The more I think about it, the more fired up I get! OSFI (Office of the Superintendent of Financial Institutions) has come out and said Bank profit margins are shrinking and the BIG Banks may start to loosen their credit lending policies in order to write more business and therefore earn more profit.
This statement just doesn’t make any sense…. let’s think about this for a minute… Take a look at Financial Post’s Biggest Companies ranked by profit in 2010.…let’s see where the Banks rank:
– #2 is RBC $5.2 billion
-#3 is TD Bank $4.6 billion
– #4 Bank of Nova Scotia $4.2 billion
– #9 Bank of Montreal $2.9 billion
– #12 CIBC $2.4 billion
Five of the top twelve most profitable companies are Banks!!! This doesn’t look like the Banks are hurting that badly, does it? We should also not forget that the govt has made several changes to mortgage lending rules…It’s already harder to qualify for a mortgage and line of credit… So what gives, OSFI??
Look, OSFI has spoken and we must not ignore this….I don’t like what they are saying and the logic they are trying to give us doesn’t make sense….But we can’t bury our head in the sand either… The Banks have too much power… We should prepare ourselves for changes… Make plans and adjust accordingly… Don’t wait for the Banks to act.
It’s clear to me that we could see some changes in lending policies…My guess is this will translate to some increased rates on your secured lines of credit, a possible review of your account, even a reduction in your limit… That’ right, the banks can even call your line of credit and ask you to repay it in full…!! They might ask you to lock into a fixed rate mortgage or get into an amortized repayment schedule instead of just paying interest only.
But it doesn’t end there… commercial accounts will also be under the magnifying glass, in my opinion. Commercial loans and mortgages get reviewed annually by the Banks…This is why it’s very important to choose your commercial lender carefully… Not all Banks are alike… there are some institutions that offer commercial loans that are not callable…
Bottom line is to be aware, stay informed and act accordingly…. If you are not sure where you fit in with these possible changes, give me a call.. I’m happy to help.