Big banks lower prime lending rate

Today's markets Highs and lows Mutual fund finder
Oct 08, 2008 03:03 PM

THE CANADIAN PRESS

Canada's biggest banks have declined to pass on to consumers the full
half percentage point cut in interest rates announced by central banks
around the world today, citing turmoil in raising money in turbulent
financial markets.

One of Canada's biggest mortgage lenders, TD Canada Trust, was first
off the mark, saying it will make a smaller quarter point cut to its
prime lending rate, which serves as a benchmark for consumer loans,
lines of credit and some mortgages.

CIBC and Royal Bank of Canada followed, saying they would cut their
prime by a quarter point as well to 4.5 per cent from 4.75 per cent,
effective Thursday.

Earlier today, the Bank of Canada and other central banks cut interest
rates by half a percentage point in a co-ordinated effort to stimulate
lending and economic growth.

The central banks had hoped the full half point cut would be passed
down to consumers, reducing borrowing costs on home equity and other
floating rate loans tied to the prime rate set by the banks, thereby
stimulating spending and a boost in economic growth.

In the United States, Bank of America, Wells Fargo and other U.S.
banks cut their prime rate by half a point, matching the central bank
rate cut

But rocky credit markets appear to have stalled such a move in Canada.
Around the world, commercial banks are finding it more difficult to
borrow money from other banks and the bond market and are being forced
to pay higher interest rates to attract funds and lower the risk for
lenders.

The retail arm of TD Bank said the troubles in the global credit
markets makes it more expensive for the bank to raise money so it
can't pass along the full Bank of Canada rate cut.

"Continuing market turmoil has steadily driven up the cost of
borrowing for financial institutions," said Tim Hockey, president and
CEO of TD Canada Trust.

"This makes it challenging to match the Bank of Canada rate cut at
this time. We recognize the efforts the Bank of Canada is making and,
despite the fact that our cost of funds remains high, we have decided
to reduce our rate by (a quarter point). We see this as a balanced
move in managing our funds and passing along the intended benefits to
our customers."

For several years, Canada's big banks have moved their prime rates up
or down in lock step with the Bank of Canada's key short-term interest
rates. However, a few months ago, they began delaying the prime cuts,
citing troubles in financial markets.

Today's cut by the banks appears to decouple many of the rates that
affect ordinary consumers borrowing to buy houses, cars or big-ticket
items in the broader economy.

And with the banks not matching the central bank cut, it also
diminishes the Bank of Canada's policy levers it can use to lower
borrowing costs in the economy.

Earlier today, Finance Minister Jim Flaherty said he wouldn't advise
Canada's banking system to decide whether to fully pass today's
interest rate cut onto consumers.

"I don't give the banks guidance on what they should do or shouldn't
do," he said.

"They respond to the steps taken by the Bank of Canada as they see
fit. We have a competitive banking system."

In a separate commentary, TD Bank economists welcomed the rate cuts by
the world's central banks and predicted more rate cuts are on the way.

"Since the start of the year, the forecasts of the various monetary
authorities all predicted significant economic improvement in late
2008 and 2009, which we felt was highly unlikely," the bank said in an
economic report.

"Moreover, further rate cuts are in the pipeline. We look for the Fed
and the Bank of Canada to cut by a further (half percentage point) at
their upcoming rate announcements."

http://www.thestar.com/article/514130

On Oct 10, 7:47*am, fraeoldbobpeff...@gmail.com wrote:
> Big banks lower prime lending rate
>
> Today's markets Highs and lows Mutual fund finder
> Oct 08, 2008 03:03 PM
>
> THE CANADIAN PRESS
>
> Canada's biggest banks have declined to pass on to consumers the full
> half percentage point cut in interest rates announced by central banks
> around the world today, citing turmoil in raising money in turbulent
> financial markets.

[snip]

In the middle of an election campaign, my roving socialist fruitcake,
Harper can do nothing about how the banks set interest rates. Dion
can't do it. Layton can't do it. May can't do it. Duceppe can't do
it. Nobody can do it.

