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Mortgage Broker News | 09 Apr 2010, 12:00 AM Agree 0
Proposals on global financial reforms by an international committee are raising concerns among Canadian bankers that lenders will be forced to resort to more mortgage securitization, according to a report in the Financial Post.
  • FJ | 22 Apr 2010, 01:59 AM Agree 0
    Big banks in Canada have purposely set themselves up as incredibly complex structures that are virtually impenetrable to scrutiny. Under those layers are literally hundreds of subsidiary companies, each with their own separate legal existence.

    This, of course, has the effect of relieving the banks from an obligation to separately report on the subsidiaries' activities with separate general purpose financial statements.

    In other words, banks partake in a lot of activity that is shielded from public oversight. We don't get to see balance sheets, income statements or cash flow statements for these subsidiary entities. Therefore, we don't know how much of their mortgages are off-balance sheet already, in so-called "special purpose vehicles", which are customarily used to shield the assets from creditors.

    We must wonder therefore whether the present concerns being raised by the banks to attempt to ward off federal regulation, may in fact be completely without any merit. The fact is, nobody knows. The only thing we really do know is that these concerns about the federal regulations are coming from stakeholders (management) who have a vested interest in keeping capital requirements as low as possible.

    Until we see completely open books for the entire web of entities that the banks have set up, shielding a good deal of their activities from scrutiny, we certainly ought not to be taking lobbying efforts such as these (against federal tightening of capital requirements, that is), very seriously.
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