TORONTO — Finance Minister Jim Flaherty says consumers across the country are worried about access to credit.
“We are hearing across Canada concerns about access to credit,” Mr. Flaherty said Tuesday. “It is a major issue going into 2009.”
The finance minister said in Toronto he will be talking to the country's major banks and working to ensure there is affordable and accessible lending.
But Toronto-Dominion Bank, in a report, said lending to consumers and businesses remained strong even as the financial crisis entered its new phase with the mid-September collapse of Lehman Brothers.
Finance Minister Jim Flaherty
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Credit to households in November was up more than 12 per cent from a year earlier, although borrowing slowed in the month on weaker demand, the bank said.
“Looking ahead, demand for bank financing is expected to diminish,” TD said. “This is already starting to appear on the household front, as weaker real estate markets and softer consumer spending is starting to temper borrowing ... Business borrowing may also advance at a slower pace, as firms respond to weaker economic conditions.”
Sandra Hanington, executive vice-president at Bank of Montreal, said in an interview Tuesday that BMO is encouraging Canadian businesses to come in, and the bank is still lending.
Industrywide, “the cost of credit has gone up across the board,” she acknowledged.
She also said that as the economy sours, borrowers are trying to rein in their debt and the volume of loan applications is decreasing.
“We see demand slowing down,” she said.
Mr. Flaherty also said the government needs to create additional stimulus to pump up a weakening economy.
“We need to create additional stimulus in the Canadian economy,” which is weakening significantly, he said.
However, Mr. Flaherty said Ottawa will not create a structural - or permanent - deficit, which would result if government spending came in the form of long-term programs.
Instead spending will be temporary and the budget will show how the government plans to come out of a deficit position, he said.
On the issue of asset-backed commercial paper, Mr. Flaherty said he still would have preferred a private sector solution.
The frozen market for nonbank-sponsored ABCP appears as though it could finally come back to life soon, thanks to government help.
“What happened is that market circumstances changed,” Mr. Flaherty said.
“They tried, they really tried,” he said of a restructuring committee, led by lawyer Purdy Crawford, that was working to unfreeze the $32-billion market.
“This was a private sector created problem, and I would have preferred a private sector solution,” Mr. Flaherty said, adding the commercial paper involved was largely the purview of provincial, not federal, regulators.
“Having said that, as minister of finance I am responsible for the systemic integrity of our financial system in Canada and my conclusion was that we needed to participate.”
Mr. Flaherty was speaking in Toronto to announce the availability of the Registered Disability Savings Plan, which was included in the 2007 budget.
“You know how government works, here we are at the end of 2008,” he joked.
About 280,000 Canadians are eligible for the program, which is expected to cost about $200-million a year once it matures.
Mr. Flaherty said that he has extended the deadline for 2008 contributions to March 2, 2009.
Bank of Montreal launched an RDSP yesterday, the first national financial institution to do so.