It's estimated that 61% of communities in BC, 65% in Nova Scotia and 84% in Newfoundland and Labrador don’t have a bank or credit union. On the other hand, many of these towns have a post office that could have banking status. Given these demographics, wouldn't you think that the advantages of introducing a postal banking system in Canada should be obvious to government?
Apparently not. Our politicians have consistently denied its implementation over the years, in spite of repeated requests by municipalities, First Nation communities, unions and community groups.
Why is that? Maybe it's time to talk about the power and influence the Big Banks hold in the Canadian political scene.
The Big Banks' position on Postal Banking
Would it surprise you to hear that the Canadian Bankers Association is opposed to postal banking? One of their principal arguments is that the need isn’t there. Access to banking branches in Canada, they say, is more accessible than ever.
Except that it’s not. The number of commercial bank branches per 100,000 Canadian adults actually decreased from 25 in 2008 to 20 in 2018.
A second argument used against postal banking has been that Canadians can access their banking from virtually anywhere through electronic banking.
That assertion doesn’t take into consideration poor and intermittent service. In 2020 rural download speeds were still nearly 12 times slower than those of urban Canadians. Moreover, Internet service tends to be more expensive in rural areas. The banks are assuming everybody can afford it.
Of course, there is a much simpler explanation as to why our Big Banks are opposed to a postal banking system. The banks are aware that if postal banking takes off in rural Canada it might be imported into the cities. That could cut into bank profits.
Now you might feel some sympathy with that concern if the banks were struggling. But quite the opposite is true. Did you know that in 2021 three out of the top five profit making corporations in Canada were banks? Did you know that the profits of the five major Canadian banks went up by $10 billion during our COVID ordeal, reaching more than $53 billion in 2021?
An argument can be made that these banks are so profitable because they are being treated extremely well by the Canadian government. A 2015 Toronto Star study found that Canadian banks paid the lowest tax rates in the G7 and less than half that the average rate of all non-financial firms in our country. Let’s not forget also that Canada’s banks received a $114 billion bailout after the 2008 financial crisis.
Given the privileges accorded to them by Government it's hard not to conclude that the position taken by the Canadian Bankers Association smacks of excessive self interest.
Whose interests does Government really serve?
Canada Post subsequently commissioned another study, this time by the right-wing think tank, the Conference Board of Canada. Not surprisingly, it concluded that the Post Office should not compete with banks. Comprehensive studies advocating a postal banking system by the Canadian Centre for Policy Alternatives and the Canadian Union of Postal Workers have been largely ignored by the Canadian government.
In 2016 a House of Commons committee recommended against postal banking, saying the postal service should instead "focus on its core competencies." A federal review of Canada Post in 2018 did not even mention the issue and a 2018 private members bill by the NDP in favour of postal banking was voted down by the two major parties.
The most the government was able to come up with was a 2020 promise to allocate $500,000 to a committee that would look at how rural post offices could offer services such as money transfers or cashing government cheques. Ultimately, the "solution", was to introduce a pilot project with the TD Bank Group that would allow the TD to grant loans up to $30,000 through designated postal outlets. To be clear, there is no place for chequing and savings accounts, mortgages, loans to small businesses, investments, etc. in this public private partnership agreement with the bank.
Government's watered down, token version of postal banking simply sidesteps the following.
Is economist Michael Hudson right in his assertion that in Canada "the financial sector, the banks, are pretty much running the country"? When you consider the way our federal "whip system" has neutered the ability of MPs to oppose party policy (something discussed in a previous blog posting), he just might have a point.
The cozy relationship between Government and the banks is definitely not the way things used to be. In fact, Canada once had one of the most progressive banking systems in the world. But we weren't vigilant and we lost it.
Why? I think we've been too easily persuaded that when it comes to money matters Big Finance knows what's best for us. It doesn't, and as the whole postal banking saga points out, our Big Banks will probably always put their own interests above those of communities. Sadly, Government seems to be comfortable with this.
That should worry us.