Media Release

COALITION CALLS FOR BANK MERGER LEGISLATION

OTTAWA -- Today, in response to the announcement of the proposed CIBC - TD Bank merger, the Canadian Community Reinvestment Coalition (CCRC) called on the federal government to enact legislation requiring a detailed review of the performance of banks in lending investment and service, to ensure that our banks serve the needs of all Canadians, and are not allowed to get bigger if they are not meeting consumer and community needs.
 “We need better banks, not bigger banks,” said Duff Conacher, Coordinator of Democracy Watch and Chairperson of the CCRC, “and we need a system like they have had in the U.S. for over 20 years to ensure that no bank gets bigger if it isn’t serving customers fairly and well.”
 All the available evidence shows that big banks provide worse service, charge higher service fees, and are no more efficient or profitable than smaller banks.  A 1994 report reviewing 39 studies of thousands of U.S. bank mergers by U.S. Federal Reserve Board economist Stephen Rhoades concluded that efficiency and profitability did not improve as a result of any of the mergers. Other U.S. studies, by Consumer Reports magazine and the U.S. Public Interest Research Group have found that mergers led to higher fees, closed branches and less customer service.
 For over 20 years, U.S. laws have required deposit-taking financial institutions to help meet “the need for credit services as well as deposit services” of communities.  Financial institutions’ performance in meeting needs is revealed by requiring them to disclose detailed data about their loans, investments and services.  The U.S. government reviews the data and grades each institution’s performance.  If a financial institution receives a failing grade, it can be required to take corrective action, and any expansion, merger or takeover of the institution can be denied. Several mergers have been prohibited by these laws, including the takeover of another bank by the Bank of Montreal’s subsidiary, Harris Bank of Chicago.
 “We are decades behind the U.S. in terms of bank accountability,” said Duff Conacher, Chairperson of the CCRC, “and its about time that the government require banks and other financial institutions to meet a high standard of performance in serving Canadians, and give us the same right to a detailed review of any expansion of bank powers, as the U.S. has had for 20 years.”