Flaherty Gives Banks Deadline to Lend More

(Tara Perkins/Kevin Carmichael — Globe & Mail)

More aggressive approach would be irresponsible, bank executives argue

Finance Minister Jim Flaherty delivered the banks a deadline of just a few weeks to get more loans out into the sagging economy, prompting the banks to counter that they’re already doing enough and added lending could prove irresponsible.

With the country entering a recession, Mr. Flaherty and Bank of Canada Governor Mark Carney will meet with the banks’ chief executives early next month to discuss why credit remains tight even after unprecedented efforts by the federal government to pump cash into the financial system.

“We expect the banks to provide adequate credit in Canada,” Mr. Flaherty said at a news conference in Saskatoon yesterday. At the meeting in January, “I expect them to make it evident to us that they are taking steps to make that more available in Canada.”

The showdown promises to be tense. Bankers argue that they are lending responsibly and that anything more would be risky. Creditworthy borrowers are still able to access funds, they argue. Read more here.

Meanwhile…

Big Banks Respond to Pressure From Flaherty

(CTV News-The Canadian Press)

Big banks can’t re-ignite the lending market on their own, despite government suggestions to the contrary, the head of the association for Canada’s financial institutions said Thursday.

Nancy Hughes Anthony, president and chief executive of the Canadian Bankers Association, agreed that many sources for lending have been pulling back in the wake of the global credit crunch that has rocked financial markets around the world.

“Banks are working to fill the gap,” she wrote in a statement, as Finance Minister Jim Flaherty stepped up the pressure on the banks to loosen up their lending practices to help revive the battered economy.

“But banks don’t have the capacity to do it all.” Read more here.