Report about government support of Canadian banks

Review from the Office of the Ombudsman | English Services

Summary

The review concerns the accuracy and fairness of an online story about government support of Canadian banks. While there was no violation of CBC Journalistic Standards and Practices, there was room for improvement to provide background to the story.

On April 30, 2012, CBC News wrote online that Canada's largest banks had “accepted tens of billions in government funds during the recession,” according to the Canadian Centre for Policy Alternatives think-tank.

The centre's report released that day, The Big Banks' Big Secret, said government support reached $114 billion at its peak in March 2009 and that banks were “in a far worse position during the downturn than previously believed.”

Among other things, the report said the Canada Mortgage and Housing Commission (CMHC) took about $69 billion off the balance sheets of the banks in mortgages. Banks also received funds from the Bank of Canada and the U.S. Federal Reserve. While conventional wisdom indicated the Canadian banking system did not suffer the same ailments as those of other countries, the Centre said the situation was far direr than Canadians knew.

The report author, the Centre's senior economist David Macdonald, said that without the government support, some banks would have been in serious trouble. At one point, he said, three banks were receiving government support in excess of their market value.

The CBC report included comment from the Finance Department and the Canadian Bankers Association, both of which said the support was neither unusual nor particularly urgent. In no instance was a bank in financial difficulty, the Association said. A spokesman for the Finance Minister said the speculation about the banks' financial condition was baseless. A federal spokesman also said the CMHC relief actually earned income for the government.

The Centre's economist disputed the federal position that the funds amounted to “liquidity support.” He referred to the support as a “bailout,” a term the Association disputed in the story.

An early version of the online story put the word “bailout” in quotes in the headline. Subsequently, the headline said: “Banks got $114B from governments during recession.” The sub headline said “Support for banks ‘more substantial than Canadians were led to believe': CCPA report.”

The complainant, Robert Bryenton, wrote April 30 that the article implied Canadian banks were suffering the same problems of banks in other countries. He said the article distorted the institutions' condition and that CBC should retract and apologize.

Esther Enkin, executive editor of CBC News, wrote May 4 to explain its position. She noted that the early version of the story had placed the word “bailout” in quotes, but that was a common way to attribute a term to someone else. In other words, CBC News wasn't suggesting any bailout — that term was attributable to the Centre's findings.

“It is CBC's mandate, part of its obligation under the federal Broadcasting Act, to carry different points of view on controversial matters of public interest and concern like this one,” Enkin wrote.

“Indeed, allowing the expression of the widest possible range of views is at the heart of the notion of fairness and balance in journalism. However, it is not the CBC's obligation to determine what is ‘truth' or what views are ‘acceptable' (a truly dangerous notion for any broadcaster), but only to present those differing views fairly and accurately affording Canadians the opportunity and the information they need to make up their own minds about the nature or quality of the views expressed. And I believe we did that here.”

Bryenton wrote back May 7. He said the Centre's claims were baseless and that CBC should not give voice to opinions posing as facts.

CBC Journalistic Standards and Practices call for a contribution to “informed debate on issues that matter to Canadians by reflecting a diversity of opinion. Our content on all platforms presents a wide range of subject matter and views.”

It adds: “On issues of controversy, we ensure that divergent views are reflected respectfully, taking into account their relevance to the debate and how widely held these views are. We also ensure that they are represented over a reasonable period of time.”

The policy calls for impartiality: “We provide professional judgment based on facts and expertise. We do not promote any particular point of view on matters of public debate.”

Conclusion

Banks loan money over the long term and borrow it in the short term. When global markets tighten, banks need to find a new source. The international financial crisis and the economic recession prompted central banks and governments to advance funds to and acquire assets from the banking system in many countries to stimulate their lending. Canada was among countries to provide a range of initiatives to fortify banking liquidity.

This was a well-chronicled effort to encourage the banks to keep making loans and investments and to encourage business activity during a recession. The Canadian support package was outlined in several announcements by the federal government and its agencies, including the Bank of Canada. In Canada at least, these efforts were not particularly related to solvency issues involving financial institutions. These measures largely expired in 2009 and 2010.

The Centre's report attempted to explain the extent of support. It used widely available data and some of its own calculations. But it also carried with it a suggestion Canadians were not fully aware of the strain on the banking system during the recession. The remarks by the report's author — that certain institutions were “under water” or that the support could have been construed as a “bailout” — had a potentially dire connotation. The report's title suggested a “big secret.”

The CBC.ca report did not explain liquidity support and did not make clear the nature of this assistance — whether it was a repayable loan, an acquisition of assets to bring balance sheet relief, or a grant, for example. The headline that banks “got” $114 billion didn't help clarify the matter. While there was ample reaction to the report's assertions from the federal government and the banking industry, the he-says-versus-he-says balance did not solve that question, either.

Still, I concluded that even though statements might have left certain impressions, the report provided divergent views accurately and thus did not violate CBC's standards and practices. But there was room for improvement in the lengthy article to provide more contextual background and a better understanding of the support provided to the banks.

Kirk LaPointe
CBC Ombudsman