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Bank of Canada showers executives with $3.5 million in bonuses in 2022

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From the Canadian Taxpayers Federation

Author: Franco Terrazzano

The Bank of Canada lavished millions of dollars in bonuses on its executives last year amid seven interest rate hikes and the worst inflation crisis in four decades, according to access-to-information records obtained by the Canadian Taxpayers Federation.

All but two of the central bank’s 82 executives (97.5 per cent) received an “at-risk pay” bonus. Twenty-five received a “performance pay” bonus.

The average bonus among Bank of Canada executives last year was $43,700, for a total cost of more than $3.5 million.

“Executives at the Bank of Canada shouldn’t be showering themselves with big bonuses when Canadians can’t afford gas, groceries or mortgages,” said Franco Terrazzano, CTF Federal Director. “Most organizations don’t give 98 per cent of their executives bonuses when they have their worst year in four decades.”

Executive bonuses at the Bank of Canada total nearly $21 million since 2015. Since then, the size of the executive class at the Bank of Canada spiked by 18 per cent.

Table: Executive bonuses at Bank of Canada, 2015-2022

Year

Number of executives

Bonuses

2015

69

$683,794

2016

70

$550,064

2017

71

$2,572,915

2018

73

$2,923,613

2019

78

$3,261,123

2020

79

$3,594,681

2021

79

$3,785,902

2022

82

$3,588,324

Total

$20,960,416

The records provided by the Bank of Canada indicate its executives did not receive “at-risk” bonus pay in 2015 or 2016.

It was a bumpy year for the Bank of Canada in 2022.

The Bank of Canada’s mandate is to keep “an inflation target of two per cent inside a control range of one to three per cent.”

But inflation was 6.8 per cent in 2022, representing “a 40-year high, the largest increase since 1982,” according to Statistics Canada. The Bank of Canada also failed to meet its inflation target in 2021.

After Bank of Canada Governor Tiff Macklem told Canadians in 2020 that interest rates would remain low for a “long time,” the central bank turned around and hiked interest rates seven times in 2022.

In 2022, Macklem admitted “we got some things wrong” and the deputy governor acknowledged “we haven’t managed to keep inflation at our target,” adding that Canada’s central bankers “should be held accountable.”

“Handing out big bonus cheques is an odd way to hold your organization accountable,” Terrazzano said. “Canadians have every right to be furious when they find out executives at their central bank were taking bonuses as inflation and interest rates soared.”

Speaking at an event organized by the Canadian Federation of Independent Business in July 2022, Macklem told companies not to adjust wages for inflation, sparking outrage among labour leaders.

All told, bonuses at the Bank of Canada total about $55 million since 2020, according to separate access-to-information records obtained by the CTF.

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The Strange Case of the Disappearing Public Accounts Report

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The Audit

 

 David Clinton

A few days ago, Public Services and Procurement Canada tabled their audited consolidated financial statements of the Government of Canada for 2024. This is the official and complete report on the state of government finances. When I say “complete”, I mean the report’s half million words stretch across three volumes and total more than 1,300 pages.

Together, these volumes provide the most comprehensive and authoritative view of the federal government’s financial management and accountability for the fiscal year ending March 31, 2024. The tragedy is that no one has the time and energy needed to read and properly understand all that data. But the report identifies problems serious enough to deserve the attention of all Canadians – and especially policy makers.

The Audit is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Following the approach of my Parliamentary Briefings series, I uploaded all three volumes of the report to my AI research assistant and asked for its thoughts. Each one of the observations that came out the other end is significant and, in calmer and more rational times, could easily have driven a week’s worth of news coverage. But given the craziness of the past few weeks and months, they’re being largely ignored.

With that in mind, I’ve made this special edition of the Parliamentary Briefings series fully accessible to all subscribers.

