TORONTO—Canada's financial regulator said on Friday it has no plans to reinstate the treatment of loans deferred by banks as performing assets, even as the number of COVID-19 cases spike and some provinces shut down businesses again.
The decision to allow the special treatment of deferred loans in March stemmed from the lack of time and information to evaluate each case individually, Superintendent of Financial Institutions Jeremy Rudin said on a media call.
The Office of the Superintendent of Financial Institutions said in August it would fully end the treatment of loans and insurance policies with deferred payments as performing from Oct. 1.
Coming alongside renewed business closures and the end of some government aid programs, the change is likely to lead to a spike in bad loans in coming quarters.
Deferred mortgages made up 13.5 percent of Canadian banks' home loan portfolios in the three months through July, from a peak of 16 percent at the end of the previous quarter.
As deferrals wind down, banks have said they will consider further extensions on a case-by-case basis rather than the broad, rapid approvals provided earlier in the pandemic.
COVID-19 cases in Canada have topped 209,000, while deaths totaled 9,862, according to government data.
"Now, we're six months in, and banks and insurance companies ... are in a much better position to go back to the loan-by-loan assessment that would be normal in these circumstances and have a lot more information from borrowers," Rudin said.
"If we get into a situation where blanket decisions again are required, of course we'd have to consider making further changes or perhaps reversing our previous decision," he added. "But that's not the situation in which we find ourselves."