Canada's banking system will withstand the next recession: Former BNY Mellon CEO
As U.S. President Donald Trump heaps pressure on Federal Reserve Chair Jerome Powell to slash interest rates, a former senior banking executive says the impact from any cuts will be limited.
“I don’t think it matters anymore,” said Robert Kelly, a former CEO of Bank of New York Mellon Corp., in a television interview with BNN Bloomberg when asked whether he’s supportive of lower rates in Canada and the U.S.
“When you think about central banks and what did they did over the last recession, there’s very little room left in the interest rate structure, unless you go negative to help the consumers and business – and their balance sheets are pretty big compared to 2007.”
The U.S. Federal Reserve cut interest rates last month for the first time since the financial crisis, spurring a trend that saw central bankers in India, Thailand, the Philippines and New Zealand, among others, lower their key lending rate, in a sign that the global economy is slowing. But that cut wasn’t enough to appease the U.S. president, who this week urged the Fed to slash the target range for its benchmark rate by a full percentage point.
Kelly, who also enjoyed a long career at Toronto-Dominion Bank and served as chair of Canada Mortgage and Housing Corporation, said instead of fixating on rates, we need to see governments focusing on basics like balancing the books, making their countries appealing for investors, having high education standards and a good medical system.
“I just don’t see interest rates being as relevant as in prior cycles,” he added.
For lenders, a low-rate environment can be challenging, Kelly noted. But, he said, there are a lot of opportunities for lenders to cut costs – like shuttering branches as more customers move toward online banking.
“On the other hand, banks so are so profitable, so liquid and have so much capital, they should be able to continue to lend throughout the next cycle,” Kelly said.