It must have been extremely refreshing for Finance Minister Jim Flaherty this week, when one banking exec said that he didn’t think it was necessary for changes to be made on mortgages in Ottawa. This comes at a time when many, such as Ed Clark at TD Bank, have called for Flaherty to once again shorten amortizations, make lending rules tighter, and make changes to HELOCs. But Flaherty came out swinging after those remarks, saying he couldn’t understand why banks wanted him to tell them how to do their business. In fact, Flaherty said that it was all “a bit much.” Now, at least one banking exec in Canada agrees with him; and that’s just what Rick Waugh told Scotiabank execs on Tuesday.
It was on Tuesday that Scotiabank held their annual meeting in which Waugh made his comments, “I agree with our government. It’s up to the banks themselves – not government or regulators – to manage our risks and advise our customers appropriately.” He continued on to say, “It’s the responsibility of government to set fiscal and monetary policies, and the level of interest rates, according to prevailing conditions.”
The fact that it’s up to the banks to approve and deny mortgage is certainly a different tune than many are singing, with so many calling for much stricter changes and much tighter lending practices – all in an effort to avert a housing and economic crisis like the United States experienced. However, Waugh doesn’t think that our housing situation is near the dire straits that the U.S.’ was, as he went to say, “The current concerns about Canada’s housing market are reason for caution but not pessimism.” And he adds, “Our housing market is supported by strong fundamentals. Supply is balanced and Canadian banks finance largely on presales and cash equity, where loan-to-value ratios show our customers have true equity. We can and will manage through any potential housing problems.”
Waugh also doesn’t think that mortgages are the biggest risk to the debt of Canadians, which might be one reason why Scotiabank was one of the big banks to enter the mortgage wars started by BMO. He does think however, that credit card lending is an area of huge concern, and that this is where consumers and banks both need to focus.
Waugh’s words did not fall on deaf ears, and it didn’t take long for Jim Flaherty to hear about it. In a response back Flaherty mentioned, “I’m glad that some of the banks, at least one of the bank executives yesterday, indicated that he agreed that actually the banks should exercise prudence and not rely on government to do it for them.”
