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Good afternoon and thank you for the opportunity to address the Committee’s study on access to credit and capital markets for small- and medium‑sized enterprises.
My name is Anthony Ostler, President and CEO of the Canadian Bankers Association. I am joined today by Darren Hannah, Senior Vice President of Financial Stability and Banking Policy.
The CBA is the voice of more than 60 domestic and foreign banks operating in Canada and advocates for public policies that contribute to a sound, thriving banking system to ensure Canadians can achieve their financial goals.
SMEs are a critical pillar of the Canadian economy, representing the vast majority of businesses nationwide and employing the majority of the private‑sector workforce.
Across Canada, banks compete aggressively with one another, and with non‑bank financial institutions and companies to deliver more than $355 billion worth of financing to SMEs – of which banks provide approximately sixty per cent of that total. Banks tailor financing solutions to meet the diverse needs of a wide variety of SMEs. Banks serve their needs through different types of financing - commercial mortgages, leasing, revolving lines of credit, overdraft, credit cards, and amortized term loans.
Banks also offer a broad range of non‑credit services, including business chequing and savings accounts (in Canadian dollars and foreign currency denominations), payments solutions, investments, insurance, and advisory services. This full suite of products and services allow SMEs to build relationships with their bank over time, sometimes for decades.
This comprehensive offering, supported by diverse funding sources, technological innovation, and trust, helps drive growth and stability for SMEs, enabling long‑term partnerships.
When providing financing to SMEs, banks undertake due diligence to assess the business and its management using the "five Cs of credit": character, capacity, capital, conditions and collateral. As part of this due diligence, banks increasingly employ technology to automate the process and leverage data. This approach has enabled banks to increase since the global financial crisis their authorized, outstanding and unused credit available to SMEs– by approximately 80 per cent.
As a result, SMEs have ample access to credit financing from banks. Indeed, according to Statistics Canada, SMEs have consistently ranked non‑financing factors such as the rising cost of inputs, corporate tax rates, recruiting and retaining employees and government regulations ahead of obtaining finance as a primary obstacle to growth. The SMEs do not consider Bank loan applications as a barrier to financing and approval rates remain high.
This being said, there are ways to provide even more credit to SMEs. For instance, we made several recommendations to the Competition Bureau in our submission – Capital for Canada: Financing the growth and stability of small- and medium‑sized enterprises.
These include:
- Implementing changes to bank capital adequacy frameworks that enable the deployment of more capital
- Incorporating growth considerations into the regulatory decision‑making process
- Streamlining and improving government guarantee programs, notably the Canada Small Business Financing Program
- Expanding data sharing policy to include government entities such as the CRA
- Finally, addressing non‑financing barriers to growth to enable SMEs to apply for more credit. For example, in a recent Statistics Canada study, regulatory requirements in Canada increased between 2006 and 2021 and this was associated with declines in economic and employment growth
Once again, thank you to the Committee for giving us this opportunity today. It's always a great pleasure for me to be able to express myself in French and to have the chance to practice it.
Thank you for your patience and your attention. We would be pleased to answer your questions.