Move aligns with intensified mortgage competition among Canadian banks
Bank of Canada governor Tiff Macklem has been appointed to chair the Consultative Council for the Americas (CCA), an advisory committee to the Bank for International Settlements (BIS) representing central banks across the Americas.
Macklem will take over the two-year term beginning January 1, 2025, succeeding Brazil’s Central Bank governor Roberto Campos Neto.
The CCA, founded in 2008, includes central bank governors from Canada, the US, Argentina, Brazil, Chile, Colombia, Mexico, and Peru, providing critical regional guidance on strategic issues in global finance. The group operates from the BIS Americas Office in Mexico City, with its members collaborating on key monetary policy issues and financial innovations.
Macklem’s appointment marks a significant Canadian leadership role within the BIS, an institution that oversees monetary stability and coordination among central banks globally. The BIS also announced that François Villeroy de Galhau, governor of the Bank of France, has been re-elected as chair of its board for another three-year term effective January 12, 2025.
In a separate leadership change, Pablo Hernández de Cos, former governor of the Bank of Spain, has been named the next general manager of the BIS, beginning his term on July 1, 2025.
Through his new role with the CCA, Macklem is expected to play a key part in advising the BIS on challenges and priorities for the Americas region, supporting initiatives in areas like economic productivity, monetary policy, and advancements in digital payments.
Mortgage war
Canada’s banking landscape could see heightened competition as the central bank’s recent interest rate cuts start to impact the mortgage market.
With over half of Canadian mortgages set to renew in the next two years, RBC analysts warned of a possible “mortgage war” among major banks vying to offer the best rates to borrowers looking to ease their monthly payments.
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According to RBC’s Darko Mihelic, even a modest 50-basis-point drop in renewal rates could mean savings of around $1,000 per year for borrowers who first secured their mortgages during the ultra-low-rate environment of 2020.
“All Canadian banks view mortgages as a significant anchor product and, currently, loan growth across multiple loan categories is very low,” he said. “The chance to grab market share from a competitor is significant.”
This anticipated mortgage competition may also be influenced by TD Bank’s situation. Following a recent $3.1 billion fine from the US Department of Justice and restrictions on its US retail banking growth due to regulatory compliance issues, TD may seek to strengthen its market position domestically, heightening competition further.
This scenario could pressure banks like the Bank of Montreal, Scotiabank, and the Canadian Imperial Bank of Commerce, all of which have significant mortgage portfolios.
“In essence, we think Bank of Montreal, Bank of Nova Scotia and Canadian Imperial Bank of Commerce are most at risk of mortgage spread compression and/or loss of customers,” said Mihelic.
Mihelic foresee these dynamics potentially leading to narrower profit margins and a focus on locking borrowers into long-term deals.
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