Bank scares in the United States and Switzerland have prompted the federal government to grant itself extraordinary powers to stem any financial panic in Canada, a parliamentary committee heard on April 27.
“The purpose of that is to really allow the minister and the government to bring forward a temporary measure, under extreme circumstances, just to help promote financial stability and safeguard public confidence in the system,” Grasham testified, as first reported by Blacklock’s Reporter.
‘Potential Bank Runs’
“Can you describe for the committee the kinds of circumstances that might trigger the use of this power?” Blaikie asked.“In the event that there is instability, concerns around potential bank runs, etc., as we saw in the U.S., the minister would be poised to be able to step in and bring forward a measure,” Grasham replied.
“The thinking is that given the current situation and the banking turmoil that we saw in the U.S. and in Switzerland, it was a prudent thing to do,” said Grasham.
‘Precedent’
Although if passed, the bill will grant Freeland the ability to raise the existing deposit insurance limit to over $100,000, Grasham said those authorities are “temporary.”“The new authorities, the proposed authorities rather, are time-limited. They’re set to expire on April 30, 2024,” she told Blaikie.
The committee learned this won’t be the first time the finance minister was given such authorities.
“There is a precedent in the early days of COVID. Under the … special emergency legislation, the minister was granted this power,” Grasham said.
“It also had an expiry date, and it did expire, and it was never used.”
That section of the act expired on Oct. 1 that year.