all, and you don't want to enforce that. You have to sit down and work with them, and that's what we're doing. But the offer is there to help them all.

    The Chair: Mr. Beaudin, do you have anything to add to that? No.

    Mr. Larry McCormick: Mr. Chair, I have just a short....

    The Chair: We are already considerably over.... Is it a really short question?

    Mr. Larry McCormick: Yes.

    A few years ago the Royal Bank brought an economist here to talk to us on this committee. Quite a few of us went to lunch. He was from Virginia, and he still farms and milks cows. This economist told us and Canadians how good the APF was. Since that time we have fine-tuned it--for some of my colleagues here who haven't really studied the facts about this. Does the Royal Bank today still stand by this and make comments about the positive effect of the APF, the agricultural policy framework?

    Thank you, Mr. Chair.

    The Chair: He really wants our bankers to reinforce the support you have for APF. If you just concur with a yes, yes, yes, you will answer his question.

    Does anyone want to respond to that?

    Mr. Brian Little: I presume you're referring to Dr. Cole. We recommend that the federal government continue to work with the industry and the provincial governments on the proposed APF framework. We have read and understand from the George Morris Centre that APF is an improvement over the current NISA program. We recognize also that there are some industry concerns about it as we go forward, but let's keep working together to resolve that.

    Mr. Larry McCormick: Thank you.

    The Chair: Can anyone improve on that statement?

    Mr. Ritz.

    Mr. Gerry Ritz: I think Don actually hit the nail on the head when he said one size doesn't fit all. That's the problem we have with the APF. So that was probably your answer.

    On off-farm jobs and securing farm debt, do you folks track that? I understand that Statistics Canada is wonderful, but the problem is they're always two to three years out of date. They're not current.

    On the age of borrowers, off-farm jobs, securing farm debt, do you folks track that type of thing? In Saskatchewan, we've done a little bit of looking around, and the average age of farmers is 60, and off-farm income is securing about 75% of the farms out there. I'm just wondering if your banks are seeing that kind of a ratio as well.

º  (1645)  

    Mr. Bob Funk: We probably wouldn't refer to off-farm income as securing farm debt, but we would certainly look at--

    Mr. Gerry Ritz: It pays for that nasty habit.

    Mr. Bob Funk: Do you mean needing to buy groceries and live?

    Mr. Gerry Ritz: Yes.

    Mr. Bob Funk: We certainly see the same incidence as the rest of the country. If you're starting a small business, often there's more than one breadwinner if there are spouses involved. They have off-farm jobs, and we're happy to see them. We take the cash flow from those jobs into consideration when we judge the credit worthiness of those opportunities.

    Mr. Gerry Ritz: Thank you.

    The Chair: Mr. Binet, do you have some questions?

[Translation]

    Mr. Gérard Binet (Frontenac—Mégantic, Lib.): This isn't a question, but merely an observation. I haven't been a member of the Agriculture and Agri-food Committee for very long, but I do represent a heavily rural riding. I listened to what Bob Funk was saying. My region was once home to a number of chrysotile asbestos mines as well as to many banks. Today, however, were it not for the credit unions, there wouldn't be many bank branches in operation at all. Of course, a handful of branches are still in business, including a branch of the National Bank, but all accounts and records have been transferred outside the region.

    Several weeks ago, I toured the region with UPA members. A National Bank official was with us and everything went very well. So, I congratulate you on your involvement.

    Mr. Little, I also appreciated your comment that the Canadian government is always striving to improve the lot of farmers.

    Thank you.

[English]

    The Chair: Thank you.

[Translation]

    Mr. Gérard Binet: That doesn't leave the opposition much room, but...

[English]

    The Chair: Are there any more comments? Mr. Maloney, do you have anything further? Mr. McCormick, are you finished? Yes.

    I need to thank you for coming before the committee, because this is obviously a big concern. We all, from time to time, receive calls about people who are in distress. The banking industry, as with most industries today, has merged, consolidated, and amalgamated, to use the various terms. Mr. Funk said his father started off with one bank in town, went to three, and is now back to one, so perhaps history repeats itself.

    We should never forget the importance of agriculture. If we leave one message with you today, it's that you not forget our farm friends. They need you more now than they've ever needed you, and there will come a time when you will need our farm friends. It's the same message I've given to the packing house industries and other industries on the BSE question and the beef industry.

    We had a request for you to report back to this committee with some of the information on 2002 versus 2003, what is BSE, and how it has impacted your policy in terms of the need now. If you could respond back to us, we would appreciate that.

    In closing, there's always that irritant we hear that comes up very often, and that is the issue raised by my colleague, Mr. Ritz, about nickel-and-diming, and that kind of thing. I think people want to know where they stand on their costs of doing business at the bank. They don't like to see these escalating little bits biting away here and there, so at the end of the month the cost of doing business with the bank is greater than they anticipated. Package deals, where you incorporate a number of things like chequing services, withdrawals, and other banking services, have a lot of merit.

    Those are some of the issues we have, but if you can work with our farming friends, particularly the beef industry at this time, we would appreciate it, because that's the message we want to give back to our farm friends.

    Thank you very much. We look forward to seeing you again some time.

    To my committee members who will still be here on Thursday, October 9, we will be doing the supplementary estimates.

    The meeting is adjourned.