Chartered banks wishing to merge should have to prove that they would not reduce service or competition in rural areas, the House of Commons finance committee has recommended.
Credit unions and new or foreign banks may well move in to pick up the service slack in areas where merged banks want to close branches, said the committee report tabled in Parliament March 27.
“Nevertheless, we have a concern that the loss of a local branch could have significant negative effects on some communities,” the committee majority said. It recommended that “merger applicants outline the manner in which the merged entity would ensure service to rural and remote communities where they are providing financial services at the time of the merger application.”
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Canadian Alliance finance critic Charlie Penson, a Peace River farmer, said in a March 28 interview the recommendation would ensure rural service is part of the consideration in future government reviews of merger applications.
“I think this is an attempt to make sure there is service provided,” he said. “I think the public interest would be protected in this.”
The committee recommended that any merger application be subject to a public interest impact assessment and reviews by the superintendent of financial services, the competition bureau and the Commons finance committees.
The last time the bank merger issue was on the public agenda, in 1998, the government decided to veto any deals. One of the major concerns then was the fate of rural service and the Liberal rural caucus lobbied to have mergers stopped.
Recently, the Senate banking committee recommended that the moratorium on bank mergers be lifted.
Penson said that while the Commons finance committee tried to lay out a road map for how merger policy could be handled, he predicted no merger approvals “until there is a new Liberal leader.”
Prime minister Jean Chrétien retires in February 2004.
The New Democratic Party denounced the finance committee report as wrong-headed and an endorsement of bank mergers.
“It is obvious,” veteran Saskatchewan MP Lorne Nystrom wrote in a minority report.
“Bank mergers in Canada would be detrimental to the public interest.”
The committee majority noted that credit unions often see bank branch closings in small communities as an expansion opportunity.
Since 2000, credit unions have taken over 72 branches that chartered banks wanted to close in six provinces.
But the committee worried that in cases where there is no alternative, bank closings will reduce business opportunities and hasten the departure of other small town and rural infrastructure.
