Finance Minister Jim Flaherty took a lot of heat from the banks, first when he essentially told them to do their job and tighten rules for Canadian and Ottawa mortgages themselves; and then again when he released his budget last Thursday – a budget in which there were none of the mortgage rule changes that the banks were calling for. Now, the president of the Canadian Bankers Association, Terry Campbell, has gotten involved, and seems to be conflicting with both the banks calling for change, and with the Finance Minister and BoC governor Mark Carney. In a meeting yesterday, Campbell told reporters that he thought the regulations being imposed on banks were far too harsh, and not just when it comes to mortgages, when it comes to all banking policies.
Campbell said at the luncheon held on Tuesday, “We are facing the biggest regulatory implementation exercise the Canadian banking industry has ever undergone, and it is not done yet. I think it would be useful for the federal government to hit the “pause” button and to take stock of the new regulatory paradigm.”
Campbell’s argument is that it’s impossible for Canadian banks to grow and develop when there is restriction after restriction being imposed. He also thinks that the restrictions are so ambiguous and require banks to use so many resources just to make sure that they’re following them, that it will drive smaller banks and lending institutions out of business, leading to little competition between Canadian banks.
But, his timing for such comments seems a bit off.
Firstly, it comes right after many banking authorities, such as the chief executive at TD, Craig Alexander, has called on Flaherty to tighten mortgage rules – a remark to which Flaherty told banks to do the jobs themselves, that they shouldn’t need more regulation. Flaherty’s argument was that, after shortening amortization periods and tightening rules on HELOCs, it was really up to the banks to impose their own restrictions. It seems that Flaherty too, thought there were enough government-imposed restrictions.
Campbell’s words could also anger Mark Carney, who’s been all for imposing restrictions, and is only leaving the interest rate at its historic low because of domestic and global economic conditions. Carney has already heavily defended the restrictions being placed on banks, as he told the Financial Times in January, “If there is ‘regulatory overload’ it pales in comparison to the difficulties, the lost output, the lost jobs…quite frankly, the suffering that’s happening in a variety of economies, our economies, as a consequence of the failure of the system.”
What do you think? Do you think Ottawa needs to step in once again and change mortgage rules, or do you think the banks should be left on their own to do it?
