Tuesday, March 06, 2007

Flaherty Makes Case for ATM Fee Flexibility

Bloomberg, Doug Alexander and Sean B. Pasternak, 6 March 2007

Bank of Nova Scotia, Canada's third- largest bank, doesn't have any immediate plans to heed a request from the country's finance minister to lower fees for automated- teller machines.

``We have a very competitive offering,'' Chief Executive Officer Richard Waugh told reporters today in Halifax, Nova Scotia. ``Our customers will make their choices. If we're not competitive then we'll react.''

Executives from Canada's six biggest banks met Finance Minister Jim Flaherty yesterday to discuss ATM fees that lenders charge customers of opposing banks. Flaherty urged the banks to reduce the fees for low-income clients such as seniors, students and disabled people. Flaherty told reporters after the Toronto meeting that he expects some banks to respond to his concerns.

Banks including Toronto-Dominion Bank, the No. 2 lender, have so far resisted making changes to their fees.

``We do believe we have attractive packages for several groups, including seniors,'' Toronto-Dominion spokesman Neil Parmenter said today. ``As of now, there's no announced change or impending change.''

Royal Bank of Canada, the country's largest lender, hasn't announced changes to its fees in response to Flaherty's meeting.

``We do continuously review our banking packages to ensure that we're delivering the best value,'' spokeswoman Beja Rodeck said. Royal Bank has 3,873 machines, the largest network in Canada.

Officials at Canadian Imperial Bank of Commerce and Bank of Montreal weren't immediately available for comment. National Bank, the country's sixth-biggest lender, is studying the matter.

``National Bank has made no commitment one way or another regarding ATM fees,'' spokesman Denis Dube said. ``We have banking packages for seniors and students that are very affordable and, as do other financial institutions, we revise our packages on a regular basis.''

Canadian Prime Minister Stephen Harper said that the government wants to ensure there's competition, and that consumers have low-cost choices.

``Like every other Canadian, when I get them from time to time, they annoy me,'' Harper told reporters in Toronto today. ``The government, as you know, is loath to interfere in the marketplace.''

Flaherty, 56, met the executives after New Democratic Party Leader Jack Layton called on him to amend banking laws to eliminate the fees. Canadian consumers paid C$420 million ($357 million) in cash machine charges in 2005, according to Layton. Flaherty has said he has no plans to impose new rules.

In a letter to the chief executives of the country's five biggest lenders last month, Flaherty said he's received a number of complaints about the fees and asked what ``options'' are available for cutting some of the charges.

The nation's banks say eliminating the fees would take away their incentive to build cash machines, and would give an unfair advantage to so-called ``white-label'' ATMs in grocery and convenience stores.

Waugh said most of his customers don't pay bank-machine fees, and that the bank will monitor its fees to make sure they are competitive.

``We share the minister's concerns,'' Waugh said after the bank's annual meeting. ``I think everybody wants to be able to ensure that they're getting the best price and service they can, and we heard his message.''
Financial Post, Scott Deveau with files from Duncan Mavin, 6 March 2007

Finance Minister Jim Flaherty was accused yesterday of "watering down" his promises to get tough on Canadian banks over ATM fees.

Mr. Flaherty met with the CEOs of Canada's big banks yesterday to press them to lower fees charged when customers use a rival's bank machine. He told reporters the meeting was "frank and direct," and while he was not expecting an immediate response, he maintained he had conveyed the concerns of Canadians to the institutions.

In particular, he said he wanted to know how the banks would respond to those with low-income Canadians, such as seniors, students and those with disabilities, who may have a limited mobility and choice in which machines they use.

"I expect that some of the banks will respond to the concerns of Canadians," he said. "It's up to them how they respond."

The key message the banks wanted to get across to the minister was that each of the banks has a different ATM offering and that there is currently a lot of choice in the marketplace, a senior executive at one of the banks said yesterday.

In general, the banks were happy with the outcome and with the opportunity to convey their side of the story, he said.

"I wouldn't say he backed off, but he realized the complexity of the issue," said the banker.

