Canada’s largest six banks are some of the most profitable institutions in the world. Four of the six were included in Fortune’s Global 500 for 2020, with RBC at 15th, TD at 20th, Scotiabank at 32nd, and BMO at 50th. Of all the Canadian companies listed, all four banks are the highest ranked.
But profitability certainly does not necessitate transparency or fairness. During the last few months many Canadians began calling for changes in the way big banking is allowed to operate and demanding greater government regulation to improve the lives and livelihoods of Canadians. Many of the changes asked for are changes that other nations made decades ago.
Over 97,000 people across Canada have joined a letter-writing campaign and/or signed a petition calling on Finance Minister Chrystia Freeland to work with all federal parties to make Canada’s big banks do more to help Canadians and small businesses, require banks to pay their fair share of taxes, and combat systemic discrimination in lending and services with eight key changes.
Democracy Watch, a citizen advocacy group, organized the letter-writing campaign and petition. The group also filed a submission with Finance Canada’s pre-budget consultation process calling for these eight key changes.
Associations representing Black and Indigenous business owners have also recently called for many of these measures to be enacted in Canada to stop discrimination in bank lending.
Most of these potential changes are inspired by the US, and others by policy in Australia, the UK, and other countries in Europe. The US, in particular, enacted many of these changes in bank regulation decades ago. Canada’s government, in contrast, has done very little to combat discrimination in bank lending and services and done virtually nothing to keep banks from gouging their customers.
This call for action comes after Canada’s Big 6 Banks (BMO, CIBC, National, RBC, Scotiabank, and TD) reported profits in 2020 totalling $41.13 billion, just $5.1 billion (12%) less than in 2019 even as their customers struggle under the economic fallout from the COVID-19 pandemic. The Big 6 had record profits of more than $46 billion in 2019—the 10th year in a row, and more than double their 2010 profits.
Even during the COVID-19 pandemic, the Big 6 Banks continue to reap high profits by firing thousands of people, shifting jobs overseas (or using temporary foreign workers), cutting services, and hiking fees and credit card interest rates even as the Bank of Canada’s prime rate drops to record low levels.
The Big 6 Banks also paid their CEOs a total of $75 million in 2019 in salary and bonuses (an average of $12.5 million each).
With profits like these, Canadian banks can afford to do much more to help Canadians during such difficult financial times, the petition argues. But the corporations will not do so on their own.
“The big banks can afford to do much more to help during this crisis, and must be required by law to disclose much more information about how they treat customers and borrowers, and about their profits in every part of their business.” Said Duff Conacher, co-founder of Democracy Watch, the organization that launched the petition. The Canadian government must “ensure [major banks] are effectively required to serve everyone fairly and well with fair interest rates and fees.”
Democracy Watch and those who support it by signing the petition and joining the letter writing campaign propose eight key changes that, should the government chose to do so, will regulate banks to ensure a fair playing field for all Canadians.
First, the petition calls to cut all interest rates and fees in half now, and cut loan payments entirely for anyone who needs it, without requiring payment or extra interest later, to support Canadians and Canadian small businesses decimated by the pandemic.
Then, the petition supports regulations previously used in the US. It will require banks to disclose detailed profit reports after independent audits and maintain reasonably low rates by capping credit card interest rates. Also, it demands the disclosure of approval rates for credit, loans and account services by neighbourhood and type of borrower, and require corrective action against any bank that discriminates— as the US has done for 30 years.
Then, the petition calls to cut back executive pay to a reasonable level and close the loopholes big banks use to avoid taxes— and impose an excess profits tax—as is done in England, Australia, and other European countries.
The eight ideas also include specifically Canadian initiatives. One suggests the creation of a independent, consumer run bank watchdog group (suggested originally by MPs and Senators in 1998). Another calls for reopening of bank branches in small towns and neighbourhoods to minimize predatory payday loan companies. Finally, the petition calls for increased enforcement measures and penalties to ensure banks serve everyone fairly and at fair prices.
Banking in Canada has had great success and is incredibly profitable, but these profits are rarely felt by the vast majority of Canadians. With this petition and campaign supporting eight key changes, Democracy Watch calls for a more equitable, fair, and modern banking system that will help ordinary Canadians and small business owners see greater financial success for generations to come.