Scotiabank CEO to Flaherty: Stop meddling in the mortgage market
Finance Minister Jim Flaherty shouldn’t interfere with mortgage pricing set by the country’s lenders, Bank of Nova Scotia Chief Executive Officer Richard Waugh said.
Flaherty, who has taken steps to cool the housing market in a bid to avert a crash, raised concerns last month over reduced five-year mortgage rates offered by Bank of Montreal and Manulife Financial Corp. amid record levels of household debt in Canada. Both lenders have since increased rates.
“I just philosophically don’t think” [government should be setting product pricing]
“I understand why the finance minister is concerned about the Canadian economy, but I just philosophically don’t think” government should be setting product pricing, Waugh said yesterday in an interview in Halifax, Nova Scotia, where the bank held its annual shareholders meeting. “Despite the difficulties of central banks to use interest rates, the alternative of trying to manage specific products or prices, to me, is fraught with difficulty.”
Scotiabank hasn’t been approached “that I’m aware of,” by Flaherty over the Toronto-based bank’s mortgage rates, said Waugh, 65. He said Canada will have a “soft landing” in the housing market instead of a full-scale crash.
“Volumes for mortgage brokers and banks will be affected, but I don’t see it as a credit event of any significance,” said Waugh. Kathleen Perchaluk, a spokeswoman for Flaherty, didn’t return e-mails seeking comment.
Canada’s third-largest bank may expand in unsecured lending, such as credit cards, Waugh said. The bank had avoided expansion in that area in the aftermath of the financial crisis, he said.
“The unsecured credit card and personal loan portfolio has behaved better than we thought,” said Waugh, who is also a vice chairman of the Institute of International Finance. “As the world is healing, I think that gives us an opportunity to expand what we call our risk appetite and take more of a prudent risk on our unsecured credit.”
In October, Waugh relinquished his role as president and was succeeded by Brian Porter, paving the way for an eventual transition to the top job. Waugh declined to say when he will retire and wouldn’t say whether he will still be CEO at the bank’s next annual meeting in Kelowna, British Columbia.
“It’s not imminent, but it will happen in a timely manner,” Waugh said. “There’s lots of things I’m planning to do and healthy to do. There will be a time, but I’m not going to disclose that right now.”
One of the issues Waugh plans to pursue as CEO and into his retirement is urging Canadian companies to boost trade with emerging-markets countries, the subject of his speech at yesterday’s shareholder meeting. In addition to his own bank, Waugh cited Linamar Corp. and Magna International Inc. as firms that have seized the opportunity.
“There is this sense of, perhaps, growing protectionism,” in countries such as the U.S., Waugh said. “It has to be done right now, because it’s not going to get better. The European and American companies are going to get stronger and boy, when that comes, competition’s really going to be keen.