New rules could force Canadian banks to pull back on lending: Scotiabank
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Canada already has one of the safest banking systems in the world. So why are regulators rushing to implement new global financial recommendations that may end up slowing growth?
That’s the gist of a report released by Scotiabank chief economist Jean-Francois Perrault, who is casting his sights a bit further out to look at new capital rules that are set to be implemented by mid-2026.
The changes are very technical (the full report can be found here), but an irony of the rules is that they hit disproportionately conservative lenders like Canadian banks, according to Perrault. What’s more, the Office of the Superintendent of Financial Institutions implemented the changes rules (what are known as Basel IV) well ahead of other peer countries.
The new capital requirements for Canadian banks could force them to get rid of as much as $260 billion in assets by 2026, according to Perrault.
“Government-mandated requirements to shed assets (or raise capital) run counter to efforts to raise investment and improve access to the housing market for Canadians,” according to the report. “This seems to be another instance of policy inconsistency in the Canadian policymaking landscape.”
