Bank executives have told MPs last week that the controversial Canadian Agricultural Income Stabilization program may have some flaws, but it should not be dramatically changed or abandoned.
“It is a new program,” Royal Bank national manager of agricultural services Brian Little told MPs on the House of Commons agriculture committee Feb. 22. “There’s bound to be some bumps on the road.”
Dave Marr, senior adviser on rural and agricultural issues for the TD Bank, warned against major changes to CAIS.
“It’s too early in the game to make dramatic changes,” he said. “It really hasn’t been around that long.”
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
The bankers said CAIS offers some stability to the industry, despite MP attempts to elicit banker criticism of the program.
And they refused to agree to a suggestion that in the light of billions of dollars of farm losses in recent years, banks should share some of the losses.
Ontario Conservative Larry Miller noted that the Bank of Montreal estimates BSE has cost the Canadian cattle industry $5 billion. Figures show that farmers in some of the country’s biggest agricultural provinces, Saskatchewan, Ontario and Prince Edward Island, are losing money.
Meanwhile, banks continue to report what Miller said “some would call obscene profits.” The MP said he gets calls from farmer constituents who have to refinance the debt and end up with a higher interest rate. He wondered if “banks have an obligation to absorb some of that (farm loss).”
Terry Campbell, vice-president of the Canadian Bankers’ Association, told him banks have business obligations.
They must satisfy their shareholders who expect a profit and regulators who insist banks operate on business principles. They want to provide a full range of services to customers.
“To do that, you have to be able to do things on a business basis,” he said. “You have to price based on risk.”
Earlier, Campbell told MPs that bankers have “bent over backwards” to help livestock operators through the BSE crisis. There have been flexible repayment schedules, repayment holidays and other attempts to be accommodating.
“From the point of view of a bank, farm failure is the worst possible outcome,” he said. Banks do not want to inherit the asset.
In answer to a question from Liberal Wayne Easter, Bank of Nova Scotia vice-president Bob Funk, said Farm Credit Canada is no longer a lender of last resort but often competes for the more lucrative commercial business.
“We often see it as a competitor.”
Easter said he thought the FCC mandate was to deal with higher-risk farmers that commercial lenders were leery of touching.
