(Repeats May 14 item with no change to text)
OTTAWA, May 14 (Reuters) - Home Capital Group's problems are contained but the sharp gains in Canadian home prices and their possible impact on the financial system are a primary concern for the Bank of Canada, Governor Stephen Poloz said in an interview with the Globe and Mail newspaper.
Poloz said the central bank saw no signs that Home Capital's deterioration had triggered contagion, according to an interview with the newspaper on the sidelines of the Group of Seven meeting of finance ministers and central bankers in Italy.
"We’d be looking for signs that there are problems with the (financial) system as opposed to preoccupying ourselves with individual institutions,” Poloz said.
“The question would be: What caused this? Is it something unique to the institution itself, or is it something in the system? … I think this situation (Home Capital) is pretty clear on that; it’s idiosyncratic.”
Home Capital, Canada's biggest non-bank lender, faced a sharp withdrawal of deposits after a regulator said it made misleading statements to investors about its mortgage underwriting business. The company has said the accusations are without merit.
In the interview, Poloz said the Office of the Superintendent of Financial Institutions and the Canada Deposit Insurance Corp were closely monitoring Home Capital while the Bank of Canada monitored the overall health of the financial system.
He declined to say whether the Bank of Canada offered emergency liquidity assistance – a collateralized loan of last resort – to Home Capital or whether it might do so if Home Capital's private-sector funding proves insufficient to stabilize the company.
The governor gave no hint that Home Capital might still request such assistance, noting that “the private sector was able to create a solution for this firm, so that’s good – the system in action.”
Poloz also reiterated in the interview the central bank's view that recent house price increases were not sustainable, and echoed previous statements that some speculation appeared to be at play in the market. He added that did not mean a major price correction was in store.
"Often, when you have a truly unsustainable housing market, you will see very rapid price increases (and) very rapid credit growth," Poloz said. "But we don’t see that in the credit side, so I do think a significant amount of this that is fundamental, but layered on top, is a speculative element.” (Reporting by Andrea Hopkins; Editing by Peter Cooney)