Several of the banks contacted by the National Post yesterday said they were still considering their response to Mr. Flaherty.

However, the Finance Minister came under immediate attack from NDP, which originally brought the issue forward and pushed it onto the Tory agenda.

"What happened to the tough guy approach?" NDP finance critic Judy Wasylycia-Leis asked yesterday. "He went in saying he was going to send a strong message, that he had the power to legislate and he walked away without any commitments."

The NDP estimates that about $420-million is collected in ATM fees each year in Canada.

The banks defend charging fees to non-clients because there is substantial cost involved in building and maintaining their proprietary ATM networks.

Ms. Wasylycia-Leis said she rejects that argument, noting that the combined earnings of the major banks amounted to almost $19-billion last year. She said the banks have ample resources to reinvest in their networks without charging ATM fees.

She also criticized the Finance Minister for focusing solely on low-income groups.

"This is an issue that affects people across the board," she said.

In Canada, the fees normally range from $1.50 at banks to $2.50 from private vendors, but are much lower than in other countries, according to the Canadian Bankers Associations.

Mr. Flaherty said the banks also noted during the meeting that the highest fees are charged by the so-called white label machines, which are privately owned and are found in convenience stores and bars.

There are now 35,000 non-bank ATMs compared with fewer than 16,000 owned by the banks, and the financial institutions argue that the proliferation of the white label industry is proof that Canadians are willing to pay for convenience.

Mr. Flaherty said the white label industry was not in the "banking business" and did not fall under this purview.

He would not say yesterday whether he planned to legislate changes if the banks didn't respond to the concerns raised.
The Globe and Mail, Tara Perkins & Sinclair Stewart, 6 March 2007

Federal Finance Minister Jim Flaherty walked away from a lengthy lunch with executives of Canada's six biggest banks unable to report that they will lower ABM fees, but hopeful that some will soon offer cheaper options to seniors, students and people with disabilities.

At least one of the banks said after the meeting that it will not be lowering fees, but the issue might get a "little bit of traction," according to someone who was at the meeting.

"People, with their ongoing reviews [of fees and banking packages], will start to factor this in," the person said.

After the 90-minute meeting at a Toronto hotel, Mr. Flaherty told reporters he spoke to the banks about his commitment to choice and competition, and pointed out his concern about the fees banks charge when a customer uses an ABM from another bank. He said his particular concern was for lower-income Canadians, especially seniors, students and the disabled.

"I did not expect a response as a group from the banks with whom I met, nor would it have been appropriate for them to respond as a group," Mr. Flaherty said, noting the banks are in competition. "I expect that some of the banks will respond to the concerns of Canadians which I expressed to them."

At least one bank said it does not plan to act.

"There is no plan to lower our ABM fees at National," said National Bank of Canada spokesperson Denis Dubé. The bank revises its banking packages regularly to meet consumer needs, and "we have, I think, a very good package for seniors and students," he said.

The bank's chief executive officer, Réal Raymond, attended the lunch, as did the CEOs of the other major banks with the exception of Bank of Nova Scotia CEO Rick Waugh, who was preparing for that company's annual meeting.

The point of the meeting with Mr. Flaherty was "to listen to each other," said Toronto-Dominion Bank spokesman Neil Parmenter. "Today wasn't about an outcome."

NDP finance critic Judy Wasylycia-Leis said she was disappointed. Mr. Flaherty had "acted like Mr. Tough Guy up until today," she said. "He said that he could bring the force of the law to bear, and so we were hoping that in fact we would see some real progress. . . . It sounds like he softened his approach and is leaving it up to the banks themselves."

She also said the minister is now talking about targeting certain groups "when this is an issue that affects Canadians right across the board."

Royal Bank of Canada CEO Gord Nixon, who attended the lunch, said last week that the ABM fee issue was becoming "regrettably politicized."

At yesterday's press conference, Mr. Flaherty said that the banks pointed out that they have different strategies. "Some of the banks are more heavily invested in ABMs than others, some are more invested in branches than others," he said. "It's up to them how they respond."