We begin with a summary of the purpose and scope of the three uploaded volumes of the Public Accounts of Canada for 2023–2024:


Volume I: Summary Report and Consolidated Financial Statements

  • Purpose: Provides a high-level overview of the federal government’s financial performance, presenting the consolidated financial statements audited by the Auditor General. It serves as the primary accountability report.
  • Scope:
    • Audited financial statements.
    • Analysis of revenues, expenses, and the accumulated deficit.
    • Overview of assets, liabilities, and financial position.
    • Discussion of economic context, risks, uncertainties, and ten-year comparative financial data​​.

Volume II: Details of Expenses and Revenues

  • Purpose: Presents the financial operations of the government, broken down by ministries and agencies, for detailed accountability.
  • Scope:
    • Financial transactions segregated by ministry.
    • Details of appropriations, revenues, and transfer payments.
    • Summary tables on ministerial expenditures by type, object, and other dimensions.
    • Appendices providing additional details on budgetary authorities and their sources​.

Volume III: Additional Information and Analyses

  • Purpose: Offers supplementary analyses and financial data beyond what is included in the first two volumes, focusing on revolving funds, professional services, and shared-cost programs.
  • Scope:
    • Financial statements of revolving funds (e.g., Passport Canada, Canadian Grain Commission).
    • Expenditure details on acquisitions, transfer payments, and public debt charges.
    • Analyses of federal-provincial shared-cost programs and claims against the Crown.
    • Miscellaneous financial and operational data for broader transparency​.

The Audit: Based on these documents, could you identify the most serious threats to Canada’s economic stability?


From the Public Accounts of Canada 2023–2024, several serious threats to Canada’s economic security can be identified. These threats emerge from the broader fiscal and economic analyses, contingent liabilities, and uncertainties highlighted in the documents.

1. Growing Public Debt and Debt Servicing Costs

  • Observation: Canada’s public debt charges increased significantly in 2024, rising by 35.2% year-over-year, largely due to higher interest rates on debt. The total accumulated federal debt stood at $1.24 trillion, representing 42.1% of GDP, up from 41.1% the previous year​.
  • Risk: Rising debt servicing costs reduce fiscal space for critical public investments, making the economy vulnerable to future economic shocks or downturns.

2. Contingent Liabilities and Indigenous Claims

  • Observation: The government recorded $16.4 billion in contingent liabilities related to Indigenous claims in 2024, reflecting ongoing efforts to address past injustices. These liabilities have been increasing at an average annual growth rate of 30% since 2016​.
  • Risk: The unpredictable nature and scale of these liabilities could create significant financial pressures if settlements or court decisions require substantial payouts.

3. Legacy Costs from the COVID-19 Pandemic

  • Observation: The government recorded $4.7 billion in pandemic-related expenses for 2024, including write-offs for expired vaccines and provisions for unrecovered loans and benefits​​.
  • Risk: These costs highlight vulnerabilities in emergency financial planning and expose the government to further financial risks if similar large-scale public health crises occur.

4. Economic Pressures from High Inflation and Interest Rates

  • Observation: Inflation returned to the Bank of Canada’s 2% target by mid-2024 after 41 consecutive months above this threshold. However, elevated interest rates (peaking at 5%) contributed to a softening economy​​.
  • Risk: Prolonged periods of high interest rates could suppress household and business spending, slowing economic growth and increasing the likelihood of a recession.

5. Climate Change and Environmental Commitments

  • Observation: Significant spending is allocated to addressing climate change, with over $1 billion dedicated to environmental programs in 2024, including pollution pricing proceeds and clean energy initiatives​​.
  • Risk: Canada’s reliance on resource-intensive industries and increasing costs to meet climate targets create economic vulnerabilities, particularly in regions heavily reliant on fossil fuels.

6. Global Economic Instability

  • Observation: Global supply chain disruptions, energy price volatility, and geopolitical events (e.g., Russia’s invasion of Ukraine) significantly impacted Canada’s economy, with slower GDP growth (1.5% in 2023) and reduced trade​.
  • Risk: External shocks could exacerbate domestic economic challenges, such as rising import costs or reduced demand for Canadian exports.

