It is not often you see any federal politician of any party come out and speak so critically about our banking system nor for that matter provincial political leaders since Canada has a two-tiered financial banking system with oversight of most credit unions at the provincial level. While the posting below on LinkedIn is not from a politician it is written by a member of Canada’s Senate where providing a sober second thought as a complementary body to the House of Commons can certainly be about banking and Canada’s international reputation.
Of note as well is that Senator Colin Deacon recommends the Globe and Mail article written by reporter Rita Trichur this week on TD Bank. It is posted on novaultnofault.com.
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Independent Senator Colin Deacon, Senate of Canada
Source LinkedIn
So who are the biggest losers in this long brewing AML failure at TD Bank? Canadians. I can’t tell you how often representatives of the hashtag#BigBanks have avoided my questions & concerns by pointing to their legendary stability during the Global Financial Crisis. Yes, 15 years ago Canada was perceived to be home to stable, honest & trustworthy banks — that ended last Thursday.
The US Dept of Justice documents contain damning facts & statements that point to a corporate culture of entitlement & arrogance. Consider this excerpt:
“According to court documents, between January 2014 and October 2023, TD Bank had long-term, pervasive, and systemic deficiencies in its U.S. AML policies, procedures, and controls but failed to take appropriate remedial action. Instead, senior executives at TD Bank enforced a budget mandate, referred to internally as a ‘flat cost paradigm,’ requiring that TD Bank’s budget not increase year-over-year, despite its profits and risk profile increasing significantly over the same period. Although TD Bank maintained elements of an AML program that appeared adequate on paper, fundamental, widespread flaws in its AML program made TD Bank an ‘easy target’ for perpetrators of financial crime.” (Source: https://lnkd.in/e9ExS6Y9)
Every Canadian bank will now have to constantly & transparently demonstrate that TD’s ethical failings were isolated, as TD claims but has yet to prove. I recommend Rita Trichur’s column yesterday (https://lnkd.in/eZwuDHSS).
But what did Canada’s now lost reputation as the home of stable, honest & trustworthy banks actually accomplish? Simply, an extended period where Canadian banks got away with increasing fees & profits to unheard levels elsewhere in the G7. Economic data from the Federal Reserve Bank of St. Louis (FRED) includes the “Lerner Index of Monopoly Power” and it shows that, in 2009, our banks more than doubled their market power relative to historical levels (and G7 counterparts) from ~0.2 to a stable state of ~0.5.
Consequently, a reliance on past regulatory success created a culture of arrogance & increasing market dominance. Profits & fees continued to rise while most of our hashtag#BigBanks underinvested in their core technology & banking systems. These systems are the new bank vaults, essential to keeping up with known & growing cybersecurity & criminal threats.
Today, Canadians are experiencing appalling & increasing levels of bank-related fraud. The most marginalized are regularly devastated because current regulations force customers to prove that they were NOT somehow at fault. Time to reverse the onus. Our hashtag#BigBanks have underinvested in the systems needed to keep Canadians hard-fought savings safe. Time for our banks to finally take responsibility for that underinvestment.
