Why Small Business Fights Bank Mergers
Swift, Catherine, Canadian Speeches
President and CEO, Canadian Federation of Independent Business
Small businesses are deeply skeptical about the proposed mergers of four of Canada's five big banks, a skepticism reflected by strong public opposition to the mergers. Promises of improved service, cost savings, greater accessibility and increased funding are all said to have been made before, and the promises never kept. They fear the mergers will result in less competition for financial services, and worse credit conditions. Small business is seen as the most important engine of economic growth and job creation, and anything that weakens it, weakens the economy and society as a whole. Speech to the Canadian Club of Toronto, November 25, 1998.
Thank you very much for the invitation to address such a distinguished audience on a controversial and important public policy issue -- the proposed mergers involving four of Canada's largest banks. As I'm sure everyone here is very much aware, if the mergers are approved, the Royal Bank of Canada would become one with the Bank of Montreal, while the Canadian Imperial Bank of Commerce would join forces with the Toronto-Dominion Bank. The fact that this is a vital issue for the Canadian financial sector and the business community as a whole may be the only thing I say here today that the bankers and small businesses can agree upon.
To provide some context for the small business perspective on bank mergers, it is important to examine the entire small business-banking relationship over the years. It has often been stormy, and is always complex. If there are any bankers in the audience today, and I suspect that there are, I'm glad you are sitting down as what I am about to say may surprise some of you. The independent business sector and the organization I am proud to represent are not anti-bank. To the contrary, we want the banks to be better. Throughout the 27-year history of the Canadian Federation of Independent Business, this has always been our objective. I admit that the reasons for this are self-serving, since a better banking system greatly helps small business owners in a number of ways, from obtaining start-up loans to get going, to credit lines to keep
going, to term loan and other bank services to help along the way. A weak and vulnerable banking system is not in the best interests of small business owners, or Canadians as a whole.
The truth is that we want banks to keep getting better and better. We want their shareholders to do well and their thousands of employees not to worry about their job security. So what we are dealing with here is not a personality clash as much as a culture clash between two business forces which in so many ways couldn't be more different if they tried.
Bankers work in large bureaucratic institutions, and have to date enjoyed a very protected position in the Canadian marketplace. On the other hand, small business owners operate in extremely competitive markets, usually have personal assets on the line as well as business assets, and do not easily conform or relate to the operation of a large bureaucracy. In addition, entrepreneurs are by their very nature risk takers. If they weren't, chances are they would never have started a business in the first place.
Small business owners tend to be optimistic, individualistic, and impatient. Bankers, conversely, tend to be risk averse. Their culture encourages them to be nervous and discourages them from going out on a limb by making independent business decisions, especially when it concerns such matters as credit lines and loans. Another difference is that small business owners are not uncomfortable with a certain amount of business chaos or uncertainty. By comparison, small business often views banks as massive bureaucratic structures which move at the pace of a receding glacier from the ice age. And as their decision-making slowly melts through the layers of bureaucracy, the outcome all too frequently has been demands for unreasonable amounts of collateral and high service charges. …