DIE RACIST.
GR
<fraeoldbobpeffers@gmail.com> wrote in message
news:a85f7a05-bda1-437b-9911-75a06548a619@f63g2000hsf.googlegroups.com...
> Big banks lower prime lending rate
>
> Today's markets Highs and lows Mutual fund finder
> Oct 08, 2008 03:03 PM
>
> THE CANADIAN PRESS
>
> Canada's biggest banks have declined to pass on to consumers the full
> half percentage point cut in interest rates announced by central banks
> around the world today, citing turmoil in raising money in turbulent
> financial markets.
>
> One of Canada's biggest mortgage lenders, TD Canada Trust, was first
> off the mark, saying it will make a smaller quarter point cut to its
> prime lending rate, which serves as a benchmark for consumer loans,
> lines of credit and some mortgages.
>
> CIBC and Royal Bank of Canada followed, saying they would cut their
> prime by a quarter point as well to 4.5 per cent from 4.75 per cent,
> effective Thursday.
>
> Earlier today, the Bank of Canada and other central banks cut interest
> rates by half a percentage point in a co-ordinated effort to stimulate
> lending and economic growth.
>
> The central banks had hoped the full half point cut would be passed
> down to consumers, reducing borrowing costs on home equity and other
> floating rate loans tied to the prime rate set by the banks, thereby
> stimulating spending and a boost in economic growth.
>
> In the United States, Bank of America, Wells Fargo and other U.S.
> banks cut their prime rate by half a point, matching the central bank
> rate cut
>
> But rocky credit markets appear to have stalled such a move in Canada.
> Around the world, commercial banks are finding it more difficult to
> borrow money from other banks and the bond market and are being forced
> to pay higher interest rates to attract funds and lower the risk for
> lenders.
>
> The retail arm of TD Bank said the troubles in the global credit
> markets makes it more expensive for the bank to raise money so it
> can't pass along the full Bank of Canada rate cut.
>
> "Continuing market turmoil has steadily driven up the cost of
> borrowing for financial institutions," said Tim Hockey, president and
> CEO of TD Canada Trust.
>
> "This makes it challenging to match the Bank of Canada rate cut at
> this time. We recognize the efforts the Bank of Canada is making and,
> despite the fact that our cost of funds remains high, we have decided
> to reduce our rate by (a quarter point). We see this as a balanced
> move in managing our funds and passing along the intended benefits to
> our customers."
>
> For several years, Canada's big banks have moved their prime rates up
> or down in lock step with the Bank of Canada's key short-term interest
> rates. However, a few months ago, they began delaying the prime cuts,
> citing troubles in financial markets.
>
> Today's cut by the banks appears to decouple many of the rates that
> affect ordinary consumers borrowing to buy houses, cars or big-ticket
> items in the broader economy.
>
> And with the banks not matching the central bank cut, it also
> diminishes the Bank of Canada's policy levers it can use to lower
> borrowing costs in the economy.
>
> Earlier today, Finance Minister Jim Flaherty said he wouldn't advise
> Canada's banking system to decide whether to fully pass today's
> interest rate cut onto consumers.
>
> "I don't give the banks guidance on what they should do or shouldn't
> do," he said.
>
> "They respond to the steps taken by the Bank of Canada as they see
> fit. We have a competitive banking system."
>
> In a separate commentary, TD Bank economists welcomed the rate cuts by
> the world's central banks and predicted more rate cuts are on the way.
>
> "Since the start of the year, the forecasts of the various monetary
> authorities all predicted significant economic improvement in late
> 2008 and 2009, which we felt was highly unlikely," the bank said in an
> economic report.
>
> "Moreover, further rate cuts are in the pipeline. We look for the Fed
> and the Bank of Canada to cut by a further (half percentage point) at
> their upcoming rate announcements."
>
> http://www.thestar.com/article/514130