The Bank Of Canada is starting to take steps to curtail its legacy loan practices.
On Wednesday, the bank said it would end loans to large institutional investors, and require companies that take on large amounts of risk to report more information about the risk they take.
This comes after a recent report found the Canadian bank is making significant loans to the largest investors, often at far higher interest rates than it would otherwise have.
“We will soon be closing some lending to large financial institutions,” Bank of America CEO Doug Porter said in a statement.
“These loans have contributed to an underutilized capital position, which has been a drag on growth and job creation.”
The bank has been under scrutiny for lending to big banks and other institutions.
The Bank’s loan portfolio has increased by about $5 billion over the past three years, from $1.5 billion to $3.2 billion.
In 2016, the banks loan portfolio increased by more than $2 billion, from about $1 billion to about $2.1 billion.
The banks new policy will make loans to firms that have significant exposure to its core lending business.
The bank will no longer lend to firms with total debt of more than 50% of their assets.
The decision comes as Canada’s banks are grappling with a rising amount of debt.
In March, Bank of Montreal CEO Jim Flaherty said the bank was in danger of becoming too big to fail.
Bank of Nova Scotia Chief Executive Officer Bob Duguid also said that “no matter what happens, the next step will be to have a balanced approach to the crisis.”
“We are not there yet, but we are moving towards that,” Duguid said in an interview with CBC Radio’s The House.
Duguid has said that the bank is looking at a range of options, including the sale of assets.
“I’m hopeful that it will be part of our portfolio that we continue to grow and that we have an ability to manage that growth, and that’s a good thing,” he said.
Bank’s policy change comes in the wake of a report from Bank of New York Mellon (BNYM) that found the bank made $3 billion in unearned income during the past two years.
In a note to clients, BNYM said that while it is “not surprising that a major bank like BNY has made significant losses in the past decade,” it is important to remember that it is a bank that was founded in the 19th century, and therefore is “one of the oldest institutions in the world that can survive in this kind of environment.”
The report also said BNY’s losses were primarily due to the fact that the firm did not “implement a capital structure that was adequate to its risks.”
It said that despite the losses, the firm “continues to be able to generate income, as well as invest in long-term projects, which are essential for long-range growth.”
In 2016 the bank took in $3,200 million in fees, while the average cost of lending to borrowers was $1,800.