G-20 leaders are working towards global reforms that will put the world’s financial system on a more solid footing, Bank of Canada Governor Mark Carney said today.

In a speech to the International Organization of Securities Commissions meeting in Montreal, Governor Carney outlined the G-20’s core agenda to reduce systemic risk and create a more resilient global financial system.

The global financial crisis exposed the fallacy of composition that strong individual financial institutions collectively ensure the safety and soundness of the system as a whole,” Governor Carney noted. “Even the most vigilant, microprudential regulatory regime can be overwhelmed by systemic risks.”

The Governor outlined three principal strategies to mitigate systemic risk: increasing the resiliency of financial institutions; enhancing the robustness of financial markets; and reducing the interconnectedness between institutions and between institutions and markets. “These changes are radical, not incremental,” the Governor said.

Creating more resilient institutions requires more and better capital, improved balance sheet liquidity, and enhanced risk management, he noted. “The final capital proposals will make the global system look more like Canada’s. For the world as a whole, however, the changes will be substantial.”

Continuously open financial markets are essential, and require policies and infrastructure that reinforce the private generation of liquidity in normal times and allow for central bank support in times of crisis. The cornerstone of sound infrastructure is clearing and settlement processes with risk-reducing elements and greater transparency of trades and financial instruments.

To reduce interconnectedness among institutions, regulators should institute staged intervention regimes, and banks should develop plans to unwind themselves in an orderly fashion if they were to fail. There must also be methods to replenish the capital of a financial institution under stress without the use of taxpayer funds. “One promising avenue is to embed contingent capital features into debt and preferred shares issued by financial institutions,” the Governor noted.

At their recent meetings in Busan, South Korea, G-20 finance ministers and central bank governors refocused on the core reform agenda of capital, resolution, and market infrastructure, Governor Carney told the audience. “Later this month in Toronto, G-20 leaders can be expected to harden that resolve,” he said. “The time for debate and discussion is drawing to a close. Policy-makers now need to decide and to implement.”…

The much anticipated announcement last week from the Bank of Canada raising its overnight rate has Canadian homeowners and those shopping for a home now wondering what they should be doing as interest rates begin to climb.

“While short-term interest rates are not expected to rise rapidly, they are expected to increase about three percentage points by the end of next year,” said Sal Guatieri, Senior Economist, BMO Capital Markets. “The era of historically low mortgage rates is coming to an end.”

So, what does this mean for home owners and prospective buyers? Is it too late to protect yourself? “The Bank of Canada’s recent rate announcement might leave some homebuyers believing they’re too late to take advantage of historically low mortgage rates,” said Jane Yuen, Senior Manager of Mortgages, BMO Bank of Montreal. “We continue to offer our low-rate 5 year fixed mortgage with maximum 25 year amortization, now at 4.25 per cent. We encourage customers to lock-in now as pressure builds for rates to rise.”

BMO advises Canadian home owners and prospective buyers to stress test their financial budget using a mortgage payment based on a higher interest rate. Here are the top tips to consider to ‘stress test’ your budget today so you don’t become ‘stressed out’ later:

Take a shorter amortization:

– The shorter the life of the mortgage, the less you pay in interest.

– Cutting your amortization period by five years from 30 to 25 years could save you over $53,000 in interest. You will be mortgage-free faster and your monthly payments will only increase by $84.

Make a larger down payment:

– Providing a bigger down payment is an excellent way to help you pay less interest over the life of your mortgage.

Make sure you can afford what you signed up for:

– Stress test your financial budget using a mortgage payment based on a higher interest rate.

– Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

Make pre-payments when you can:

Pay weekly or bi-weekly instead of monthly.

Take advantage of prepayment privileges:
Increase your mortgage payment (principal and interest) by a percentage over the current payment. At BMO this option can be exercised once each calendar year, at any time, without charge.

Pre-pay a percentage of the original mortgage principal each calendar year. At BMO this option can be exercised in minimum amounts of $100 without charge, some conditions apply.

Always make sure you save for a rainy day:
If you are up to your maximum in debt, you may not be well prepared for the leaky roof along the way.

Think carefully about fixed vs. variable:
While variable rates mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) come with the peace of mind of being insulated against rate increases.…

With one day left for small business owners to file their income tax return there are still ways for entrepreneurs to take advantage of various tax-saving strategies.

“It’s not too late to maximize tax incentives that can ultimately help small business owners boost their bottom line,” said Mark Shoniker, Director, Commercial Banking, BMO Bank of Montreal. “From choosing the right payment method to maximizing income-splitting, entrepreneurs should work with a tax expert – such as a Chartered Accountant – to make the most of the tax strategies available to them.”

Mark Shoniker is available for interviews with media on last-minute tax tips and strategies to save this season.

