Economy 53,058 Posted June 5, 2019 Share Posted June 5, 2019 https://www.bnnbloomberg.ca/osfi-increases-domestic-stability-buffer-for-big-banks-to-2-1.1268322 Canada continues to ever tighten credit rules to ensure that extremely high consumer debt and a hot real estate market don't end up causing disaster. Over past 10 years a series of changes have gradually taken hold to make Canadian banks safer and more resilient: - Max mortgage amortizations lowered from 35 years to 30 years - Lowered again from 30 years now to 25 years - max refinancing on home equity allowed lowered from 100% to 80% - minimum downpayment to avoid default insurance raised to 20% - limits imposed on number of mortgages offered with less than 20% downpayment regardless of default insurance The government didn't stop the regulations there - As of January 1st 2018, all mortgage borrowers must now pass a 2% mortgage rate stress test meaning you must qualify for a rate 2% higher than you are getting in case rates rise you can still make payments - Now today's announcement is for the banks. Minimum reserves in cash are being raised to 10% of outstanding loans in case a recession happens and defaults surge, banks can absorb heavy losses without requiring a bailout Link to post Share on other sites More sharing options...
Economy 53,058 Posted June 5, 2019 Author Share Posted June 5, 2019 Wouldn't it be halerious if with all these steps and regulations our banks still failed? I mean US consumer debt peaked at 134% of disposable income in 2007 and in Canada it's 178% now Home prices peaked at 7X average incomes in the US before the crash in Canada it's reached 9X @PartySick @Luc @Woolfsmck Are all these regulations sufficient to avert a crisis? The debt imbalances are so bad But the banks have so much cash and many steps were taken to ensure debt quality... So crash or no crash??? Link to post Share on other sites More sharing options...
Adrenaliner 3,809 Posted June 5, 2019 Share Posted June 5, 2019 2 hours ago, Economy said: Wouldn't it be halerious if with all these steps and regulations our banks still failed? I mean US consumer debt peaked at 134% of disposable income in 2007 and in Canada it's 178% now Home prices peaked at 7X average incomes in the US before the crash in Canada it's reached 9X @PartySick @Luc @Woolfsmck Are all these regulations sufficient to avert a crisis? The debt imbalances are so bad But the banks have so much cash and many steps were taken to ensure debt quality... So crash or no crash??? Wow this is quite scary. It's crazy how people have no idea how big this is. Thanks media. Link to post Share on other sites More sharing options...
Economy 53,058 Posted June 5, 2019 Author Share Posted June 5, 2019 6 hours ago, Adrenaliner said: Wow this is quite scary. It's crazy how people have no idea how big this is. Thanks media. Some circumstances are different so our higher debt load hasn't caused a crash like it did in the US Some Countries besides Canada who's consumer debt load has surpassed the US in 2007 include: - Australia - Switzerland - Denmark - Netherlands - Sweden None of them have collapsed either so far. Well Australia has been struggling big time with stagnation tho and falling house prices but not an outright crash tho Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted June 5, 2019 Share Posted June 5, 2019 I think it would have lot of negative repercussions... when the us credit market froze, some businesses and people used their Canadian assets to function... Canada's problems are kinda U. S. problems too ... like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
Economy 53,058 Posted June 5, 2019 Author Share Posted June 5, 2019 20 minutes ago, Woolfsmck said: I think it would have lot of negative repercussions... when the us credit market froze, some businesses and people used their Canadian assets to function... Canada's problems are kinda U. S. problems too ... It would. But do u think a crash will be averted with a soft landing or no? Of all the regulations put in place the one that worked the best was the 2% premium rate stress test that simulates you qualifying rates 2 percentage points above what ur Actually getting When that started last year prices finally stopped surging... But they aren't really dropping either they are just flat Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted June 6, 2019 Share Posted June 6, 2019 13 hours ago, Economy said: It would. But do u think a crash will be averted with a soft landing or no? Of all the regulations put in place the one that worked the best was the 2% premium rate stress test that simulates you qualifying rates 2 percentage points above what ur Actually getting When that started last year prices finally stopped surging... But they aren't really dropping either they are just flat Canadian gov has more direct control of the economy than the U.S since it is smaller, the thud from a crash will be a lot less.... Plus Canadian people seem to have more common sense than most Americans... I can't really predict the outcome here, plus I don't follow the Canadian economy very closesly. like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
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