Recently the C.D Howe Institute also set its sights on the FCC (Farm Credit Corporation). Now one would expect that all the facts would be available for anyone to research if they so desired. In fact a few phone calls and a request to the FCC, would have elicited the information that the C.D. Howe Institute so obviously did not want to have.
Governments would do well to be cautious with information published by the C.D. Howe. This could have had serious consequences for the agriculture industry and the country.
The normally sedate and composed FCC responded this past week with a letter to both the Ontario Farmer and the Financial Post. .
For your reading pleasure here it is in its entirety:
Letter to the Editor
FCC submitted the following Letter to the Editor to the Financial Post in response to an opinion item from the C.D. Howe Institute, published in the Financial Post on March 20, 2013. Letter content below:
At Farm Credit Canada (FCC), we believe that a healthy agricultural credit market offers customers choice from a range of financial institutions. We share this viewpoint with 100,000 FCC customers, as well as thousands of farmers and agribusiness operators who are not our customers.
That’s why I continue to be amazed at how opinions on this issue are being presented repeatedly as facts – without balanced opinions from multiple groups who are actually involved in the industry. The most recent example is the March 20 opinion piece that appeared in the Financial Post by academics Finn Poschmann and Phillipe Bergevin, authors of a recent C.D. Howe report on financial Crown corporations entitled Reining in the Risks: Rethinking the Role of Crown Financial Corporations in Canada. They use inflammatory and unsubstantiated words like "subprime," "dodgy," and "hypercompetitive" to describe FCC lending practices.
Here are some facts about FCC to add to the record.
FCC has been growing and profitable for more than two decades. We are a prudent and responsible lender. Our financial strength has never been better. More than 98% of our $25 billion portfolio is in good standing, which reflects the overall strength of the agricultural industry and a deep commitment and business savvy by our borrowers to run sound businesses.
FCC doesn’t receive money from the Government of Canada. FCC is self-financed and pays millions of dollars in dividends to the government each year. The Auditor General of Canada conducts FCC financial audits every year, which are available to the public. The majority of our profits are reinvested in additional lending and learning activities for our customers.
As with other federal financial Crown corporations, FCC borrows funds from the government. The accusation that this advantage is used to undercut the market is false. Where banks, credit unions and FCC compete for business, our research shows that, on average, our customers pay us a modest premium.
The authors have inferred that the best way to rein in FCC’s supposed "risky, hypercompetitive practices" would be to return us to a lender of last resort. Ironically, being returned to a lender of last resort is exactly the step that would expose taxpayers to more risk. Providing access to capital to customers of various sizes, in a wide range of sectors, all across Canada helps FCC keep its overall risk portfolio healthy.
FCC continued lending to agriculture through the financial crisis in 2008-09 when many other lenders did not. Some FCC growth occurred as a direct result of other lenders exiting the market at that time, and many involved in the industry today will say its current good health relates to the fact that access to credit was available through the 2008-09 period. In 2009, the banks collectively withdrew from an agricultural finance market that, overall, was still healthy, while FCC continued to provide new lending capital and grew its portfolio. FCC is in agriculture for the long run and this sets us apart.
Furthermore, the insinuation that FCC is not interested in enhancing risk management practices could not be further from the truth. Like it did with the Business Development Bank, the CD Howe Institute and the authors made no effort to contact FCC to express an interest in seeing the systems and processes we have in place to manage risk, which might have provided at least some balance or insight. We welcome the current Office of Superintendent Financial Institutions (OSFI) review, both to help us validate what existing practices are working well and to learn what new steps will strengthen our risk management even more.
Finally, the opinions and direct experience of FCC customers and the agriculture industry at large matter a great deal. We have more than 100,000 customers across Canada. Virtually every one of them also deal with other financial institutions for deposits and other financial services, neither of which are offered by FCC. In the authors’ research and commentary, the views of customers and the industry are completely absent. That makes one wonder exactly whose perspective they represent, and who would really benefit if their views were implemented.
We routinely send business to credit unions and banks across Canada, and partner with them on deals. We will continue to operate in a spirit of cooperation, no matter what mud-slinging and misrepresentation occurs about FCC.
Sincerely,
Greg Stewart
President and Chief Executive Officer
Farm Credit Canada