Small business owners can also check with their financial institution for tax information. BMO SmartSteps for Business (bmo.com/smartsteps) is an online tool providing tax tips to entrepreneurs as well as a customized plan to make their banking more efficient, while taking care of financial needs that go beyond their businesses.

Key tax tips for business owners found on BMO SmartSteps for Business include:

Income splitting

Family-run businesses can capitalize on income-splitting by hiring a spouse or children as employees, since a reasonable salary is deductible. They pay the tax themselves, and if they pay at a lower rate, there could be tax savings for the overall family.

Take caution to ensure their pay is reasonable, their roles in the company are clearly defined, and their performance is well documented.

Deductions for small businesses

A small business tax deduction can reduce the combined corporate tax rate on the first $500,000 of active business income to as low as 12 per cent.

The deduction may be available if your company qualifies as a Canada Controlled Private Corporation (CCPC), carrying on an active business in Canada.

Exemptions for capital gains

Small business shares can qualify for a lifetime capital gains exemption of up to $750,000. Some rules apply, however, including that the claimant must have owned the shares for at least two years before selling.

Remuneration options

Small business owners who have incorporated their business have greater flexibility in determining how to be compensated, such as choosing to pay themselves a salary, dividend, or both.

For example, a reasonable salary can create personal RRSP room, provide a deduction for the business, and help bring taxable income below the $500,000 threshold for the small business deduction. On the other hand, a dividend may be taxed at a lower rate for the owner than a salary or bonus, but would not be deductible for tax purposes.

It is important to note that with corporate tax rates poised to decline in Canada, knocking down profit to below $500,000 by taking out salaries may not be the best strategy. Instead, small business owners could pay the corporate tax rate instead of the top personal rate, and wait until funds are needed before paying a dividend.

“Entrepreneurs can always benefit by dusting off their books and doing a little spring cleaning,” added Mr. Shoniker. “Evaluate your goals, review your tax strategy with a CA, and use BMO SmartSteps for Business for tips on boosting efficiency and productivity.”…

An estimated 2.1 million households in 10 major surveyed centres indicated they completed renovations last year according to the Renovation and Home Purchase Survey released today by Canada Mortgage and Housing Corporation (CMHC). The average cost of renovations was approximately $12,100.

The Renovation and Home Purchase Survey reports on actual renovation expenditures made in the previous year, as well as intentions to buy or renovate a home in 2010 in the following 10 major centres: St. John’s, Halifax, Québec City, Montréal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver.1 The survey provides timely information on renovation market trends.

“More than $25.8 billion was spent on renovations in 2009 across the 10 major surveyed centres, an increase of about $4.5 billion compared to 2008,” said Gustavo Durango, Senior Economist at CMHC. “As well, when Canadian homeowners were asked about their renovation plans for this year, 43 per cent indicated that they intend to spend $1,000 or more by the end of 2010.”

Half of the households surveyed reported that the cost of renovations undertaken in 2009 was in line with what they had budgeted, while 35 per cent said that they went over their planned budget for the renovation. Twenty-seven per cent of households that undertook a renovation project hired a contractor for a portion of the work. Twenty five per cent of renovations in 2009 were completed by “do it yourselfers”. However, many households (42 per cent) chose to contract out the entire renovation project.

Across the surveyed centres, 76 per cent of households who undertook renovations in 2009 paid for the work from savings, a slight increase from 75 per cent in 2008.

The main reason given by households for renovating in 2009 was to update, add value or to prepare to sell (52 per cent). Thirty-two per cent said the main reason for renovating was that their home needed repairs. The top three renovations completed last year were: remodelling rooms (34 per cent); painting or wallpapering (29 per cent); hard surface flooring and wall-to-wall carpeting (27 per cent).

Of the 10 major surveyed centres, the highest percentage of homeowner households that renovated in 2009 was in St. John’s at 59 per cent, followed by Ottawa at 58 per cent, and Halifax and Winnipeg (both at 55 per cent). The centre with the lowest proportion was Montréal at 45 per cent.

Renovation intentions for 2010, across the 10 surveyed centres, are highest in St. John’s, where 55 per cent of consumers indicated they plan to undertake renovations costing $1,000 or more. This is followed by Halifax, Winnipeg and Ottawa (all at 50 per cent). The proportion of potential renovators is lowest in Québec City and Montréal (both at 39 per cent).

On the home purchasing front, six per cent of all households indicated they bought a home in 2009, unchanged from 2008. The largest share of homebuyers was in Edmonton (nine per cent), followed by St. John’s, Quebec, Ottawa and Winnipeg (all at seven per cent). The lowest share of homebuyers was in Toronto (five per cent).

