How to side-step the mortgage stress test

Good morning! In this week’s newsletter, John Turley-Ewart digs into Scotiabank’s past to understand its CEO succession, Canaccord makes another move and why some credit unions can dodge the mortgage stress test.

— Joe Hood, Managing Editor, Financial Post

Scotiabank goes rogue — again

Yesterday marked the first official day on the job for new Scotiabank chief executive Scott Thomson, who is taking over from Brian Porter at a time when the bank’s stock has lagged its peers. In tapping a businessman instead of a banker — Thomson was previously CEO of heavy equipment dealer Finning, as well as a director of the bank — Scotia has bucked the Big Five trend of selecting banking lifers, often from within their own ranks, for the corner office. As John Turley-Ewart observed in a column this week, it isn’t the first time the storied bank has flashed an independent streak. And, as he noted, “When Scotia goes rogue it is almost never by happenstance.” So what is Scotia up to this time? Turley-Ewart looked to its recent record — and deep into the 191-year-old institution’s past — for clues.

AGENT OF CHANGE?

Canaccord Genuity deepens push into wealth management

Canaccord Genuity made headlines earlier this month when it announced management intended to take the broker-dealer private in a deal that valued it at $1.13 billion, but it isn’t putting growth on pause while it waits for that offer to close. On Wednesday, Canaccord made another move, disclosing that it would be acquiring the Canadian private wealth business of Mercer Global Investments Canada Ltd. in a deal that would add $1.5 billion in client assets to its wealth management arm. The move is latest move Canaccord has taken to build out its wealth management business in recent years, including the purchases of two U.K. firms, Adam & Company and Punter Southall Wealth Limited.

WEALTH OF OPPORTUNITY

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How to dodge the stress test

OSFI’s mortgage stress test, which forces buyers to qualify at the greater of 5.25 per cent or two percentage points above their contract rate, has come under fire for being too onerous, especially as interest rates have risen. But not everyone knows that the test only applies to uninsured mortgages extended by federally regulated financial institutions, such as banks. Credit unions, by contrast, are bound by provincial regulations, meaning some still offer what are known as “contract-rate qualification” mortgages. As Barbara Shecter reported this week, it’s a small niche of the mortgage market, but one that has been growing — and could attract more interest as the federal banking regulator considers adding new measures to tighten underwriting standards.

TEST CASE

Canada has $300-billion cash buffer to soften blow of coming recession, says RBC’s CEO 

Canada’s big banks expected to buck U.S. layoff trend, hold onto staff 

Ontario Teachers’ Pension Plan pauses private China deals 

Canadian pension plans post lowest returns since the 2008 financial crisis 

TD strikes deal with CanadaVisa immigration site as newcomers surge 

Crypto ETFs roar into life with eye-popping 2023 returns 

The FP Finance Newsletter was compiled by FP Managing Editor Joe Hood. Reporters Barbara Shecter and Stephanie Hughes go where the action is. Designer Gigi Suhanic made it look great and web editors Pamela Heaven, Victoria Wells and Noella Ovid contributed at every step along the way.

Do you work in Finance? Do you have a tip? In between Zoom calls, let Barbara or Stephanie know what’s up.

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