Financial Post, Duncan Mavin, 17 January 2008
Executives at Canada's big banks were outraged at suggestions they have held discussions to set interest rates independently of rate-setting decisions from the Bank of Canada.
It is "absolutely not" the case that the banks get together to set rates, said a spokesperson for Bank of Montreal.
"Pricing decisions are proprietary decisions and we don't discuss them in advance," he said.
Privately bankers expressed frustration at the suggestion in a media report yesterday that the banks were discussing defying the central bank -- which is expected to cut its key interest rate by 25 basis points next week--because their own borrowing costs have risen due to the global credit crunch.
In public too, the banks denied very strongly that any collusion has taken place.
"Canadian banks make competitively driven, independent decisions with respect to the setting of interest rates," said a spokesperson for Royal Bank of Canada.
"Pricing decisions reflect both economic realities and the Bank of Canada's monetary policy," she said.
A spokesperson for Toronto-Dominion Bank said the bank sets rates following its own policies, and "factors in a bunch of things including market conditions and what the Bank of Canada is doing.
"From our point of view, it's a TD decision and not a group decision," he said.
The other big banks declined to comment on the story.
The media report cited a report issued in mid-December from TD, in which the bank's economics department speculated some banks could choose not to reduce the prime rate after a Bank of Canada rate cut.
The TD spokesperson said the report from the economics department was "no reflection of corporate policy" and he pointed out that TD has no history of defying the bank of Canada.
Other industry sources also said the banks are unlikely to act in a way that would be considered a big snub to the Bank of Canada.
Officials at the Bank of Canada were actually pleasantly surprised at how quickly the banks followed the central
bank's last rate cut in December, considering tough market conditions, said one very senior ranking bank executive.
Bankers also speculated about the source of the media report which caused a stir on Bay Street. One BMO insider said, "If the pot is being stirred on this, it's not coming from BMO."
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Executives at Canada's big banks were outraged at suggestions they have held discussions to set interest rates independently of rate-setting decisions from the Bank of Canada.
It is "absolutely not" the case that the banks get together to set rates, said a spokesperson for Bank of Montreal.
"Pricing decisions are proprietary decisions and we don't discuss them in advance," he said.
Privately bankers expressed frustration at the suggestion in a media report yesterday that the banks were discussing defying the central bank -- which is expected to cut its key interest rate by 25 basis points next week--because their own borrowing costs have risen due to the global credit crunch.
In public too, the banks denied very strongly that any collusion has taken place.
"Canadian banks make competitively driven, independent decisions with respect to the setting of interest rates," said a spokesperson for Royal Bank of Canada.
"Pricing decisions reflect both economic realities and the Bank of Canada's monetary policy," she said.
A spokesperson for Toronto-Dominion Bank said the bank sets rates following its own policies, and "factors in a bunch of things including market conditions and what the Bank of Canada is doing.
"From our point of view, it's a TD decision and not a group decision," he said.
The other big banks declined to comment on the story.
The media report cited a report issued in mid-December from TD, in which the bank's economics department speculated some banks could choose not to reduce the prime rate after a Bank of Canada rate cut.
The TD spokesperson said the report from the economics department was "no reflection of corporate policy" and he pointed out that TD has no history of defying the bank of Canada.
Other industry sources also said the banks are unlikely to act in a way that would be considered a big snub to the Bank of Canada.
Officials at the Bank of Canada were actually pleasantly surprised at how quickly the banks followed the central
bank's last rate cut in December, considering tough market conditions, said one very senior ranking bank executive.
Bankers also speculated about the source of the media report which caused a stir on Bay Street. One BMO insider said, "If the pot is being stirred on this, it's not coming from BMO."