7. Labor Market and Productivity Challenges

  • Observation: While job creation remained positive, population growth outpaced employment gains, leading to an increase in the unemployment rate to 6.5% by October 2024. Productivity improvements have been uneven​.
  • Risk: Labor shortages in key sectors and declining workforce participation among certain demographics (e.g., aging population) could undermine economic resilience.

8. Dependence on Resource Revenues

  • Observation: Volatile global commodity prices impacted nominal GDP growth, with gains slowing to 2.9% in 2023 after double-digit growth in prior years​.
  • Risk: Fluctuations in resource revenues leave Canada exposed to external shocks, particularly in provinces like Alberta and Saskatchewan, heavily reliant on oil and gas.

These challenges underscore the need for proactive fiscal and policy measures to safeguard economic stability, manage liabilities, and address emerging risks.


The Audit: What would you recommend as the three most urgent areas to address to avoid deepening the economic crisis?


1. Manage Rising Public Debt and Debt Servicing Costs

  • Why It’s Urgent: The rapid increase in public debt charges (35.2% in 2024) is crowding out fiscal space for essential programs. The federal debt, at 42.1% of GDP, has become a significant liability, with interest rate fluctuations posing an ongoing threat​​.
  • Recommendations:
    • Introduce stricter fiscal discipline by prioritizing expenditures that yield long-term economic benefits (e.g., infrastructure, innovation).
    • Develop a comprehensive debt reduction strategy to stabilize the debt-to-GDP ratio in the medium term.
    • Explore debt refinancing strategies to lock in lower interest rates where feasible.
  • Impact: Reducing debt servicing pressures will free up resources for critical investments and improve Canada’s fiscal resilience.

2. Mitigate the Economic Impact of Contingent Liabilities

  • Why It’s Urgent: Contingent liabilities related to Indigenous claims have grown exponentially (30% annually since 2016), creating fiscal unpredictability and potentially overwhelming future budgets​.
  • Recommendations:
    • Accelerate settlement negotiations to limit litigation costs and interest on outstanding claims.
    • Establish a transparent reserve fund specifically for contingent liabilities, ensuring predictable future payouts.
    • Increase collaboration with Indigenous communities to address systemic issues and prevent further claims.
  • Impact: Resolving liabilities promptly will reduce fiscal uncertainty and demonstrate Canada’s commitment to reconciliation.

3. Address Structural Labor Market and Productivity Challenges

  • Why It’s Urgent: Despite job creation, rising unemployment (6.5% in late 2024) and productivity stagnation threaten long-term economic growth. Labor shortages in critical sectors further exacerbate vulnerabilities​.
  • Recommendations:
    • Expand skilled immigration programs to address labor shortages in healthcare, technology, and green industries.
    • Increase investment in workforce retraining programs, particularly for sectors undergoing automation or transition due to climate policies.
    • Promote workplace flexibility and childcare access to increase labor force participation, particularly among women and aging workers.
  • Impact: Enhancing workforce productivity and participation will strengthen the economic foundation and support GDP growth.

Rationale for Prioritization

These areas represent the most immediate threats to economic security and fiscal stability. Addressing them proactively can reduce vulnerabilities and position Canada for sustainable growth.


The Audit: What are the most surprising and disturbing details in these documents?


1. Rapid Growth of Public Debt Charges

  • Detail: Public debt charges increased by 35.2% year-over-year to $47.3 billion, representing one of the fastest-growing expense categories. This reflects a combination of higher interest rates and the significant size of Canada’s debt​​.
  • Why Disturbing: Such a rapid increase in debt servicing costs could divert funds from essential public services and programs. It also signals limited fiscal flexibility in the event of future economic shocks.

2. Ballooning Contingent Liabilities

  • Detail: The federal government recorded $16.4 billion in expenses for Indigenous contingent liabilities in 2024. This is part of an ongoing surge, with liabilities increasing by 30% annually since 2016​​.
  • Why Disturbing: While reconciliation efforts are vital, the sheer scale and rapid growth of these liabilities are fiscally unsustainable without structural changes or dedicated funding mechanisms. The risk of further liabilities emerging adds to fiscal uncertainty.

