Global Regulation Threatens Canadian Mortgage Market

Most of you have heard the expression, “One bad apple ruins the whole bunch.” No doubt this is true. The same can’t be said, unfortunately if you’re the only good apple in the bunch.

I’ve often said that Canada has taken a bit too much credit for being clairvoyant and avoiding the subprime mess that the States got into, because the truth is that we were saved by time. The US was the canary in our mine. We ran out of race track before we got too heavily invested in subprime mortgages, but believe me – it was coming.

Be that as it may, Canada does have a very strong banking sector and a good system of risk management. CMHC and Genworth Financial provide quality insurance to the mortgage market and banks and other Canadian mortgage lenders generally make prudent lending decisions.

Unfortunately, the strengths of the Canadian system don’t appear to be given much credit under a set of proposed global financial reforms being developed by the Basel committee.

I personally have a great deal of concern about global regulation of any kind. Strictly from a democratic standpoint, I don’t like unelected authorities from other countries telling my country how to run it’s business. We elect our government and entrust them to do what’s best for our country. An unelected committee of individuals with goals and priorities that may or may not have anything to offer Canada (and can in fact be detrimental to us) has no business dictating the terms of how we operate here. I do believe in strong global trade and the benefits of working with other countries are numerous – but I draw the line at having them tell us how to operate.

The Canadian lending and insurance system has been a great boon to Canadians, offering choice, competition, savings and stability beyond what most other countries can claim. If it needs tweaking to improve it, then let’s do that – but let’s keep the bad apples out of our barrel.

The Financial Post has an interesting article with commentary from key Canadian bankers that discusses the resistance to the Basel committee’s proposals.