MEDIA RELEASE

COALITION CALLS FOR BANK ACCOUNTABILITY SYSTEM IN CANADA BASED ON U.S. LAWS

OTTAWA - Today, responding to record bank profits and misleading claims by the Canadian Bankers Association (CBA) concerning the potential effect of enacting bank accountability measures in Canada, the Canadian Community Reinvestment Coalition (CCRC) released its fifth Position Paper. The paper, entitled An Accountability System for Financial Institutions in Canada: How to Ensure They Meet a High Standard of Performance calls on the federal government to enact legislation, based on U.S. laws which have existed for 20 years, that will allow Canadians to ensure that banks and other financial institutions are serving all customers fairly and well.

The CBA has falsely claimed that enacting bank accountability laws in Canada similar to the U.S. would lead to access to credit restrictions in some communities. The CBA should be well aware of the U.S. laws since the Bank of Montreal (BMO) and Toronto-Dominion own U.S. financial institutions, and BMO has announced plans to open branches in Florida.

In fact, the U.S. laws require deposit-taking financial institutions to help meet "the need for credit services as well as deposit services" of communities, in a manner "consistent with the safe and sound operation of the institutions" (quotations directly from the U.S. Community Reinvestment Act (CRA)). As a result, the only possible effect of enacting a CRA-like law in Canada would be that if needs are not being met in specific communities, and these needs could be met in a safe and sound manner, then financial institutions would be required to meet these needs. In the U.S., the laws have revealed poor performance by financial institutions in serving some communities, and in response financial institutions have invested over $210 billion in these communities.

"We are decades behind the U.S. in terms of bank accountability," said Luc Lapointe, Coordinator of the CCRC, "and its about time, given the ever-increasing power of Canada’s big banks and the financial services sector in general, that the government require banks and other financial institutions to meet a high standard of performance in serving Canadians. False claims by the CBA about the potential effects of bank accountability measures should not stop the government from enacting these measures." The CCRC’s Position Paper details the privileges and protections Canada’s banks have enjoyed for decades, their dominating power in the financial services market, and significant ongoing problems facing bank customers. The Paper sets out an accountability system that matches the banks’ market power with responsibility to serve their customers well. Based on the U.S. system, the CCRC proposes enacting requirements for banks and other financial institutions to do the following:

• determine the credit needs of each community the financial institution serves, and how well the institution is performing in meeting those needs, by disclosing each year, for business and community development loans and investments:
• as in the U.S., the number of applicants, and the number approved and rejected (with reasons for rejections); - the number of loans and investments called by the institution; - the default and loss rate for loans and investments;
• as in the U.S., all categorized by size of loan or investment; size, type and location of the business or development; and gender of the business owner.
• determine how well the institution is performing in providing service to depositors in each community by tracking and disclosing each year:
• the number of complaints received, and the rate of resolving complaints;
• the number of lawsuits initiated by customers against the institution, and the number won, lost or settled, as compared to lawsuits by the institution;
• whether an independent audit of of the financial institution's provision of basic banking services reveals that the institution has lowered the barriers to access to services; and
• as in the U.S., the location of branches opened and closed.

In addition, the CCRC proposes that the federal government evaluate the above data and grade each financial institution’s performance in serving each community, as in the U.S. system taking into account the overall safety and soundness of the institution’s activities. The public should have the right to make submissions to evaluators concerning the performance of financial institutions. The institution would receive a poor grade if the evaluation reveals, for example, that the institution arbitrarily rejects certain types of loan applicants; maintains excessive barriers to access to basic banking services or has a high rate of complaints or successful lawsuits against the institution.

The CCRC recommends that, after a two-year transition period to develop the evaluation system, the following incentives should apply to financial institutions to encourage them to improve their performance if it is inadequate in specific communities or regions of the country:

• as Ontario has done, federal, provincial and local governments should be permitted to make a satisfactory performance rating a condition that must be met before services are contracted out to an institution;
• as in the U.S., governments should be permitted to deny applications to expand by a financial institution that has an overall failing grade;
• senior representatives of the financial institution should have to attend a public meeting in any community where the institution has a failing grade to set out how the institution plans to improve its performance;
• the fines set out in financial institution legislation could be levied against institutions with failing grades; and
• as Ontario has done, the federal and provincial governments should consider imposing a surtax on financial institutions, combined with a tax credit that could be applied to the surtax based upon the performance of the institution.