An examination of the agency overseeing financial institutions in this country seems to show such watchdogs lack the authority to tackle consumer abuses as aggressively as their U.S. and European peers, in the wake of multiple reports of improper sales practices at big Canadian banks.
Canada’s banking system avoided failures in the 2007-09 financial crisis and the World Economic Forum consistently ranks it as being among the world’s soundest, crediting strong regulations and oversight for the top billing.
But media reports that staff at the country’s biggest five banks had moved customers to higher fee accounts and raised overdraft and credit card limits without their knowledge made MPs and campaign groups question if lenders were being properly supervised.
A review of budgets, staffing and legal powers at the disposal of the Financial Consumer Agency of Canada (FCAC), seems to show the regulator lacking the firepower of its U.S. and British peers.
The FCAC has a budget of $18 million for the 2016/17 financial year and employs 89 staff. In contrast, the Office of the Superintendent of Financial Institutions that oversees the safety of the entire banking system employs 700 with an annual budget of $144 million.
By comparison, Britain’s Financial Conduct Authority had an annual budget of 519 million pounds ($858 million) and more than 3,000 staff at the end of its last fiscal year. The U.S. Consumer Financial Protection Bureau had a budget of $606 million ($808 million Canadian) last year and more than 1,600 employees.
The FCAC’s fines are also capped at $500,000 per violation and since its formation in 2001, the FCAC has issued fines totaling just $1.7 million. In contrast, Britain’s FCA has dished out over $3 billion pounds since its creation in 2013 while the CFPB has handed out fines worth over $5 billion since its creation in 2011.
One consumer advocate opined that the Canadian regulator’s failure to detect questionable business practices reported by the public broadcaster could be down to the lack of "mystery shopper" checks where inspectors pose as regular customers.
When Wells Fargo paid $190 million U.S. last year to settle charges that its sales staff created a multitude of unauthorized accounts, it was down to a whistle-blower and media who alerted the authorities about the practices.
But "mystery shopping" helped U.S. regulators last year to investigate allegations of racial discrimination at BancorpSouth Inc that led to a $10.6-million U.S. settlement.
In Britain, regulators used the technique in 2008 to investigate banks’ mis-selling of loan insurance in the nation’s most costly corporate scandal.
Advocates have also criticized the FCAC for effectively tipping off banks when it said earlier this month it would review business practices in the federally-regulated financial sector in April.
