Op-Eds
Published in the Financial Post
Media reports abound with speculation about how Bank of Canada interest rate cuts will lift the Canadian housing market. To be sure, you hear cautionary notes that the rate cuts that began with last week’s 25-basis-point cut will likely be slow. Less has been said, however, about how for many homeowners lower rates won’t actually reduce borrowing costs.
Variable-rate mortgages should see a full and immediate response to the rate cuts. But the 2024 CMHC Mortgage Consumer Survey shows only 23 per cent of mortgages are variable rate, five per cent are a fixed/variable combination and 69 per cent are fixed rate. The most common fixed-rate mortgages are for five years although three-year terms…
Published in the Financial Post
Canada’s financial regulator is in a ticklish situation. On March 6, United States Federal Reserve Chairman Jerome Powell signalled that U.S. regulators are reconsidering their plans to hike capital requirements for large banks in accordance with what is commonly referred to as the “international Basel III endgame agreement.”
The obvious question? Should Canada’s counterpart, the Office of the Superintendent of Financial Institutions (OFSI), follow suit? The obvious answer? In my view, yes, the OSFI should suspend its plans to implement similar changes for the six major Canadian banks until it is clear whether the U.S. and other major jurisdictions actually proceed.
The Basel…
Just over two decades ago, the Sarbanes-Oxley Act put the regulation of corporate compliance on the map. It has since become a governance preoccupation, spawning armies of compliance professionals, commanding a substantial portion of every board’s agenda and costing hundreds of billions of dollars. Elaborate legal mechanisms — such as sentencing guidelines, whistleblowing regimes and personal liability of directors and management — aim at preventing employee wrongdoing and heightening oversight by directors and senior management to ensure internal systems are effective.
The objective — better, more honest governance — is hard to argue with. Yet time and time again we see high-profile firms encouraging, acquiescing in or simply…
Ottawa has set its sights on reining in predatory lending rates. Last year it set out draft regulations that would lower the rate non-prime lenders can charge from 48 to 35 per cent (“annual percentage rate” or APR). Will that keep people who are prey to predatory lending from entering a cycle of debt? Probably not.
There are two types of borrowers, prime and non-prime. Prime borrowers have strong credit scores that give banks and credit unions confidence they will pay their loans on time and in full. As a result, they can borrow at reasonable interest rates. Non-prime borrowers are more diverse. Some have a checkered repayment history. Others, including immigrants, have no Canadian credit history. Because banks and credit…
The last two years have not been kind to central banks. Inflation in many countries soared far beyond target, reaching levels not seen in decades. Central bankers have responded with necessary but painful interest rate hikes.
Despite disappointment in the performance of many central banks, let’s not lose sight of key lessons. First, inflation stinks, inflicting most harm on those who can afford it least. Second, central banks are the best institutions we have to make sure it goes away and doesn’t come back. As we head into 2024 and inflation continues to fall, it’s worth remembering why the world established central banks and low inflation targets in the first place.
Until the 1990s, central banks struggled…
