Finance Committee on April 19th, 2007

[Tim Hockey]

I'm just wondering if that's the same spirit that resulted in the Competition Bureau's tribunal order in 1996.

[The Chair, Conservative, Brian Pallister]

I think Mr. Del Mastro is asking if you'd enter into a non-competition agreement.

[Dean Del Mastro, Conservative, Peterborough, ON]

I mean a non-competition agreement with each other on that level, just on bank fees. Would you say, “We at TD Bank will not charge you a fee if you use a Royal Bank machine”?

[The Chair, Conservative, Brian Pallister]

Perhaps you should be asking Ms. Black what she'd think of that, Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

This is not agreeing to price-fix; this is agreeing to provide something at no charge. So that's not price-fixing. Would you consider it?

[Richard Taylor]

I would just add, from the Competition Bureau's point of view, that a non-compete agreement, even at a zero price, if it stops others from providing the service and degrades the quality of service, competition—

[Dean Del Mastro, Conservative, Peterborough, ON]

Well, we have that with the credit union.

Mr. Hockey, would you like to answer the question?

[Tim Hockey]

A short answer is that we look at all options, but I don't think that would be very appealing to any of us. Once again, we've all made very different—

[Dean Del Mastro, Conservative, Peterborough, ON]

But it might be appealing to your clients.

[Tim Hockey]

We think our clients are very well served. We are gaining market share. Our customers are saying they have choice and convenience and can avoid those fees if they wish to.

[Dean Del Mastro, Conservative, Peterborough, ON]

Okay, thank you.

There's another thing I'd like to touch on. A number of you have touched on the cost of doing business. Mr. Westlake, you just talked about the various fees that are involved in providing ABM service. Ms. Baxendale, you spoke of a number of measures CIBC has taken to make bank machines more accessible. White label machines are actually preventing you from having to incur these costs. You don't have to pay them anymore. So based on these savings, isn't it counterintuitive to be charging additional fees for people to use them? They're already paying a fee for that convenience, and your customers are benefiting.

What would you say to that, Ms. Baxendale?

[Sonia Baxendale]

I'm not exactly sure that I understand your question.

[Dean Del Mastro, Conservative, Peterborough, ON]

It costs you a lot of money to establish bank machines. You have another group that's coming and putting bank machines in for free. When your customers use them, you charge them a fee, when in fact that machine has actually saved you the cost of having to provide that machine to your customers.

[Sonia Baxendale]

But the reason we have a very large and very broad network of ABM machines is to deliver that service to our customers at no cost. That's what we are trying to achieve, to give convenience and service to CIBC customers.

[Dean Del Mastro, Conservative, Peterborough, ON]

Okay, but for some of my folks who live in rural areas, who may well be CIBC customers, their closest bank machine may not be a CIBC machine. Your customer has the convenience of accessing that machine, and you didn't have to pay anything to provide it to them. So wouldn't that savings, therefore, justify your not charging them an additional ABM fee?

[Sonia Baxendale]

Again, our intent is to have as broad a network as possible, which is ABMs and branches and online--all the vehicles available--so that all of our customers need to come only to CIBC for their services.

[Dean Del Mastro, Conservative, Peterborough, ON]

That's fine, but you're not going to some of my smaller communities any time soon. It wouldn't make business sense.

Now, I brought that up for clarification more than anything else. There's a broader issue here at play, and the broader issue is that people are concerned that banks make money, and banks making money is kind of like people having to pay taxes: nobody likes hearing about it. But I think it's a necessity of the economy. I understand the benefits of the economy, but I'd like to give a few of the bank representatives here an opportunity to speak to why bank profits are a good thing for Canada.

[The Chair, Conservative, Brian Pallister]

Mr. Del Mastro, I'd encourage those who wish to speak to that particular friendly question to do so in response to a subsequent question.

We'll go to Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair.

I would encourage you not to answer it while I ask my questions.

I have just a couple of quick questions. I'm sorry I came late. Some of this may have been addressed during some of your presentations, but since we have all the banks here, I have a general question. I guess I'll pick on one or two of you.

What would happen if this committee was able to convince the government to start regulating these bank fees and not allow the ability to charge Interac fees? What would happen? How would you reconfigure your cost system? Would that mean that other services would cost more money?

I think it's a fair question, because there are certain costs that you now have for those Interac machines. I think that's what we've heard. So you'd have to disperse or spread out the cost somewhere else, I would imagine, by charging for other services. Or does it mean that you would take a hit on the bottom line? I think it's a fair question. I think it's a black and white type of question.

I'll ask Mr. Hodgson; you're nodding your head. Mr. Hockey, I see you also nodding your head.

[Christopher Hodgson]

I think the decision in terms of whether we would pass that on or take it on the bottom line would be an individual choice by institution. Clearly, what we would do is look at the impact of those costs. It would clearly have an impact on our investments and whether or not we would continue to put ABMs in different locations. As I mentioned a little earlier, I think you'd end up with a similar model to what you have in the U.K. now, where a lot of those have been passed on, through other banking costs, to their customers. They've raised the level of banking costs.

So if you look at the cost of banking in the U.K. versus in Canada, it's more expensive in the U.K., from a banking perspective, for various numbers of products than it is here in Canada.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Tremblay, what's your view on this issue?

[Michel Tremblay]

From our standpoint, it's very important. I explained that very clearly in my brief statement. If we face competition from a network that is not regulated by the federal government and that manages four times more ABMs than we do, and if we did not impose these fees but the other did so, our current clients would have a strong incentive to deal with this other service provider. From then on, they could even use our network for free. In terms of competition, we see very clearly how that situation would penalize us.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

If we were to adopt provisions that meant that you could no longer impose Interac fees, would you be prepared to stop imposing them or would you then have to charge more for other services to your clients?

[Michel Tremblay]

As I've just explained, we're facing a very different kind of competition. Desjardins, which has a dominant position in Quebec, would continue to charge these fees and would not have to react by increasing other fees.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'm talking about the bank itself. If you no longer have the right to charge Interac fees, would the bank be prepared to reduce its overall income within its balance sheet?