3. Significant Write-offs and Provisions for Pandemic Programs

  • Detail: The government wrote off $1.2 billion in expired COVID-19 vaccines and therapeutics and recorded $3.5 billion in provisions for unrecovered pandemic-era loans​​.
  • Why Disturbing: These figures highlight inefficiencies in planning and administration during the pandemic response, leading to substantial financial losses. The scale of unrecovered funds also raises questions about accountability in the deployment of emergency programs.

4. Rising Unemployment Despite Job Creation

  • Detail: While 475,000 jobs were created in 2023, the unemployment rate rose to 6.5% by late 2024 due to population growth outpacing employment gains​​.
  • Why Surprising: Despite strong job creation, an inability to keep pace with population growth signals structural issues in labor force integration. This poses a risk to Canada’s economic competitiveness and social cohesion.

5. Declining Corporate Income Tax Revenues

  • Detail: Corporate income tax revenues decreased by 0.7%, driven by reduced taxable income despite an overall increase in total revenues​.
  • Why Surprising: The decline in corporate tax revenues during a period of economic recovery raises concerns about potential tax avoidance, economic inequality, or over-reliance on other revenue streams, such as personal income taxes.

6. Substantial Environmental and Climate Spending

  • Detail: Over $1 billion was allocated to environmental programs, including pollution pricing proceeds. However, the documents note Canada’s slow progress toward net-zero targets and risks to resource-dependent provinces​​.
  • Why Disturbing: While necessary, this spending may be insufficient given the scale of the climate challenge. The mismatch between spending and measurable progress on climate goals risks long-term environmental and economic consequences.

7. Unanticipated Costs of Indigenous Reconciliation

  • Detail: Beyond contingent liabilities, the government is facing unpredictable settlement costs due to increasing litigation and the complexity of claims. These have already exceeded $60 billion since 2016​​.
  • Why Disturbing: The ongoing financial impact of these settlements reflects Canada’s historical neglect of Indigenous issues. Resolving these claims is essential, but the lack of predictability or dedicated funding highlights systemic shortcomings in reconciliation strategies.

8. Softened GDP Growth and Inflation Challenges

  • Detail: Real GDP growth slowed to 1.5% in 2023, and inflation remained high throughout the year, only reaching the Bank of Canada’s 2% target by mid-2024​​.
  • Why Disturbing: The prolonged inflationary period and sluggish growth signal a fragile recovery. These economic conditions could exacerbate income inequality and lead to further fiscal strain.

9. High Provisions for Unrecovered Loans

  • Detail: Provisions of $3.5 billion were recorded for emergency loans provided during the pandemic. The government continues to face difficulties in recovering these funds​.
  • Why Disturbing: This provision raises serious questions about the efficiency of loan administration and the government’s ability to safeguard public funds during emergencies.

10. Heavy Dependence on Volatile Resource Revenues

  • Detail: Nominal GDP growth slowed to 2.9% in 2023, largely due to easing commodity prices after a surge in 2022. Resource dependence remains a key economic vulnerability​.
  • Why Surprising: Despite global shifts toward renewable energy, Canada’s reliance on resource revenues remains high, posing long-term risks to economic diversification and stability.

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Two major banks leave UN Net Zero Banking Alliance in two weeks

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From The Center Square

Under Texas law, financial institutions that boycott the oil and natural gas industry are prohibited from entering into contracts with state governmental entities. State law also requires state entities to divest from financial companies that boycott the oil and natural gas industry by implementing ESG policies.

Not soon after the general election, and within two weeks of each other, two major financial institutions have left a United Nations Net Zero Banking Alliance (NZBA).

This is after they joined three years ago, pledging to require environmental social governance standards (ESG) across their platforms, products and systems.

