* CEO says correction won't hurt economy significantly
* Says data shows housing slowdown well within expectations
* Says mistakes by global banks have hurt public trust
By Andrea Hopkins
TORONTO, Sept 18 New data showing a slowdown in
Canada's hot housing market was largely expected and a market
correction will not have a significant impact on the Canadian
economy or on its big banks, the head of Bank of Nova Scotia
said on Tuesday.
As Canadian homeowners and economists watch and worry about
the risk of a U.S.-style housing crash, Scotiabank Chief
Executive Rick Waugh said he believes the country's mortgage
lenders and its economy will withstand a drop in both prices and
"There can be some hardships, but because the Canadian
economy is so well diversified - we have a strong national
balance sheet, we have a strong income statement for our
country, and our banks are the same ... (so) that while we have
to be concerned - we should be - it is nothing like what has
happened in other jurisdictions," Waugh told reporters.
"I can say for our bank that even numbers that are greater
than you are seeing, the economic effects to us and therefore to
our customers are not significant, and what we see now is
probably at worst a soft landing."
Data released on Monday showed existing home sales in Canada
suffered their biggest month-over-month decline in more than two
years in August, a sign that recent government mortgage rule
changes may be hastening an end to the country's post-recession
The Canadian Real Estate Association (CREA) figures prompted
the industry group to cut its sales and price forecasts for this
year and next. CREA now forecasts sales will rise just 1.9
percent this year and then decline 1.9 percent in 2013.
Many economists have forecast a price correction of between
10 percent and 15 percent, while more bearish experts see a 25
percent drop in prices, similar to what happened in the 2009
U.S. housing collapse.
But Waugh, the head of Canada's third-largest bank, said all
indications so far point to a fairly modest correction that will
not significantly affect lenders, which lose money when
homeowners stop paying their mortgages.
"The numbers we're seeing are really not a huge surprise.
They are well within our expectations of, say, 10 percent
(declines) in sales volume and 10 percent in prices," Waugh told
reporters following a speech on risk management in Toronto.
He told a business audience that the mistakes of a few big
global banks have hurt public trust in financial institutions,
and it will take continued work by both political leaders and
banks to restore confidence in the system.