King Arthur Movie Tristan

Back on Jan 26th, I made the following comment in Gerry (one of the top five political minds in the country) Nicholls' blog regarding bank fees:

A little de-regulation in the banking sector should solve Jack's [Layton] problem, eventually anyway. Really, they screw us over because their is no real competition.

Think Jack would go for opening up the banking business?

Finally, somebody, somewhere agrees with me.

In today's Financial Post Marcel Latouche of The Institute for Public Sector Accountability had a piece called we need Bank Competition, not fee regulation.

Generally, Canadian bank charges and service fees have been higher than those of American banks. The reason for this is not usually widely discussed, and Canadian customers seem to only get some help, if any, when bank profits go up or when it becomes politically advantageous to do so. The real problem is that the Canadian banking industry operates as a virtual oligopoly. With very few banks and little competition, the industry can charge whatever it likes, in return for fewer and fewer services.

...I do not believe that the government should interfere in the operations of the market. Instead if the government wanted to reduce the costs of banking services it could very easily do so. The government has the power to legislate how the banks operate. A conservative government that presumably believes in a free-market philosophy should look at allowing bank mergers, but with an important caveat -- allow the entry of more foreign banks in the Canadian market.

Should both mergers and foreign bank entry in the market be allowed, I believe that the following will happen:

There will be increased competition due to more banks in the marketplace

Fees will come down and perhaps in some cases, such as in the United States, disappear

Customers will find themselves with more outlets to do their banking face-to-face.

Exactly! The reason the banks are gouging us is because their is no significant competition to
take away business when they do gouge. And that competition can only come from opening the market to foreign competition. Any other solution is just a new problem to be solved.