TD CEO Talks of Self-Regulation

TD Bank CEO Ed Clark suggested yesterday that the government may let banks tighten lending standards on their own, as opposed to a government-mandated “major tightening” of mortgage rules.

“They’re worried that the Canadian economy is slowing down right now and [major rule changes are akin to] taking out a bazooka,” Clark told Bloomberg. He said policymakers prefer that banks “tweak” their own lending guidelines. 

“We have seen the banks in a series of small moves say ok, ‘why don't we tweak here and tweak there and see if we can tighten the rules.’”

Those rules have indeed been tightened. In recent weeks and months, banks and non-banks alike have raised rates on higher-risk applications like stated income and rental deals.

“We are trying to have a national dialogue that changes people’s behaviour and a number of banks like us have said ‘ok, if we think people's debt loads are getting high let’s start to crank up the pricing a little.”

Lenders have also stiffened income and qualification guidelines. In some cases (like with TD’s own equity program), the stricter policies have made the products somewhat impotent.

“There’s nothing going on in Canada like what happened in the United States because the banks own the mortgages, we put them on our own balance sheet,” Clark said. “But it doesn’t mean we couldn’t have a problem…”

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Rob McLister, CMT