\u201cCanada’s banks have ample capacity to help fund the country’s adjustment in this new era,\u201d says Peter Routledge, head of the Office of the Superintendent of Financial Institutions. (Credit: Cole Burston\/Bloomberg) <\/p>\n
Canada\u2019s federal banking regulator is considering loosening lending rules for the country\u2019s largest banks to encourage business loans, with one scenario applying to money loaned for public-private infrastructure development.<\/p>\n
Peter Routledge, head of the Office of the Superintendent of Financial Institutions, said in a speech Wednesday that OSFI is looking at changing the capital treatment of certain types of business loans because Canada\u2019s banks have built up substantial capital cushions. At the same time, encouraging business lending by banks could shore up the economy amid challenging geopolitical times and a months-long trade war with the United States, Routledge said.<\/p>\n
He said there is room to ease up now because the country\u2019s banks have weathered crises from the COVID-19 pandemic to fallout from the failure of Silicon Valley Bank.<\/p>\n
\u201cBanks could make nearly $1 trillion in additional loans or other extensions of credit \u2026 and remain above current capital minimums,\u201d he said, adding that this is a material amount relative to Canada\u2019s $3-trillion economy.<\/p>\n
\u201cCanada\u2019s banks have ample capacity to help fund the country\u2019s adjustment in this new era.\u201d<\/p>\n
Rather than looking at the resilience built into the system following the 2008 financial crisis as merely a safeguard, there should be a way to use it as a catalyst for national prosperity, he said, adding that OSFI is calling on the banks to come to the regulator with ideas for how this will be accomplished without adding too much risk to the system.<\/p>\n
\u201cWe see the system\u2019s resilience as a strategic advantage to be leveraged to support Canadian businesses and households as the country adapts,\u201d he said, comparing the consideration of bank business lending changes to OSFI\u2019s July decision to shave capital requirements on infrastructure investments by life insurers.<\/p>\n
\u201cWhen banks, insurers and pension plans are well regulated, adaptable and capable in managing their risks, Canadians benefit from reliable access to credit and financial services to stronger support \u2026 businesses and communities.\u201d<\/p>\n
Following his speech, Routledge said the worries triggered when the U.S. initiated the trade war early this year \u2014 which had prompted OSFI to prepare for possible pandemic-style measures to shore up capital \u2014 had not resulted in poor outcomes for banks, which have continued to post strong profits so far this year.<\/p>\n
The Canada-U.S.-Mexico Trade Agreement (CUSMA) comes up for review next July, a process kicked off Tuesday by the Office of the U.S. Trade Representative. Some trade lawyers and economists are predicting that U.S. President Donald Trump\u2019s administration will seek major concessions from Canada.<\/p>\n
Story Continues <\/p>\n
\u201cI\u2019m optimistic the resilience we built in the (banking) system could handle a less favourable outcome (on trade),\u201d Routledge said Wednesday. \u201cI would prefer that any renegotiation of CUSMA would have maximum benefits and minimal costs for the country. If that is not the case, the system will be prepared and has the resilience to adapt.\u201d<\/p>\n
In his speech, Routledge pointed out that Canada\u2019s financial system has been more resilient than other jurisdictions over the years \u2014 including the U.S. \u2014 and suffered far fewer bank failures. He noted that each new crisis is jarring at the time, despite the eventual outcome, and expressed relief that Canada\u2019s system had again fared well following the Silicon Valley bank failure in 2023.<\/p>\n
He added that his confidence in the system does not mean he doesn\u2019t expect to face further shocks.<\/p>\n
\u201cI have high degree of confidence that as sensational as it will seem at the time, and it will, because it\u2019ll be the first thing that happened in X years, the system will come through it,\u201d he said. \u201cWe\u2019ll take a punch and we\u2019ll adapt and we\u2019ll keep moving forward.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cCanada’s banks have ample capacity to help fund the country’s adjustment in this new era,\u201d says Peter Routledge,…\n","protected":false},"author":2,"featured_media":151446,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[69028,80193,80196,49,48,44,80194,80195],"class_list":["post-151445","post","type-post","status-publish","format-standard","has-post-thumbnail","category-canada","tag-2008-financial-crisis","tag-business-lending","tag-business-loans","tag-ca","tag-canada","tag-news","tag-office-of-the-superintendent-of-financial-institutions","tag-osfi"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/151445","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=151445"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/151445\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/151446"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=151445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=151445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=151445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}