Five per cent of households across the surveyed centres intend to purchase a home that will be used as a primary residence in 2010.

Home buying intentions are strongest in Edmonton where seven per cent of households reported that they are considering buying a home this year, up from six per cent in 2009. Purchase intentions are the lowest in St. John’s and Ottawa at four per cent (these were the only jurisdictions reporting lower intentions than last year, a decline from five per cent in 2009).

As Canada’s national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making vital decisions.…

One size does not fit all Canadians when it comes to credit card reward choices. A recent RBC poll shows that one-third (33 per cent) of Canadian cardholders prefer cash back over any other type of incentive, including merchandise (27 per cent) and travel rewards (23 per cent).

“While travel and merchandise rewards remain popular, many Canadians want a straightforward reward card that gives them cash back on everyday purchases,” said Sean Amato-Gauci, vice-president, RBC Credit Cards.

RBC’s payment survey conducted by Ipsos Reid, found that more than half (58 per cent) of Canadians hold a credit card with some type of reward program. Nine-in-ten credit cardholders (88 per cent) say they pay for travel using their card and more than half (53 per cent) use it to pay for retail purchases. Fifty per cent indicate they use their credit card for dining, entertainment or gas purchases, while a third (34 per cent) use it to pay for drug store purchases.

The survey also found Canadian families spend on average $628 at the grocery store each month. The majority (53 per cent) use their debit card at the cash register, with the others split between using cash (21 per cent) and credit cards (26 per cent) to pay for groceries.

“Many cash back cards have complicated earn rates or thresholds that Canadians find confusing and misleading,” noted Amato-Gauci. “Our clients have told us they want a simple and straight forward cash back card, with no tiers to calculate, no clubs to join, or points to track.”

The RBC Cash Back card offers the following features:
– One per cent cash back on all purchases
– Five per cent cash back on grocery store purchases until December 31, 2010
– Purchase Security and Extended Warranty insurances
– Zero Liability fraud protection

The RBC Cash Back card tracks rewards on the cardholder’s monthly credit card statement and pays out the cash back in January each year. A cardholder who spends about $500 a month on groceries, and $500 on other monthly purchases using their RBC Cash Back card for the remainder of this year would earn over $200 by next January.

“The cash back you receive can add up quickly based on the day-to-day spending habits of an average Canadian family,” added Amato-Gauci.

Amato-Gauci provides the following tips for optimizing your credit card rewards:

Don’t spend more, spend smart – If you never carry a balance and always pay your bills on time, you can actually make your card work for you by using it frequently for all kinds of purchases and expenses. Many people rely on their credit cards for larger purchases but may not use it for everyday shopping instead of using cash. Groceries, gas, restaurant and clothing purchases add up quickly and may earn rewards at a higher rate than some other categories of spending. You can also use your card to pay monthly expenses such as utilities (hydro, cable, mobile phones) daycare, tuition, gym memberships and newspaper subscriptions, to bump up your rewards.

Put your monthly payment on autopilot – Choose a card that allows you to set up a monthly payment that automatically pays off your entire balance or the minimum payment. By using your credit card for everyday purchases and paying it off at the end of the month, you will earn cash back but not pay any interest.

Consider insurance benefits – A card feature that is often overlooked is purchase protection which insures against loss, theft or damage up to 90 days after purchase. Another valuable feature is an extension of the manufacturers’ warranty period which can provide additional protection for larger ticket items such as home electronics or appliances.

Double dip if possible – Certain retailers let you earn points for purchases in their own reward program or in other independent programs. If you are a member of these programs, you can present your program card to the retailer to earn the applicable points, while at the same time earning cash back rewards by using your credit card to pay for the purchase.

Look for rewards that offer convenience – With some reward programs, points expire so you need to remember to use the points or call the card issuer to request your rebate. Others send your rebate to you when you hit a certain threshold or credit your account automatically at the beginning of each year. Either way, it makes sense to use a card that gives rewards without any prompting from you.…

A new BMO survey shows that Ontario business owners are apprehensive when it comes to how they will be affected by the introduction of the harmonized sales tax (HST) on July 1.

The survey, conducted by Harris/Decima, found that 51 per cent of Ontario business owners expect the impact will be negative, while 33 per cent believe it will have a positive effect.

“The Ontario Government estimates that the HST will save businesses in the province about $4.5 billion annually,” said Sal Guatieri, Senior Economist, BMO Capital Markets. “The savings will encourage investment, helping to boost productivity and the province’s competitiveness.”

“Businesses in Ontario will be affected by the implementation of HST as it will lower costs and should encourage investment in the province,” said Mark Shoniker, Director, Commercial Banking, BMO Bank of Montreal. “But businesses will also have to make some adjustments so they are ready for the changes that will come with the HST.”

