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Dechaine said the total value of loans deferring payment because of COVID-19 fell 23 per cent for the Big Six lenders from the previous quarter, to $260 billion.
However, Dechaine added that “the true test of Canadian borrower resilience will come during Q4/20, as we estimate that approximately 85-90 per cent of deferral programs expire and as Government support programs are also adjusted.”
Not everyone may pass the test of borrower resilience. Analysts at Fitch Ratings said several banks had indicated quarterly provisions for credit losses for performing loans likely hit their peak in the prior quarter, although actual loan losses may start to increase in the quarters to come.
“Impaired loans and chargeoffs are expected to increase in fiscal 2021, or more than 90 days after the majority of pandemic-affected retail and wholesale customers exit deferral and government support,” the report from the credit-rating agency said.
But OSFI sees the time as right to start withdrawing some of the COVID-19-related regulatory relief it had announced during the early days of the pandemic. Those measures included the special deferral treatment and reducing a buffer that requires banks to hold extra capital to guard against risks.
Similar regulatory relief has been granted by OSFI for insurance companies that have granted loan and premium-payment deferrals. Those deferrals will now receive the same regulatory treatment going forward as the bank-provided deferrals.
Furthermore, OSFI said it would lift a moratorium it had placed on portability transfers for private pension plans.
“Over the course of the past five months, institutions and private pension plans have demonstrated their resilience and continue to adapt their risk management tools, operations, and processes to the current environment,” the regulator said in a press release. “As a result, OSFI has begun the careful transition back to its standard regulatory and supervisory position.”
Financial Post
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