Citizens have final say on bank mergers

This editorial was published during May 1998 in the Toronto Star and the Victoria Times-Colonist

Like a tidal wave, the proposed Royal Bank-Bank of Montreal and CIBC-TD Bank mergers appear unstoppable.

It's not hard to see why. We're talking about Canada's most powerful economic players. The banks have huge assets. Think of how enormous the federal government is. Yet each of the Big Five banks are bigger, in terms of assets, than the federal government's annual budget. Three of the Big Five lend more money each year than the federal government spends.

If the proposed mergers go ahead, the two new megabanks will be colossal,  controlling over 70% of the country's banking assets. That's a frightening prospect, considering their poor record in customer service, such as small business lending and service fees.

The devastating impact of the proposed mergers on jobs has been called "a dirty little secret." Scotiabank and National Bank CEOs, joined by bank industry analysts, estimate that up to 65,000 people could lose their jobs if the mergers proceed, as local branches are shut down.

The banks' power makes it easy to despair that anything can be done to stop the proposed mergers. Media coverage has reinforced this view. The Toronto Star's Richard Gwyn, for instance, claims that "the deals are done. All the politicians can do, even a powerful one like (Finance Minister) Martin, is hope to extract a few local concessions", says Gwyn. "The era of big, self-regulating corporations is upon us." ("Here and in U.S. banks do what they want", April 17).

But is it true that we can do nothing in the face of corporate power?

The evidence suggests that organized citizens' movements can have a dramatic impact, even when dealing with banks.

In the 1970s, U.S. citizens mobilized against discrimination by banks against low-income communities and won passage of a landmark bill called the Community Reinvestment Act (CRA). U.S. consumers have benefited for more than 20 years from laws which require detailed disclosure and review of whether banks are serving local communities adequately. If a bank is not performing well, regulators can deny any proposed expansion, merger or takeover of another financial institution.

For example when the Bank of Montreal's subsidiary, Harris Bank of Chicago, wanted to buy another Illinois bank in 1992, the takeover was stopped because Harris Bank had a poor lending and service record, as revealed under a CRA review. Harris was also required to take corrective action. It pledged $327 million in credit and assistance over five years for affordable housing and small business loans and to meet other needs in Chicago communities. Other U.S. bank mergers have been stopped for similar reasons.

 In Canada, a powerful citizens' movement is building to stop the proposed megabank mergers and to push for the kind of accountability measures enjoyed by U.S. banking customers. Finance Minister Paul Martin has opened a window of opportunity for citizen action by insisting, quite rightly, that he will wait for the reports of the federal task force on financial institutions and of a panel of Liberal MPs before deciding on the mergers. Their approval "is by no means a fait accompli", says Martin.

Pressure on the Liberal Government to approve the deals is enormous. Yet we need to remind ourselves of a few basic facts. First, Canada is a democracy in which public opinion should have a powerful impact on public policy. Secondly, a majority of Canadians  oppose the proposed mergers, according to two national polls. Thirdly, let's take heart from the opposition expressed by a broad range of Canadians and organizations. The bank accountability coalition which I chair has tripled in size in only 18 months to include 77 organizations representing well over three million Canadians. Lastly, the banks have provided no evidence that their proposed mergers will benefit their customers, while the evidence of negative impacts from bank mergers in other countries is extensive.

But two things are essential for citizens to have an impact. First, we need to believe that we can help shape the future of Canada's banking industry. We must not succumb to the feeling that the proposed mergers are "done deals", waiting to be rubber-stamped by government.

And we have a responsibility not only to oppose, but to propose. Our opposition to banks becoming bigger should be accompanied by advocacy of measures to ensure banks become better, in terms of serving all Canadians fairly. It's about time our federal government enacted laws to benefit Canadian financial consumers and communities, similar to those enacted by the U.S. government over 20 years ago.