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What is the difference between 250 and 450 billion dollars? The average consumer cannot even comprehend those figures, but John E. Cleghorn, Chairman and C.E.O. of the Royal Bank of Canada, seems to be able to. The question is whether the proposed merger between the Bank of Montreal and the Royal Bank of Canada will really benefit the average Canadian consumer, or if it will result in additional near-monopolistic control of the economy which serves mainly to boost the egos of those in power. For the past 38 years there has been an unwritten policy against big buying big. In other words, the proposed merger would not have occurred. New international competitors like the Hong Kong Bank, Wells Fargo & Co., and GE Capital Corp., have been aggressively entering the Canadian marketplace and because of the increased competition, management has found it necessary to consolidate. It is up to Canadians to decide if the proposal is a strategic and smart decision that follows the trend put forth by the U.S., Germany, Japan and | Switzerland or is this a disastrous step which will inevitably lead to further mergers and a monopoly of big banks. On one hand, the merger does allow a Canadian financial institution the ability to compete in the global economy. The amalgamation will place a Canadian bank in the top ten banks of North America and within the top twenty-five in the world. If competitive, some argue that the long term will provide increased jobs. It is arguable, if Canadian banks cannot compete, buy outs or disintegration will result. It can also be said that this merger will eliminate redundancy which, in turn, increases efficiency and thus increased profits for shareholders and lowered costs for consumers. On the other hand, Canadians may experience many negative side effects under the strong arm of such powerful institutions. Forefront in the minds of citizens is the possibility of many lost jobs. In addition, this amalgamation will mean a reduction in the choice for consumers. In Saskatoon and Regina, for example, many branches will eventually merge diminishing the available choice. It | also spells a greater threat to other financial institutions like Canada Trust, Scotiabank, and the Credit Unions. It is a certainty that smaller institutions are strategizing to remain competitive. One megabank in Canada would have extremely high influence over the government's monetary and fiscal policy. It used to be that the financial industry was founded on the four pillars: Banking, Trust companies, Insurance companies, and Brokerage houses. The banks have bought out all trust companies except for Canada Trust. The banks own all of their own insurance companies, and they have bought out every brokerage house except for Midland Walwyn. We now have a situation where six institutions have virtual control of the Canadian financial marketplace. It is true that this merger may have some positive global effects and indirect benefits to the consumer. However, for the average consumer in rural Saskatchewan, whose options are already limited, the negative effects may far outweigh the positive. |