Just about every quarter over the past five years, a variation on a theme appears in the national news: Canada’s big five banks posted another period of record profit.
And just about every time, the story follows the same frame: industry insiders warning that the good times won’t last very long, a cursory look at changes made within the banking sector that might bring profits down and a snapshot of the forces and fees that helped boost the revenue.
On December 6, 2016, Tim Kiladze kicked off one report for the Globe and Mail by saying that Canada’s biggest banks “defied the odds” to make record profits. But don’t worry he forecasts, those odds are stacking up again against the banks and that 2017 might be rough.
Kiladze’s guess has proven to be wrong. Royal Bank’s income in Quarter 1 of 2017 grew by 24 per cent to an obscene $3.03 billion. TD’s income grew by 25 per cent.
Remarkably, the Business News Network characterized TD’s revenue as this: “It’s not right to use the word “loser” for a bank like TD, which has delivered so much growth to shareholders over the years. But its performance in the first quarter was soft compared to others in the group.”
According to CBC News, this increase was result of the banks aggressively pursuing growth.
A different report from CBC’s Go Public supports this. It revealed that Canadian banks are turning the screws to Canadians to get them to invest in financial products that they don’t need. Just after CBC first broke the story, they received nearly 2000 emails from current or former bank employees confirming and elaborating the pressure that bank workers are under to upsell financial products.
Staff from each of Canada’s five major banks admitted to being pressured, even threatened with being fired, if they failed to upsell their customers.
The report closed a loop that many Canadians are well aware of: that bank profits are being fueled by debt, interest and pushy financial salespeople who have been made to look as if they’re acting in your financial interest, even though they aren’t.
And it’s taking its toll. Not only are bank employees telling CBC that increasingly, people are resigning over the stress of pressuring customers to purchase their products, but household debt is at a record high too. In the first quarter of 2017, Canadian household debt hit a whopping 167.3% of household income.
On Dec. 1, 2016 CBC News pointed to “more exposure in the mortgage market” as being part of the upward trend in bank profits. On March 15, 2017, the Canadian Press reported that of the record-high debt held by Canadians, more than 65 per cent of it is due to mortgages.
But don’t worry! TD economist Diana Petramala told the Canadian Press that even though Canadians are carrying record debt, “… households have been getting a nice boost to their net wealth,” thanks to the out-of-control housing market in parts of Canada.
Reading these stories is like witnessing a round of collective bargaining where management’s proposal is so far away from the workers’ that they might as well be on different hemispheres of the globe.
Canada’s big five banks are out of control. While there are some regulations that should be able to stop the pressure tactics being used to boost their profits, they clearly aren’t effective.
Canadians need a market intervention that will buck this trend and refuse to play the same game as the banks. While credit unions are already an option that every union, and union activist, should already be using, Canadians need a more direct confrontation to this greed.
If Justin Trudeau and the Liberals wanted to address these trends, they would move towards creating a Canadian postal bank. Postal banking would undercut the high fees of the big banks, offer a low-cost alternative for Canadians and be available everywhere Canada Post already is. They could also undercut payday loan lenders and companies like Moneymart to help Canadians send money to family abroad.
The opportunities offered by postal banking are so obvious that the Liberals’ hesitance to implement the call from CUPW is a clear indication that they are comfortable with the current lending and charging practices of Canadian banks.
But this can’t continue. Canadians don’t have the capacity to take on endless debt. Before we reach our collective breaking point, unions and labour activists need to fight to make postal banking a reality. Really, it’s the only way to stop the runaway greed of The Big Five.