Academic journal article Canadian Journal of Regional Science

Banks in Small Communities in Canada: 1998-2004

Academic journal article Canadian Journal of Regional Science

Banks in Small Communities in Canada: 1998-2004

Article excerpt


This paper examines changes in the provision of fundamental services to smaller communities in Canada. The research analyzes changes in the network of Canadian banks over the period 1998 to 2004 for the 874 places in Canada that reported populations of less than 50,000 inhabitants in 2001. It is well known that the Canadian banking sector has undergone major changes in its delivery system since the early 1990s. The research examines the relationship between bank services and other services, specifically by assessing if a decrease or increase in the number of bank branches in these smaller centres follows the same patterns and locational tendencies as other major service and retail providers (i.e., physicians, dentists, pharmacies, grocery stores, and car dealerships). The paper examines two fundamental issues: (i) the level of banking service in these communities; and (ii) whether banks typically are the first services to leave these centres. The empirical evidence indicates that changes in the banking system in small Canadian communities are associated directly with the overall economic performance of these places. The paper provides models of the lag-effects associated with service change in small town communities, identifying the services that either lead or follow change.


Cet article etudie les changements dans l'approvisionnement de services fondamentaux aux plus petites communautes au Canada. La recherche analyse les changements au sein du reseau de banques canadiennes au cours de la periode allant de 1998 a 2004 pour les 874 endroits au Canada qui ont reporte des populations de moins de 50 000 habitants en 2001. C'est bien connu que le secteur bancaire canadien a subi des changements majeurs dans son systeme de livraison depuis le debut des annees 1990. La recherche examine la relation entre les services bancaires et les autres services, specifiquement en evaluant si la diminution ou l'augmentation du nombre de succursales bancaires dans ces plus petits centres suit les memes modeles et tendances de localisation que d'autres fournisseurs importants de services et de vente au detail (p.ex. medecins, dentistes, pharmacies, epiceries et concessionnaires automobiles). L'article examine deux problematiques essentielles : (i) le niveau de services bancaires dans ces communautes; et (ii) si les banques sont typiquement les premiers services a quitter ces centres. La preuve empirique indique que les changements dans le systeme bancaire de petites communautes canadiennes sont associes directement avec la performance economique generale de ces endroits. L'article fournit des modeles des effets de decalage (lag effects) associes a un changement de services dans de petites communautes urbaines, identifiant les services qui menent a ou suivent un changement.


The Canadian banking system has undergone major changes in the delivery of services to customers since the early 1990s. Advances in banking technology, efforts to reduce costs, improvements in efficiency and consolidation processes combined to reorganize the banking network. Banks moved towards a multi-channel approach by combining physical outlets, automated banking machines (ATMs) and Internet technology. The number of branches declined throughout the country while the branchless options for banking increased.

This study addresses how banks fit into the transformation of small communities in Canada--those with less than about 50,000 inhabitants--and presents an exploratory examination of this transformation. Previous works suggest that rural communities suffered to a great extent from bank branch closures (Bowles 2000) and that access to ATMs would not replace bank branches easily (Option Consommateurs 2003). However, studies conducted in the U.S. (Avery et al 1999), Great Britain (Willis et a1 2001) and Australia (Argent 2002) have found that the impact on small places is not unambiguously negative. …

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