Canadian banking fees: Hit the consumer

By Jason Hanley
December 07, 2004
All the major Canadian banks made huge profits in 2003. Royal Bank led the group with net income of $3.005 billion. Bank of Nova Scotia followed with $2.477 billion. CIBC and Bank of Montreal posted "modest" profits of $2.063 and $1.825 billion, respectively.

Now, there's no crime in running a profitable business. Unfortunately, most of the bank's revenue comes from the least fortunate people. Let's take Royal Bank for instance:

Royal Bank had total gross revenues of $15.7 billion. Of this, $10.937 billion was generated from loans -- in other words, money taken from people who obviously don't have enough money and need to borrow it.

The bank was then kind enough to redistribute $5.452 billion as deposit interest -- in other words, money given to people who have so much money they can afford to have it sit around in bank accounts.

The remaining $5.485 billion from the loan interest was of course retained by the bank for operations expenses, like executive salaries and stock options, for instance.

A further $1.078 billion comes from the much-hated "service" fees, which sometimes don't even involve receiving a service. The Royal Bank doesn't even list their fees online. Their website states, "please consult the Personal Banking Accounts - Features and Fee brochure at your nearest RBC Royal Bank branch."

The Bank of Montreal is less shameful and lists their fees. Here are some of the worst:
  • Items returned non-sufficient funds (NSF) - $30.00 - YES, thirty dollars!
  • Stop payment - $12.50
  • Foreign currency cheque deposited to Canadian dollar account - $5.00
  • Overdraft Transfer Service, Per transfer (fee is in addition to any debit transaction fee) - $5.00
  • Incoming Wire payments - $14.00 - this is just to receive a wire transfer. Sending is a minimum of $15.00+
  • All of these items are in addition to the monthly bank account fee which is often $5 - $15 a month or $60 - $180 per year
These "services" cost the bank next to nothing. They are almost pure profit -- often taken from people who can afford it the least.

Banking costs are taking up a higher and higher percentage of the income of people who can afford it the least. Meanwhile, this money is being redistributed to those who already have much more than they need.

If this trend continues, there will be a huge cost to society. Banks need to stop taking from the poor and giving to the rich.

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