TORONTO May 21 Canada's top banking regulator
said on Tuesday she is focused on the risk Canada's big banks
face from low interest rates and real estate lending, but is
happy that the housing market is moving into more balanced
Julie Dickson, head of the Office of the Superintendent of
Financial Institutions, or OSFI, said the impact of low interest
rates can clearly be seen in the Canadian real estate market.
Canada's housing market was red hot in the years following
the recession. But it began cooling in the middle of 2012 in the
wake of government moves to tighten mortgage lending rules, even
though rates remain near historic lows.
"The real estate lending market has been a significant area
of focus for OSFI, because of the significant incentives for
consumers to borrow and for banks to maintain revenues, the size
of mortgage lending portfolios, the concerns about some markets
being over-valued, and the possibility that customers' debt
serviceability could be masked by low interest rates," Dickson
said in remarks to the Bloomberg Canada Economic Summit.
"We're happy to see there has been some adjustment in the
real estate market. We're seeing a more balanced situation now,
but one has to always pay attention."
The tighter lending rules were aimed at preventing consumers
from taking on too much debt to get into an expensive housing
The changes shortened the maximum term of an insured
mortgage loan to 25 years and limited the amount of equity that
could be taken out of a home using an insured mortgage.
The move to rein in lending was a bid by the government to
prevent a U.S.-style housing crash and banking system meltdown.
Dickson noted that Canada's big banks, named soundest in the
world for five straight years by the World Economic Forum, are
already in compliance with Basel III capital requirements, aimed
at bolstering the global banking system against future shocks.
She also noted that the bulk of the banks' mortgage
portfolio is insured by the Canada Mortgage and Housing Corp., a
Canada's top six lenders in order of size are: Royal Bank of
Canada, Toronto-Dominion Bank, Bank of Nova
Scotia, Bank of Montreal, Canadian Imperial
Bank of Commerce and National Bank of Canada.
Dickson, who has drawn praise for her firm supervision of
the banks, also said she did not intend to seek a new term as
Canada's regulator when her term ends in mid-2014.
"I love Canada's banks but I do not want another seven years
in that role," she said. "On July 4, 2014, I will be on my way."