Big 6 banks double their profits since 2009 to $29.29 billion, and increase executive bonuses by 51% since 2008 to $10.3 billion
Comprehensive audits, and new Financial Consumer Organization needed for effective bank and financial services industry accountability, and for financial literacy
"It is essential, for deterrence, to have strong penalties that we know will be enforced."
Prime Minister Stephen Harper
CTV National News, February 26, 2009
For more information contact:
Duff Conacher, Board member of Democracy Watch Chairperson of the CCRC
Tel: (613) 789-5753
Tuesday, December 11, 2012OTTAWA - Today, in response to Canada's big six banks reporting their new record annual total profits for the fourth year in a row -- totalling $29.29 billion (up 15% from $25.46 billion in 2011, and more than double their 2009 total profits of $14.34 billion), the Canadian Community Reinvestment Coalition (CCRC - Canada’s largest and leading bank accountability coalition) is making it easy for Canadians to send a letter to the federal Conservatives and opposition parties calling on them to implement accountability measures to ensure bank profits are not based on gouging customers and arbitrarily cutting credit, loans and services, and to ensure the banks support Canadian economic development and job growth.
The big six banks' profits for the 2011-2012 fiscal year were as follows:
BMO - $4.19 billion (up 35% from 2011's total of $3.3 billion)
CIBC - $3.3 billion (up slightly from 2011's total of $3.1 billion)
National Bank - $1.6 billion (up 26% from 2011's total of $1.2 billion)
Royal - $7.5 billion (up 17% from 2011's total of $6.7 billion)
Scotia - $6.2 billion (up 17.6 from 2011's total of $5.27 billion)
TD Canada Trust - $6.5 billion (up 10% from 2011's total of $5.89 billion)
As the CCRC predicted in December 2008, the failure of the federal Conservatives and opposition parties to regulate Canada's big banks in the public interest has allowed the banks to gouge out of Canadians the more than $16 billion dollars in losses and writedowns they suffered in 2008 - losses which were due mainly to their own irresponsibly risky investments.
Canada's wage gap is growing and the highest in 30 years, and Canada's big six banks are taking $10.3 billion dollars of Canadians' money to give as bonuses to their executives and staff (7.5% more than in 2011).
Beyond the record-high gap between the prime rate and credit card interest rates that the banks have maintained for the past decade, and the regular gouging practice of continuing to charge interest on the full amount of a credit card debt even if most of the debt has been paid off, other examples of bank gouging and excessive profits include the following:
Every survey done in the past decade has shown 90 percent of Canadians believe access to banking services and credit is essential for functioning in society - so given that the consumer is always right the federal government should regulate banks as they do other essential services like heat and electricity.
These regulations are also needed to increase bank accountability in return for the almost $200 billion in support the federal government gave the banks in 2008-2009.
"Past government actions and the Conservatives' recent credit card and debit card codes and regulations are too little, too late to ensure Canada's big banks are not making excessive profits from gouging customers and cutting services and failing to lend to job-creating Canadian businesses," said Duff Conacher, Coordinator of Democracy Watch and Chairperson of the CCRC.
"To help the Canadian economy overall, and to ensure the big banks serve everyone fairly at fair prices, the federal government must facilitate the creation of a national financial consumer-directed watchdog group, and require independent audits to determine if the banks are reaping excessive profits through gouging interest rates and fees, and the arbitrary cutting of credit and services for some customers and communities," said Conacher.
"Every dollar of excessive profit for the banks, and every person and business the banks unjustifiably cut off from credit, costs the Canadian economy because it means that the banks are overcharging for their essential services and loans, and choking off spending and job creation," said Conacher.
In February 2011, the federal Conservatives' Task Force recommended extensive measures to increase financial literacy in Canada, but ignored the lowest-cost, most effective and broadly supported solution to this problem which is to use the innovative "pamphlet method" to create a membership-based Financial Consumer Organization as recommended by the federal MacKay Task Force and House and Senate committees in 1998, and an Individual Investor Organization as proposed by an Ontario legislature committee in 2006.
Financial service industry customers and investors are currently gouged with extra charges that companies in the industry use to pay their more than $400 million annual costs for industry advocacy efforts (advertising, lobbying, political donations and gifts). The most effective way for the federal government to balance the marketplace is to implement the pamphlet method to give customers and investors an easy way to fund their own advocacy watchdog groups.
