With two big announcements from OSFI around changes to mortgage and banking practices – specifically at non-bank lenders – do you think the regulator is overreaching?
Take our poll today.
The Office of the Superintendent of Financial Services (OSFI) announced last week it will be increasing its supervisory efforts for residential mortgage underwriting – specifically focusing on Guideline B-20, which it also announced potential changes to.
Those changes include;
- Requiring a qualifying stress test for all uninsured mortgages;
- Requiring that Loan-to-Value (LTV) measurements remain dynamic and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers;
- Expressly prohibiting co-lending arrangements that are designed, or appear to be designed to circumvent regulatory requirements.
OSFI is inviting consultation from industry stakeholders, which can be sent via email
That announcement followed one a week prior that the regulator plans to disallow non-bank institutions from using banking terms to describe its practices – even if their deposit offerings and other bank-like products are exactly the same type of offerings provided by banks.
“OSFI has observed increased use of the words ‘bank’, ‘banker’ and ‘banking’ by non-bank financial service providers. OSFI is issuing the Advisory to provide clarity regarding its interpretation of the restrictions and the exception mentioned above,” OSFI said in a public letter. “The restrictions apply to all non-bank financial service providers, including both federally regulated trust and loan companies and provincially regulated institutions. They also apply to unregulated financial service providers.”
So it begs the questions: Does it seem like the banking regulator is purposefully targeting non-bank entities, which could erode competition?