Flaherty eyes prudent bank lending to curb rise in Canadian household debt
Ottawa, Ontario, Canada (AHN) – To curb the alarming rise in Canadian household debt, federal Finance Minister Jim Flaherty urged Canadian banks Thursday to adopt prudent lending policies. He issued the proposal after Statistics Canada found that household debt reached a record-high level in the third quarter of 2010, outpacing even the debts of American households.
The International Monetary Fund has forecast a muted growth for Canada next year largely on account of the growing household debt.
Among the measures that banks could take are to cut the maximum amortization period for mortgages to 25 from the current 35 years, or to institute tougher criteria for lenders to be eligible for government-backed mortgage insurance. The insurance is usually a requirement to secure a bank housing loan.
Two large Canadian banks had earlier asked Ottawa to initiate measures to curb consumer access to bank loans. Flaherty reminded Canadian financial institutions that prudent lending is one of their hallmarks, which is the reason why no Canadian banks collapsed or required government bailout during the recent global financial crisis.
Flaherty also disclosed that the 2011 federal budget will not have any major new spending or new cuts. He said the restraint measures, worth $17.6 billion over five years, placed by the Tory-led government are sufficient to reduce Ottawa’s budget deficit according to timetable.
By not introducing major cuts and spending, the Conservatives would give the political opposition little room to push for a no-confidence vote after Ottawa submits its 2011 budget to the Parliament for approval. A no-confidence vote could trigger a spring election.
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