* Regulatory, political scrutiny set to intensify
* Lawmakers call for parliamentary investigation
* Regulator says review will begin in April
* FCAC says issues have been raised with bank CEOs
* Banks defend practices after latest allegations
(Recasts, adds comments by analyst, lawmakers)
By Matt Scuffham
TORONTO, March 15 Canada’s banks faced
intensifying scrutiny on Wednesday after the country’s financial
watchdog launched an investigation and lawmakers called for a
parliamentary inquiry following media reports suggesting
improper sales practices at certain banks.
Financial Consumer Agency of Canada (FCAC) Commissioner
Lucie Tedesco expressed concern over the reports by CBC News
that employees at some of the country’s largest banks had opened
accounts for products and services for consumers without
properly obtaining their expressed consent, an issue the
regulator said it will focus on in a review to begin in
mid-April.
Canadian banks have until now avoided the consumer
mis-selling scandals that had affected banks in the United
States and Europe in recent years. However, some analysts said
banks in Canada have therefore been subject to lighter
regulatory scrutiny, enabling them to engage in sales practices
no longer deemed acceptable elsewhere.
The banks named by in the reports by CBC News have all
subsequently defended their sales practices.
“The lack of scandals has led to Canada avoiding the
regulatory scrutiny of sales practices seen in other markets, in
particular the UK. We think this could now change, putting some
pressure on profitability,” said Citi analyst Stefan Nedialkov.
British banks have so far paid out more than 24 billion
pounds ($29 billion) compensating customers who were mis-sold
loan insurance and Spanish banks face a bill of nearly 4 billion
euros ($4.25 billion) after a 2013 court ruling that they sold
mortgages to around 1.5 million customers without explaining
interest rates could not fall below a certain level.
Sales practices at banks in the United States have come
under scrutiny after Wells Fargo & Co reached a $185
million settlement in September with U.S. authorities after
admitting branch staff had opened up to 2 million unauthorized
customer accounts amid pressure to meet internal sales goals.
Two lawmakers who sit on Canada’s House of Commons Standing
Committee on Finance said on Wednesday that banks’ business
practices and the effectiveness of financial regulation in
Canada should be examined by the committee.
“Is it adequate enough? Do they have enough power?,” asked
Liberal MP Robert-Falcon Ouellette. “Part of our role is not
only to hold the government to account but the entire financial
system.”
Conservative MP Dan Albas called on the FCAC and Canada’s
finance ministry to explain how they are responding to the
concerns and to address questions around the effectives of
regulators.
“I’d like to see the Minister of Finance (Bill Morneau) tell
us whether he believes the current framework works,” he said.
Canada’s finance ministry reiterated on Wednesday it was
confident the FCAC would examine the issue carefully.
CBC News had reported last week that customers of
Toronto-Dominion Bank were moved to higher-fee accounts
or had their overdraft and credit card limits increased without
their knowledge after staffers came under pressure to meet sales
targets.
On Wednesday, CBC News reported that employees at the
nation’s other biggest banks – Royal Bank of Canada, Bank of
Montreal, Canadian Imperial Bank of Commerce and Scotiabank –
said they had engaged in similar practices.
The banks have all defended their practices.
Royal Bank of Canada said in a statement that its
employees “embrace the responsibility of putting our clients’
needs at the center of all we do.”
Bank of Montreal said in a statement it is
committed to “putting customers and employees first” and
Canadian Imperial Bank of Commerce said its staff are
“incentivised to do what is right for our clients.”
Bank of Nova Scotia said in a statement that all
employees are “focused on the needs of our customers.”
TD has defended its practices.
Shares in Scotiabank and Bank of Montreal were down 1
percent on Wednesday. Shares in CIBC fell 0.7 percent. Shares in
TD and RBC were down 0.3 percent.
($1 = 0.8195 pounds)
($1 = 0.9408 euros)
(Additional reporting by Leah Schnurr; Editing by Jeffrey
Benkoe and Meredith Mazzilli)