HSBC Bank Canada has been one of the first to be hit the hardest with Ottawa’s tighter mortgage rules. With an announcement last week, the bank has closed their doors on consumer lending. The move is one that has shut office doors throughout the country, and has hundreds of Canadians looking for work.
The move was made after the bank tried to sell off the division rather than just close it altogether; but it comes on the heels of new proposed rule changes by the banking regulator’s superintendent, and just after new Basel rules have been announced. Those rules are created by the global Basel Committee, a group formed from 12 representatives of the biggest global banks in the world. The latest change to the Basel rules is that banks need to put up more capital, and that they need to hold 4.5% of all common equity – a number that’s gone up by 2.5% under the old Basel rules, and something that HSBC just can’t afford right now on the consumer lending side of things.
HSBC Bank Canada chief executive Lindsay Gordon says, “Under the Basel rules, the risk of weighing is fairly high so it does attract a material level of capital.” And that’s not all that. The new proposed mortgage rule changes that have been proposed by the OSFI would have made it even tougher for Canadians to get mortgages, and for banks like HSBC Bank Canada to give them. While it’s debatable as to whether or not those changes are going to be made, they would be something the bank simply wouldn’t be able to handle.
The move has closed 75 HSBC Bank Canada offices already, leaving 500 unemployed individuals in its wake, and was something the bank had tried desperately to avoid. “Despite concerted efforts,” says Gordon, “a suitable buyer could not be found. Having exhausted all available alternatives, the appropriate steps are now being taken to wind down the business.” In September 2011, HSBC sold its Canadian full service investment advisory business to the National Bank of Canada for $206 million, but was still looking for a way to unload its consumer lending division.
The bank is still planning to service and collect the existing Toronto and Ottawa mortgages it has on loan, as well as the rest of the Canada, and you can still find online applications for mortgages and second mortgages alike on their website. However, this is a business that’s going to be completely winding down in the very near future; and one that is most likely going to be very hard to get approval with until that happens.
