Finance Committee on April 19th, 2007

[Jim Westlake]

The Royal Bank owns no white label machines.

[Mike Wallace, Conservative, Burlington, ON]

Thank you for that.

Today our NDP colleague introduced a private member's bill that wants to completely ban bank fees for the use of ABMs. Can you tell me if there are any other fees--for chequing accounts, etc.--that we at the federal level regulate or set at the bank? Does anybody know? I didn't think so.

The example you used, Mr. Hockey, was excellent, about the milk and how the big store works. My logic would say that if we're going to say you can't charge fees for ABMs, then you can't charge fees for chequing accounts or anything else.

At the end of the day you have a responsibility to your shareholders. My shareholders are the taxpayers. I'm assuming you would try to raise revenue through higher interest rates. Would that be an accurate statement? Is that one way you might be able to recoup some of those losses? Would you then just not invest in the thousands of machines for convenience that have been created around the country?

Does anybody want to comment on that?

[Maurice Hudon]

Mr. Wallace, I think you've probably identified the likely outcome of such a measure.

[Christopher Hodgson]

I think the market is the best common denominator in all of this. Regulating fees is not going to accomplish more choice and convenience for customers around the country. The bottom line is that customers have the opportunity to move somewhere else if they're not satisfied with the fee package they receive from a particular institution. They can vote with their feet.

As I think you've heard here today, all of us have said that anywhere from 75% to 90% of our customers pay no convenience fees by accessing their own proprietary networks. One issue that all of us need to look at is raising the level of awareness throughout Canada about how Canadians can better access all of our different banking packages. I think that's something we would all undertake to do.

[Mike Wallace, Conservative, Burlington, ON]

I was actually a banker for six weeks, but I didn't like it--and I won't say which bank, Mr. Hockey.

[Some hon. members]

Oh, oh!

[Mike Wallace, Conservative, Burlington, ON]

You're expanding the network, which tells me that consumers, your customers, are demanding more convenience, or you wouldn't be investing the money in those areas.

I live in Burlington, and there are bank machines and bank branches absolutely everywhere. Can you tell me what your customers are telling you about the need for more banking machines and more convenience? You're obviously making those management decisions based on some information. Can you share that publicly?

Does anybody want to answer?

[The Chair, Conservative, Brian Pallister]

A brief reply will have to suffice.

[Tim Hockey]

The number of transactions being done at ABMs is actually decreasing, and it has for a number of years, even as the number of actual ABMs increases. The reason for that is other channels. The primary one we haven't talked about today is the fact that there is now an alternate way to get cash, and that's through debit. Many Canadians are now realizing that when they make a purchase at a store they can add $100 and take that additional cash. That's a form of ABM. It helps the merchant keep their cash floats down, and it doesn't require any ABM deployment. As a result there are actually fewer transactions going on.

Our customers--and I'm sure those of the rest of the banks--are saying they want to have more branches with more access, 24/7 and 365, through Internet, ABM, and telephone. They want us to keep investing, which is why all of us continue to make massive investments in those channels.

[The Chair, Conservative, Brian Pallister]

We continue now with Madam Wasylycia-Leis.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you, Mr. Chairperson.

Thank you all very much for your appearance today and for participating in this study of our committee on ATM fees and other bank fees and electronic banking.

I almost feel, sitting here, like I'm in some surreal world. Everything's great in the banking world, and there are no problems. I have to tell you, there's a big difference between Bay Street and Main Street.

Many of us represent communities where what you're telling us is just not the case. Either there isn't the access or the choice.... This notion about choice and competition is so far removed from the reality of so many Canadians that I think you should all go back and rethink what your purpose is.

You're not just like any other business. There's a Bank Act. You have a charter responsibility. You have an obligation to provide information. You can't just sit here and say this is all a matter of competition and good business practice. You have an absolute obligation to tell Canadians some basic facts.

Let me lighten up for a minute. My good colleague Mike Wallace mentioned my bill. It's just been tabled today. It calls for changes to the Bank Act, and Mr. Flaherty says it's quite possible to actually prohibit and eliminate fees in terms of electronic transfers of funds that are used now by the banks. Does anybody here disagree with this?

[Voices]

Oh, oh!

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Does anybody support this bill?

[Mike Wallace, Conservative, Burlington, ON]

Not even the Competition Bureau.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

All right. I didn't think so. I was hoping you'd ask the question, Mike, so I could save my time.

Unfortunately, here in Canada our banks are not willing to listen to public pressure, it seems, because when concerns have arisen in other countries there has been an appropriate response from the big banks, and here, clearly, you're not prepared to do that. That's why we have to go the legislative route, because Canadians are expressing concern. They are voting with their feet, because they don't have the kind of access you're talking about and they are being gouged.

So let me get at the question of gouging, and let me go through each of the major banks. What is the actual cost per transaction when one uses an ATM machine, whether it is one's own bank's or another's?

Mr. Hudon, can you give us the cost per transaction?

[Maurice Hudon]

I will have to echo the comments made on that subject earlier. First of all, the matter of costs on any one service is a very challenging thing to determine, and we would not disclose it if we did have those costs.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

You won't disclose. So even though the public would like some basic information about what they're being charged and what the costs are and how they're being gouged, you will not disclose it.

The banks have all said, and we've had this verified at our committee, that you do not cross-subsidize your operations, that each part of your operation is a stand-alone. So you do know the costs. You treat each area as distinct and separate; therefore the ATM stream subsidizes itself. It stands on its own. You know the costs, you know the charges, you know the profits.

Can you, Mr. Hodgson, tell me if you agree with what Professor Johnson from Queen's University said when he said, at the most, it's 60¢ a transaction? Yes or no?

[Christopher Hodgson]

I'm not going to give any proprietary information, but I will tell you this. The issue of ATM fees, the cost of putting the network in place, is not just specific to that, as Tim indicated. When we open up a new branch--and we've opened 35 this year; we opened 15 last year--there is a cost of opening up that whole branch system. The two to three ATMs that we put in each of our new branches are part of that. It's part of our marketing; it's part of our branding. So we don't look at this as one specific cost setter. It's part of an integrated part of opening up a new branch system. We don't divulge that for competitive reasons, which Tim has already indicated.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

So you're not refuting the fact that the costs are pennies to do these transactions in terms of the actual service?

[Christopher Hodgson]

No, I didn't say that.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Well, is anyone here refuting what expert witnesses have said to this committee in terms of about a 27¢ or 30¢ cost per transaction and another 2¢ to 15¢ Interac fee, which means you're looking at about 40¢ per transaction? All of you, as banks, charge up to $5.15, if you apply every single cost. That is a mark-up of what, 500% or 600% or more? It seems to me that it's well beyond the notion of gouging. Gouging is after 15% or 20%, is it not?

You have a situation where you're not prepared to give Canadians the facts, but you're prepared to keep doing this without explanation and without due regard for people's right to access their own money without serious penalty.

[Christopher Hodgson]

I think we are very transparent. I think that—

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Okay then, will you release your figures?

[Christopher Hodgson]

I think that 75% to 90% of our customers don't pay any fees, and those who access another system have the ability—

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

I've heard that before. I would like to know—