No Means No to Savings & Choice
Contact:
Michael Walker, Executive Director
The Fraser Institute, (604) 714-4545 Email: michaelw@fraserinstitute.caRelease Date: 16 December 1998
VANCOUVER, BC>>> The Minister of Finance, in his decision to preclude the two proposed bank mergers has prevented savings to consumers and likely stifled future innovation.
The economics of the banking industry are very much like any other industry, new firms will enter, or existing firms will expand into markets, if profits are available. Witness Wells Fargo in small business lending, and more recently, BankOne in credit cards. The result: lower prices, increased competition and greater consumer choice.
According to a recent Fraser Institute study, Bank Mergers: The Rational Consolidation of Banking in Canada, consolidating the branch system would save between 10 and 30 percent of non-interest costs, amounting to savings of between $1,000 and $3,000 per Canadian over the next ten years.
The domestic reason for consolidation is technology. The number of instant tellers in Canada has increased 204 percent between 1988 and 1997. At the same time, some 5.9 million Canadians bank by phone, while another 1.6 million use the internet. By focusing on branch-banking, Paul Martin has ignored these technological changes. Preventing the mergers inhibits the ability of the domestic banks to invest in new technologies and to more effectively respond to the needs of consumers.
The solution is simple: allow greater competition by removing the existing barriers to entry and allow domestic consolidation.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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