Thank you. Mr. Chair.
Thank you to the witnesses for being here.
Over the past five years, Canada's major banks have seen consistently higher profit margins, largely driven by interest from credit card products, which often carry interest rates around 19.9% or higher. For example, by 2022, the combined net income of Canada's six largest banks reached $60.7 billion, with $102 billion from net-interest income.
Credit products like credit cards play a significant role in the earnings as higher interest rates persist, despite the broader lower interest rate environment. Banks have also benefited from several favourable conditions, including minimal defaults due to pandemic-related federal aid and low operational costs. In fact, loan loss reserve funds set aside to cover potential loan defaults were largely released as fewer Canadians defaulted than anticipated, which boosted profits further. The strong financial performance led to increased dividends and substantial executive bonuses, but did not translate to lower interest rates for the consumers.
My question is for anyone on the panel. Would you like to contest any of that?
Okay, then I'll just move on. It will be based upon that.
Ms. McKee, why is it, then, that banks and credit cards require a 20% interest rate, generally, for their products? There are some other products that are available at lower interest rates, but they generally also come with more difficulty to acquire for consumers or fewer benefits elsewhere.
Why is it consistently 20%, despite even the Bank of Canada just recently lowering its rate? Why would credit cards not have a lower rate as well?