It was just two days ago when Terry Campbell, president of the Canadian Bankers Association, spoke out about the constant reform that Ottawa is putting banks through. At the time, Campbell called for a cessation of the reform after reform came down from Ottawa, dictating how banks do business and changing rules on Toronto and Ottawa mortgages. His comments were untimely, as they came shortly after Jim Flaherty’s budget outlined that rules on HELOCs and other mortgage debt would not change. Campbell’s remarks also came shortly after Mark Carney, BoC governor, had already heavily defended his reform practices. Now, the outcry from the Association leaves Carney not only defending those reforms once again, but showing Campbell how they were exactly what gave Canadian banks relief during the financial crisis.
When referring to Campbell’s suggestion that banking authorities “press pause” on reforms and see if it all makes sense, Carney pointed to the fact that banks were perfectly fine with the reforms and the intervention Ottawa took when banks were in trouble during 2008-2009. Carney said, “No one presses pause in the middle of the financial crisis when $4 trillion were lost and 28 million jobs were lost, 400,000 here in Canada.” He continued on to say, “It was a good thing we didn’t press pause when we provided over $30 billion of liquidity to the Canadian banking system. It was a good thing the government of Canada didn’t press pause when it provided very timely and effective term liquidity to the Canadian banking system.”
There a few measures in there that Carney’s referring to when he speaks about how Ottawa helped out the banks during the recession. The first measure was when Ottawa bought tens of billions of dollars worth of mortgages from the banks so that the banks could free up some of their cash and keep credit markets afloat. Carney is also referring to the historically low levels of 0.25% that he dropped the interest rate to during the height of the crisis.
These steps were taken to protect the Canadian economy and to keep banks from needing the bailout that U.S. banks did. And after having taken these steps, it’s no wonder that Carney would be upset when banking authorities essentially say, “Thanks so much, but that’s enough now.”
Campbell also said in his comments that it was important that Ottawa step back after making changes and see if it’s all working together, before imposing even more restrictions. To that Carney replied, “I think it’s very clear what we’re looking to do…to build a more resilient financial system, that means more capital, better liquidity management. The reform pieces all fit together.”
