The Office of the Superintendent of Financial Institutions (OSFI) will not force Canada’s banks to assume more mortgage risk, despite calls from many in the industry for them to do so.
“This is an initiative that really belongs to the government as a whole," newly-appointed OSFI superintendent, Jeremy Rudin told reporters following a speech at the Economic club of Canada, according to the Globe and Mail. "It’s something that, if there’s an interest, it would be an issue for the Minister of Finance to lead.”
It’s a potential policy that created quite the stir among industry pundits in late summer, with the Canada Mortgage and Housing Corporation (CMHC) confirming it is considering implementing risk-sharing measures.
“In our role as an adviser to government, we are evaluating a range of ideas on future improvements to our housing finance system, including risk-sharing with lenders to further confront moral hazard, future sandbox changes if housing markets are to become less stable, and increased capital requirements,” CMHC President and Chief Executive Officer Evan Siddall told the Saint James Club in late September. “Lots of work has been done on how corporations can better manage commercial risks, but in my view, too little attention has been paid to government’s management of tail risk.”
However, it seems as though OSFI has passed the buck to the finance minister who, himself, recently intimated the government will not make any major changes to the mortgage lending industry in the near future.
“We’re looking at things, but we’re not going to be doing anything dramatic,” Oliver said in an interview in Cairns, Australia, according to the Financial Post. “We don’t see the need for it.”