Morneau monitoring Home Capital situation ‘very closely’
Federal Finance Minister Bill Morneau speaks to the media after talks on housing market in the Greater Toronto Area with Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory in Toronto on Tuesday, April 18, 2017. (Chris Young/THE CANADIAN PRESS)
Finance Minister Bill Morneau said he’s been keeping a close eye on struggling mortgage lender Home Capital Group Inc. and he’s discussed the situation with federal financial regulatory officials.
In a statement to The Globe and Mail, Mr. Morneau said he “was pleased to see Home Capital’s funding issues resolved by market participants.”
Shares of Home Capital have plummeted since last week when the company disclosed a sharp decline in its deposit base used to fund mortgages. The company arranged a $2-billion line of credit as a backstop. The company’s deposits have fallen more than $1.5-billion in a little more than a month.
“Over the last several days I have been monitoring the Home Capital Group situation very closely, and I have been in touch with the heads of federal financial regulatory agencies to discuss this ongoing situation,” said Mr. Morneau in a statement provided by his office. “There is a strong regulatory framework in place for oversight of federally regulated financial institutions that protects insured depositors and financial stability, and that pays close attention to their mortgage underwriting practices.”
Home Capital through its subsidiaries, Home Trust, Home Bank and Oaken Financial, offers mortgages and high-interest savings accounts. Those savings are covered by the Canada Deposit Insurance Corp., a federal body that insures deposits of up to $100,000.
According to the CDIC, the federal Crown Corporation has handled 43 bank failures since its creation in 1967. The most recent case was Security Home Mortgage Corporation in 1996.
In his statement, Mr. Morneau praised the fact that Home Capital has managed to raise money from other private sector institutions.
“What I’ve seen over the last few days is proof the system is working as it should, where institutions facing challenges find market-based solutions,” he said. “We will continue to monitor developments closely.”