According to the “bank-led and UN-convened” NZBA, global banks joined the alliance, pledging to align their lending, investment, and capital markets activities with a net-zero greenhouse gas emissions by 2050, NZBA explains.

Since April 2021, 145 banks in 44 countries with more than $73 trillion in assets have joined NZBA, tripling membership in three years.

“In April 2021 when NZBA launched, no bank had set a science-based sectoral 2030 target for its financed emissions using 1.5°C scenarios,” it says. “Today, over half of NZBA banks have set such targets.”

There are two less on the list.

Goldman Sachs was the first to withdraw from the alliance this month, ESG Today reported. Wells Fargo was the second, announcing its departure Friday.

The banks withdrew two years after 19 state attorneys general launched an investigation into them and four other institutions, Bank of America, Citigroup, JP Morgan Chase and Morgan Stanley, for alleged deceptive trade practices connected to ESG.

Four states led the investigation: Arizona, Kentucky, Missouri and Texas. Others involved include Arkansas, Indiana, Kansas, Louisiana, Mississippi, Montana, Nebraska, Oklahoma, Tennessee and Virginia. Five state investigations aren’t public for confidentiality reasons.

The investigation was the third launched by Texas AG Ken Paxton into deceptive trade practices connected to ESG, which he argues were designed to negatively impact the Texas oil and natural gas industry. The industry is the lifeblood of the Texas economy and major economic engine for the country and world, The Center Square has reported.

The Texas oil and natural gas industry accounts for nearly one-third of Texas’s GDP and funds more than 10% of the state’s budget.

It generates over 43% of the electricity in the U.S. and 51% in Texas, according to 2023 data from the Energy Information Administration.

It continues to break production records, emissions reduction records and job creation records, leading the nation in all three categories, The Center Square reported. Last year, the industry paid the largest amount in tax revenue in state history of more than $26.3 billion. This translated to $72 million a day to fund public schools, universities, roads, first responders and other services.

“The radical climate change movement has been waging an all-out war against American energy for years, and the last thing Americans need right now are corporate activists helping the left bankrupt our fossil fuel industry,” Paxton said in 2022 when launching Texas’ investigation. “If the largest banks in the world think they can get away with lying to consumers or taking any other illegal action designed to target a vital American industry like energy, they’re dead wrong. This investigation is just getting started, and we won’t stop until we get to the truth.”‘

Paxton praised Wells Fargo’s move to withdraw from “an anti-energy activist organization that requires its members to prioritize a radical climate agenda over consumer and investor interests.”

Under Texas law, financial institutions that boycott the oil and natural gas industry are prohibited from entering into contracts with state governmental entities. State law also requires state entities to divest from financial companies that boycott the oil and natural gas industry by implementing ESG policies. To date, 17 companies and 353 publicly traded investment funds are on Texas’ ESG divestment list.

After financial institutions withdraw from the NZBA, they are permitted to do business with Texas, Paxton said. He also urged other financial institutions to follow suit and “end ESG policies that are hostile to our critical oil and gas industries.”

Texas Comptroller Glenn Hegar has expressed skepticism about companies claiming to withdraw from ESG commitments noting there is often doublespeak in their announcements, The Center Square reported.

Notably, when leaving the alliance, a Goldman Sachs spokesperson said the company was still committed to the NZBA goals and has “the capabilities to achieve our goals and to support the sustainability objectives of our clients,” ESG Today reported. The company also said it was “very focused on the increasingly elevated sustainability standards and reporting requirements imposed by regulators around the world.”

“Goldman Sachs also confirmed that its goal to align its financing activities with net zero by 2050, and its interim sector-specific targets remained in place,” ESG Today reported.

Five Goldman Sachs funds are listed in Texas’ ESG divestment list.

The Comptroller’s office remains committed to “enforcing the laws of our state as passed by the Texas Legislature,” Hegar said. “Texas tax dollars should not be invested in a manner that undermines our state’s economy or threatens key Texas industries and jobs.”

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