Thursday, March 9, 2000
OTTAWA - Today, the Canadian Community Reinvestment Coalition (CCRC) released its ninth position paper, the first-ever review of financial institutions in Canada following the U.S. Community Reinvestment Act model. The paper reviews Toronto-Dominion Bank and Canada Trust, and their mergers, and sets the standard for reviewing all future takeovers in the financial services industry.
The 23-page position paper, entitled An Unjustifiable Takeover: A Performance Evaluation of Toronto-Dominion Bank and Canada Trust Based on the U.S. Community Reinvestment Act Process, reviews the service, lending and investment records of TD-Bank and Canada Trust, and grades the two financial institutions in each category. Overall, the CCRC assesses both institutions as "Needs to Improve", the second-lowest grade possible, and in many categories recommends that the institutions be required to disclose much more detailed information about their community development lending and investment records and activities outside Canada so that adequate information is available to assign grades in these areas.
"Paul Martin wilfully ignored the poor service and lending records of TD Bank and Canada Trust when he approved the takeover," said Duff Conacher, Coordinator of Democracy Watch and Chairperson of the CCRC, "and as a result he has let a big bank that serves many people badly get bigger without requiring the bank to serve people better." The CCRC recommends that Finance Minister Paul Martin impose further conditions on the takeover of Canada Trust by TD Bank, specifically requiring that each institution improve their records in all areas assessed failing grades within two years, and to impose penalties on the institutions if they do not improve.
As the report details, when TD Bank proposed to take over New York-based Waterhouse Investor Services in spring 1996, the U.S. government conducted a Community Reinvestment Act (CRA) review of Waterhouse and imposed conditions concerning improving service and lending records as part of its approval of the takeover. TD Bank made several significant pledges, all enforceable by law, to satisfy the U.S. regulators, including appointing a TD Bank officer to serve on Waterhouse's CRA committee, and ensuring that Waterhouse's CRA record is reported to TD's board of directors regularly.
Paul Martin refused to conduct a CRA-like review of TD's takeover of Canada Trust, despite repeated requests by the CCRC, and has to date refused to commit to including a regular review and grading system in the upcoming changes to federal financial institution laws. The CCRC's report shows how easily the federal government could complete such ongoing reviews of Canada's big banks and other large financial institutions.
"If Martin does not include a review and grading system for financial institutions in his upcoming legislation," said Conacher, "it will reveal just how little he cares about the problems and concerns of the over 20 million financial institution customers across Canada, and just how committed he is to allowing banks and other financial institutions escape accountability for poor service records."
The following is a summary of the grades handed out to TD Bank and Canada Trust (CT):
1. Access to Banking Service
TD Bank - Substantial Noncompliance because several surveys have found that TD discriminates against people with low-incomes in providing banking service, and charges higher than average service charges.
Canada Trust - Substantial Noncompliance because several surveys have found that CT discriminates against people with low-incomes in providing banking service, and charges higher than average service charges.
2. Branch Operations
TD Bank - Needs Improvement because TD has been withdrawing full-service from customers and pushing them to use machines, especially in low-income and rural areas.
Canada Trust - High Satisfactory because CT has been opening full-service branches over the past decade.
3. Customer Satisfaction
TD Bank - Needs Improvement because of increasing customer complaints, a high rate of complaints overall, several lost customer lawsuits, and lack of full disclosure.
Canada Trust - Needs Improvement because of refusal to disclose complaint records, and to participate in an independent complaint-handling system.
4. Business Financing
TD Bank - Substantial Noncompliance to Needs Improvement because TD lends a smaller portion (7.8%) to small- and medium-sized businesses than other banks, and the portion has decreased in the past few years; because TD lends $95.2 billion (85.5%) of its total business lending in loans of more than $5 million to only 1,724 big businesses (1.48% of total business borrowers), with $57 billion loaned in Toronto; because much of TD's lending seems to be to industries that degrade the environment or to the financial industry which does little to create sustainable communities or jobs; and because of lack of full disclosure of all business financing activities.
Canada Trust - Insufficient Information because Canada Trust does not participate in the voluntary system of business lending disclosure as most Canadian banks do (the system is flawed, but better than having no information).
5. Community Development Financing
TD Bank - Insufficient Information because TD does not provide enough information in this area (e.g. concerning financing for affordable housing and other community developments) to assign a grade, and the federal government does not require the information to be disclosed (as recommended by the CCRC).
Canada Trust - Insufficient Information because Canada Trust does not provide enough information in this area to assign a grade.
6. Operations Outside Canada
TD Bank - Insufficient Information because TD is not required to provided enough information in this area to assign a grade.
Canada Trust - Insufficient Information because CT is not required to provided enough information in this area to assign a grade.
Canadian Community Reinvestment Coalition
P.O. Box 1040, Station B, Ottawa, Canada K1P 5R1
Tel: (613) 789-5753
Fax: (613) 241-4758
Copyright 1999Canadian Community Reinvestment Coalition