"No corporation has a right to gouge or unjustifiably cut services, especially when providing an essential service such as banking or trying to recoup self-inflicted losses like the banks are suffering from, but the Conservative government is continuing the negligence of past federal governments by subsidizing the big banks and other financial institutions with hundreds of billions of taxpayer dollars while failing to effectively require them to maintain loans to creditworthy customers and serve everyone fairly and well at fair prices," said Conacher.
best thing the federal government can do to help the Canadian economy overall
is to ensure effective, ongoing financial services industry accountability by requiring banks to prove their loan
and investment interest rates and charges are fair, by auditing bank lending
and competition levels in communities across Canada and, as recommended by the 1998 MacKay
Task Force and House and Senate committees, by requiring financial and
investment companies to distribute a pamphlet in their mailings to customers
and investors that invites them to join a citizen watchdog group to watch over
the financial industry and federal government," said
little or no cost to the federal government or the financial services industry,
consumers and investors across Canada can be given a very easy way to band
together to help and protect themselves through forming and funding their own
Details of Canada's big bank profits and failure of federal
government to ensure they are fair
According to Fortune magazine's 2010 Global 500 Report, based on FY 2009 annual revenues, three of Canada's big six banks were among the 500 largest companies in the world (RBC (228th with revenues of $32.61 billion, profits of $3.298 billion); TD Canada Trust (401st with revenues of $21.733 billion, profits of $2.667 billion), Scotiabank (414th with revenues of $21.428 billion, profits of $3.032 billion)
In the 2009 Global 500 Report (based on 2008 annual financial reports), four of Canada's big six banks were within the top 18 banks in the world in terms of profit as a percentage of revenues (TD - 6th; Royal - 11th; Scotiabank - 13th; BMO- 17th), and four were within the top 30 banks in the world in terms of overall profits (Royal Bank - 13th; TD - 18th; Scotiabank - 21st; BMO - 29th), and four were within the top 21 banks in terms of profits as a percentage of assets (TD - 15th; Scotiabank and Royal - tied for 19th; Bank of Montreal - 21st).
Finance Minister Jim Flaherty has implemented only a voluntary, loophole-filled code of conduct in August 2010 covering business relations between retail companies and credit card and debit card companies.
And three of the eight credit-card regulations implemented in January and September 2010 by the Conservatives change only credit-card-disclosure requirements, another proposal only addresses consumer consent for increasing a credit limit, and another only limits debt collection practices in one way.
None of these five proposed regulations do anything to prevent gouging, nor does the Conservatives' Task Force on Financial Literacy (which is redundant given the existence of the 8-year-old Financial Consumer Agency of Canada (FCAC) and other federal and provincial financial education agencies).
And while the other three credit-card regulations (a 21-day interest-free period (which came into effect until September 2010), a restriction on one fee, and payment allocation requirements) will protect a few customers from a few charges, none of the proposals will decrease already excessive credit card interest rates (which are especially galling given the Bank of Canada's prime lending rate has dropped to its lowest level ever), nor the extra interest rate and fee hikes the banks and other companies have unilaterally imposed in the past couple of years, nor their overcharging for various credit card and other banking services.
And none of the Conservatives' proposals prevent the banks from cutting off credit for people and businesses that have made their payments consistently for years and are very creditworthy.
The Conservatives' so-called "Economic Action Plan" offered huge, public-funded subsidies to the big banks of more than $200 billion, but the Conservatives (just as past Liberal governments did) continue to fail to require the banks to charge fair prices and treat all customers fairly.
To their credit, both the federal NDP and the federal Liberals proposed in fall 2009 more effective gouging-protection measures, but unfortunately they have not worked together and with other MPs to pass a bill imposing these measures on the big banks and other credit card issuers, nor have they proposed an industry-wide audit which is needed to determine whether banks are treating all customers fairly and what are actual fair prices for all banking services, nor have they proposed any effective financial consumer empowerment initiatives such as creating the watchdog groups using the low-cost method proposed by the CCRC.
Details about the CCRC's proposals
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For more information contact:Duff Conacher, Board member of Democracy Watch Chairperson of the CCRC Tel: (613) 789-5753
Canadian Community Reinvestment Coalition
P.O. Box 821, Station B, Ottawa, Canada K1P 5P9
Tel: (613) 789-5753
Fax: (613) 241-4758
Email: info "@" cancrc.org
Copyright 2012 Canadian Community Reinvestment Coalition