Canadian Banks Ignore Finance Minister's Call For More Lending

December 19, 2008 8:50 a.m. EST

Saskatoon, Saskatchewan (AHN) - Canadian Finance Minister Jim Flaherty gave local banks a few weeks deadline to hike their lending to consumers and businesses, instead of hoarding cash. But the banks are not threatened, saying their lending policies are consistent with responsible lending and anything beyond what they are doing will be risky for them.

To push Canadian banks to lend more, Flaherty and Bank of Canada Governor Mark Carney will meet with banks' chief executives in January.

In response to the pressure, Toronto-Dominion Bank chief economist Don Drummond said, quoted by the Globe and Mail, "How do people, whether it's a politician or a business or a Canadian, think banks should conduct their business in the current time?... On one hand, every politician in the country was waving around the World Economic Forum finding that we have the most stable, sound banking system in the world."

Drummond admitted there has been a decline in lending, but the contraction did not come from the banking sector, but from other industries. He added there has been a softening of demand for loans since November, particularly housing mortgages.

Nancy Hughes Anthony, president and chief executive of the Canadian Bankers Association, pointed out other lending sources have reduced their lending as a result of the global credit crisis. "Banks are working to fill the gap... But banks don't have the capacity to do it all," she said in a statement.