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Big-Banks According to unnamed sources, the heads of the Big Six banks met with the Bank of Canada’s Mark Carney on Nov. 25. That’s according to this Globe & Mail article.

The Globe writes that the banking giants privately told policy makers to tighten mortgage qualifications—including increasing minimum down payments and reducing maximum amortizations.

The Globe says “Not one [of the bankers] disputed the idea that it would be wise for Ottawa to take action” and make it harder for people to get mortgages. That is “according to people familiar with the discussions,” states the Globe’s story. Apparently Mark Carney himself wouldn’t confirm any of this.

Assuming these accounts are factual, what could be behind the banks' seemingly altruistic desire to sacrifice short-term mortgage profits for stricter insured mortgage lending?

  • The Globe suggests banks are concerned about a potential housing crash. That could increase mortgage defaults and spill over into non-insured loans—costing the banks a lot of money.
  • The Georgia Straight feels the banks’ motives may be more ulterior. It says their concern may be due to brand new OSFI accounting rules that make high-ratio insured mortgages less attractive to hold on banks’ balance sheets.
  • “An added bonus for the banks,” according to the Straight, "would be that tighter mortgage rules would make life harder for the banks’ competitors, like credit unions, which rely heavily on mortgages."

In a follow-up story published today, the Globe says Finance Minister, Jim Flaherty, sees no bubble threat at this time, and has no immediate plans to tighten mortgage rules.

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