The current crisis, much more complex than that of 2008?

La crise actuelle, bien plus complexe que celle de 2008?

The president and chief executive officer of National Bank, Louis Vachon, said that the recovery is expected to be difficult to predict

April 24, 2020 21h24


The current crisis, much more complex than that of 2008?

Julien Arsenault

The canadian Press


MONTREAL — at The controls of the National Bank for almost 13 years, Louis Vachon had a ringside seat when the financial crisis of 2008 occurred. But this time, the picture is much more complex, according to the banker of 57 years.

Today’s economic storm has been caused by health reasons had prompted many countries to put their economies on a break in order to limit the spread of the COVID-19, rather than by imbalances that have occurred in the financial markets, he explained, Friday, during a telephone interview on the sidelines of the annual meeting of shareholders to be held in a virtual format.

“A second crisis is not more enjoyable than the first, but for the latter, there is not really precedent, he explained. Create of containment to protect the population with the economic impact that it causes, it is almost never done in practice.”

Thus, the president and chief executive officer of the National believes that the recovery is expected to be difficult to predict, since it will essentially be dictated by the health aspect through the world.

In addition, until there is a vaccine, the measures of social distancing will remain in place, noted Mr. Vachon, which makes it difficult to forecast surrounding the pace of the recovery. At present, some 13,000 employees of the financial institution are equipped to telework, while about 6500 are in the branches that are still open.

“The recipe book is not very well developed, and the impacts will be different according to the regions and sectors of activity, said the president of the sixth largest bank in the country. There are impacts on our employees, the community and our shareholders.”

According to the most recent economic forecasts of the National gross domestic product (GDP) of Canada could contract by 4.8 % in 2020, which “would constitute the largest annual fall recorded since 1961”. On the quebec side, the GDP is expected to register a decline of 5.2 %. In the United States, economic activity is expected to decline by 6 %.

Mr. Vachon did not receive a question at the meeting, virtual shareholders, which is much less than during the annual meeting in person. When asked about the financial impact of the pandemic on the financial performance of the bank, the latter is limited to say that the portrait would be more clear, toward the end of may, when will be announced the results for the second quarter of the year.

Good response

The banker was also of the opinion that the response of the National had been appropriate in respect of its clients who find themselves in a more precarious financial situation as they are deprived of their livelihood. Like other financial institutions, the bank québec has lowered the interest rate for certain credit card holders and offered postponement of mortgage payments – with the interests that continue to run.

Since the beginning of the crisis, the banking sector and the credit card companies have been challenged to lower the interest rate, sometimes up to more than 20 %.

“The crisis is not over, and before giving medals and notes, I believe that it is necessary to wait until the end of the crisis,” replied Mr. Vachon in an interview.

With a mortgage portfolio of $ 42 billion $ compared to credit card balances totaling nearly $ 2 billion, the National wanted to focus on what weighed the most in the balance – the mortgage.

For Mr. Vachon, the structure of the moratorium on the mortgage payments protects both the client and the bank even if the interest continues to run.

“A loan where interest is still on the run is always considered to be efficient, he said. So I do not need to deduct from our capital. This allows us to have enough time to support other individuals and businesses.”

So far, 60 000 files – 40 000 for a mortgage and 20 000 to personal loans – have been treated in regards to deferred payment. On the side of the credit cards, the minimum monthly payment accompanied by a temporary reduction in the interest rate has been accepted in 7900 cases.

Le Soleil

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