Bank Watchdog Ends Special Treatment for COVID-19 Mortgage Deferrals

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Dechaine said the total value of loans deferring payment due to COVID-19 fell 23% for Big Six lenders from the previous quarter, to $ 260 billion.

More than 760,000 Canadians postponed or skipped a mortgage payment during the pandemic. Photo par Getty Image / iStockphoto

However, Dechaine added that “the real test of the resilience of Canadian borrowers will come in Q4 / 20, as we estimate that around 85-90% of deferral programs expire and government support programs are also adjusted.

Not everyone can pass the borrower resilience test. Fitch Ratings analysts said several banks had indicated that quarterly allowances for credit losses on performing loans were likely to peak in the previous quarter, although actual loan losses may start to increase in the coming quarters.

“Bad loans and write-offs are expected to increase in fiscal 2021, more than 90 days after the majority of retail and wholesale customers affected by the pandemic quit government deferral and support,” the report says. from the credit rating agency.

But OSFI believes the time has come to begin withdrawing some of the COVID-19 regulatory relief it announced at the start of the pandemic. These measures included the special treatment of deferral and the reduction of a buffer that requires banks to hold additional capital to hedge against risk.

Similar regulatory relief has been provided by OSFI to insurance companies that have granted deferrals of loans and premium payments. These deferrals will now benefit from the same regulatory treatment in the future as the deferrals provided by the bank.

In addition, OSFI has said it will lift a moratorium it has placed on portability transfers from private pension plans.

“Over the past five months, institutions and private pension plans have demonstrated their resilience and continue to adapt their risk management tools, operations and processes to the current environment,” the regulator said in a statement. hurry. “As a result, OSFI has initiated a prudent transition to its normal regulatory and supervisory position.”

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• Email: [email protected] | Twitter: GeoffZochodne

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