The alternative lender is on the Central Bank`s radar
The alternative lender is on the Central Bank`s radar, following OSC allegations that have resulted in the pulling of deposits.
“Federal financial sector authorities are working collaboratively to monitor the situation at (Home Capital Group),” the Bank of Canada wrote in its quarterly Financial System Review, published Thursday.
The financial review provided a recent history of Home Capital’s woes, focusing on “funding stress” at the channel lender following the “rapid withdrawal of certain deposits” that occurred after the Ontario Securities Commission announced its allegations.
“Against a backdrop of increasing household indebtedness and housing market imbalances, depositors were sensitive to information about the business prospects of mortgage lenders,” the Bank wrote. “This focus was particularly acute for HCG because its main business is mortgage lending to borrowers who do not meet all the lending criteria of traditional financial institutions.”
The BoC noted that the deposit withdrawals took place despite the fact that mortgage arrears at Home Capital remained low.
Home Capital has since been able to stabilize itself following the deposit withdrawals.
“The resulting funding and liquidity strain highlighted the vulnerability associated with overreliance on less-stable funding sources,” the BoC wrote. “To date, HCG has been able to find a market-based solution to this liquidity stress by securing a collateralized line of credit against a portion of its mortgage portfolio. On 30 May 2017, HCG stated that it continues to work on developing longer-term liquidity solutions.
“The market largely viewed this situation as idiosyncratic to HCG, which accounts for about 1 .5 per cent of Canadian mortgage lending . Market participants have remained confident in the capital and liquidity position of other Canadian lenders.”
The Home Capital section was just a small part of the Bank’s financial review. To read the document in its entirety, click here.
“Federal financial sector authorities are working collaboratively to monitor the situation at (Home Capital Group),” the Bank of Canada wrote in its quarterly Financial System Review, published Thursday.
The financial review provided a recent history of Home Capital’s woes, focusing on “funding stress” at the channel lender following the “rapid withdrawal of certain deposits” that occurred after the Ontario Securities Commission announced its allegations.
“Against a backdrop of increasing household indebtedness and housing market imbalances, depositors were sensitive to information about the business prospects of mortgage lenders,” the Bank wrote. “This focus was particularly acute for HCG because its main business is mortgage lending to borrowers who do not meet all the lending criteria of traditional financial institutions.”
The BoC noted that the deposit withdrawals took place despite the fact that mortgage arrears at Home Capital remained low.
Home Capital has since been able to stabilize itself following the deposit withdrawals.
“The resulting funding and liquidity strain highlighted the vulnerability associated with overreliance on less-stable funding sources,” the BoC wrote. “To date, HCG has been able to find a market-based solution to this liquidity stress by securing a collateralized line of credit against a portion of its mortgage portfolio. On 30 May 2017, HCG stated that it continues to work on developing longer-term liquidity solutions.
“The market largely viewed this situation as idiosyncratic to HCG, which accounts for about 1 .5 per cent of Canadian mortgage lending . Market participants have remained confident in the capital and liquidity position of other Canadian lenders.”
The Home Capital section was just a small part of the Bank’s financial review. To read the document in its entirety, click here.