Tips and Advice on Preparing for the HST Include:

Revise Your Budgets

Some items you would normally purchase and recover under the provincial sales tax (PST) may not be recoverable with the HST, which could affect your budget. Conversely, most businesses that now sell GST-taxable goods and services, including exports, will be able to claim input tax credits (ITCs) for any HST paid on assets and expenses.

Adjust cash flow forecasts

Purchases that are currently exempt from PST, such as telephone equipment and computers or office supplies, will now include HST which can be claimed as an ITC. The cash flow for your business may be affected because of the time interval between paying for the HST and getting the ITC refund. Take this lag into consideration and revise the projections for your cash flow.

Modify invoices

All invoices should be changed to include the new tax rate on applicable goods and services. They should state the proper rate, your GST/HST registration number and any other information that should be indicated according to Canadian Revenue Agency regulations.

Review eligibility for credit

Businesses that make less than $2 million in annual revenue from taxable sales are eligible for a $1,000 credit from the Ontario government. If your business falls into this revenue category, fill out a form to receive the credit.…

The Ontario economy has pulled out of recession as the auto sector is rebounding and domestic demand, led by housing, is gaining strength, according to the Provincial Outlook report by BMO Capital Markets Economics. But the recession left a deep dent in Ontario’s economy, and a number of factors will likely temper growth in the coming years: a strong loonie, sluggish U.S. consumer demand and fiscal restraint. Growth this year is expected to reach 3.4 per cent before slowing to a below-average 2.9 per cent in 2011.

“The auto sector did the most damage to the Ontario economy in 2009, with production falling as much as 60 per cent below prior-year levels,” said Robert Kavcic, Economist, BMO Capital Markets. “However, production has since bounced back, and recent announcements like the $245 million investment by GM in St. Catharines, a third shift at GM in Oshawa and a second shift at Honda in Alliston, are encouraging. Still, the recovery in the broad manufacturing and export sectors will remain tepid as the loonie hovers at strong levels; real net exports were negative in the last two quarters of 2009.”

The trouble in manufacturing has lifted Ontario’s unemployment rate to 8.9% in May, above the national rate and now also above those in Quebec, New Brunswick and Nova Scotia. Still, while the goods sector remains depressed, service-sector employment has recovered to record levels and will remain a key support.

Domestic demand in Ontario has firmed and will drive growth in 2010. Retail sales have bounced more than 10 per cent from their recession low, while the red-hot housing market is starting to cool.

The government of Ontario is projecting a $19.7 billion deficit in fiscal 2010/11, and has begun to plant the seeds of future spending restraint. The deficit clocks in at 3.3 per cent of GDP, and will be followed by another six years of red ink before returning to balance in fiscal 2017/18. “This represents by far the longest and deepest stretch of deficits among the Canadian provinces,” noted Mr. Kavcic.…

The vacancy rate in seniors residences surveyed in Canada Mortgage and Housing Corporation’s (CMHC) National Seniors Housing Survey increased from 9.2 per cent in 2009 to 10.8 per cent in 2010, according to CMHCs Seniors Housing Report, Canada Highlights edition.

“Vacancy rates and rent levels in the seniors housing market are higher than those in the traditional rental market,” said Bob Dugan, Chief Economist for CMHC. “Seniors residences provide a wide variety of amenities and services to their tenants. These services and amenities contribute to rents that are higher than in the traditional rental market. These higher rents, coupled with more frequent turn-over, result in higher vacancy rates.”

The national vacancy rate applies to standard spaces, which are defined as:
private units such as a bachelor, one-bedroom or two-bedroom apartments occupied by a single individual or a couple; one unit is considered as one standard space;
semi-private units (one unit is considered as two standard spaces);
ward units (one unit is considered as three standard spaces or more).

The vacancy rate is calculated for all standard spaces regardless of whether the occupant participates in a meal plan or requires medical services. The vacancy rate covers only spaces that accommodate residents who receive less than 1.5 hours of care per day.

Vacancy rates varied considerably across the country, from a low of 6.2 per cent in Saskatchewan and New Brunswick to a high of 18.1 per cent in Newfoundland and Labrador. The vacancy rates for standard spaces in Ontario (16.4 per cent), Nova Scotia (15 per cent) and Alberta (12.2 per cent) were above the national average of 10.8 per cent, while the rates in British Columbia (10.4 per cent), Quebec (8.4 per cent), Manitoba (7.9 per cent), and Prince Edward Island (7.1 per cent) were below the national average.

The average rent for bachelor/private units, where at least one meal is included in the rent, was $1,857 per month. Quebec posted the lowest average rent at $1,329, while Ontario posted the highest average rent at $2,585.…