Friday, April 6, 2012

Canadian Financial Regulator Says Banks Don't Always Follow Board Policies

Color me shocked. How do you rack up the same debt as Americans and run house prices to nearly double that of the U.S. without some fudging around the edges?

Banks execs get measured on performance today. Every percentage of market share stolen by a competitor who is fudging more that month is a hit on performance. Banks engage in a race to the bottom or they lose business.

Financials regulator says bank executives don't always follow board policies
ORONTO - Bank executives in some cases have not been following policies set down by their boards of directors, raising the possibility of undue lending risks, Canada's banking watchdog said Thursday. Julie Dickson, head of the Office of the Superintendent of Financial Institutions, said the federal agency has created a new safeguard against such practices as part of a slate of proposed new guidelines. "Going forward senior management will have to provide a declaration to the board that the financial institution is in compliance with the OFSI guideline (that they are following board policy)," she said.
According to the article 42% of bank assets in Canada are real estate.

Profits and Balance Sheet Developments at U.S. Commercial Banks in 2005
These financial and economic conditions left an imprint on banks' balance sheets. The relatively low level of fixed mortgage interest rates and the rapid climb in the prices of residential and commercial real estate spurred the demand for bank loans secured by real estate, and the share of bank assets attributable to real estate loans rose to nearly one-third.
The U.S. banks were pushing nearly 33% right before the crash and Canada is at 42%? Seriously folks. Did you miss that blood bath suffered just south of you?

Checking in with Australia...

From Steve Keen
You can also see in this chart how badly the bubble sucks down other development funds that might actually be directed into something economically productive.

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