Reuters: Regulatory News: Scotiabank CEO cautious, not pessimistic, on housing

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Scotiabank CEO cautious, not pessimistic, on housing Apr 3rd 2012, 17:09 Tue Apr 3, 2012 1:09pm EDT * Says gov't was right not to tighten housing rules * Sees bigger threat from regulation By Cameron French SASKATOON, Saskatchewan, April 3 (Reuters) - Bank of Nova Scotia Chief Executive Rick Waugh says Canada's simmering housing market gives reason for caution, but that it's up to the country's banks, rather than the government, to manage the risks of their massive mortgage portfolios. "The current concerns about Canada's housing market are reason for caution but not pessimism. We can and will manage through any potential housing market problems," he told the Scotiabank's annual general meeting in Saskatoon, Saskatchewan, on Tuesday. Several Canadian bank executives - Toronto-Dominion CEO Ed Clark in particular - have said they would welcome further government moves to tighten mortgage rules in a market that has been heated up by historically low interest rates. The federal government, which has already tweaked mortgage rules three times in the last few years, left mortgage standards unchanged in last week's budget. "I agree with our government. It's up to the banks themselves - not government or regulators - to manage our risks and advise our customers appropriately," Waugh said. Canada's appetite for low-rate mortgages has been helped along by aggressive competition by the banks to offer attractive deals, and has raised fears that the market could deflate dangerously when rates eventually rise. Consumer lending, and mortgages in particular, are a key revenue driver at the banks. "We keep a very close eye on our mortgage portfolios, and in Scotiabank they are in good shape," said Waugh, who has been CEO of Canada's No. 3 bank since 2003. However, he pointed to an increasingly tight global regulatory environment as a possible threat to the strength of the Canadian banking sector. The country's banks have emerged from the past five years of financial uncertainty in a much stronger position than many of their international rivals. While shares of U.S. and European banks are still trading at a fraction of their pre-crisis levels, Canadian lenders are trading near or above those levels. "Canada continues to have sound supervision, but we must be careful that rules designed to fix problems in other jurisdictions and financial markets do not impair our own proven and successful financial sector," Waugh said. He said the Basel III international regulations for bank capital and the U.S. Volcker rule have a "reasonable probability" of unintended consequences that could inhibit economic growth and job creation, and even work against the goal of greater financial sector stability. Canada's banks and the country's financial services regulator have spoken out against the Volcker Rule, a key plank in the Dodd-Frank financial oversight law, which is designed to prevent banks from trading with their own funds. Canada's bank argue the draft rule would limit Canadian banks' ability to manage their risks. Link this Share this Digg this Email Reprints

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