Although the newspapers keep stating that the economy is slowly improving they are looking at big business and not at smaller companies. It appears that many banks/credit unions are no longer lending to certain types of businesses, not renewing mortgages on existing businesses etc. If the banks are not lending to small business who are the bread and butter of this economy, how is the economy going to improve?
What the banks say and what they are doing are two different things. The banks say that they are lending and will look at any deal. Many high producers in the banks are stating that they used to have their deals approved even two weeks ago but policies have changed the they banks are retrenching and shrinking their book of accounts. Some financial institutions say that they will lend up to 85% loan to value but then they bring in their appraisal who will appraise the property at 60% of the last known sales price, then the financial institution will then say they will lend 85% against this number. Shouldn’t they say that they want to lend only to 50% coverage but they can charge a higher fee if they claim that they are lending to a higher loan to value ratio.
Canadian banks have always stated that they have to get bigger so they can compete on the world market. Is this a necessity or is this just the egos of the people running the bank? Why do they have to keep growing? Whenever they expand into the United States, their investments result in poor results, they end up selling parts of their US subsidiaries and taking huge losses. In Canada, there were no high ratio loan losses compared to the US however if the company loses money in the US, they go back to their Canadian customers and penalize them but reducing the amount they will lend them, calling their loans or even getting out of certain segments of the marketplace. Have you ever heard a bank state that they made a mistake by trying to expand worldwide? They have a virtual monopoly of the banking system in Canada so when something goes wrong they can increase their rates to their customers because their customers have no where to go. If they lose money on an investment in another country, why do they raise rates in Canada for the wrong business strategy? If a multinational company has poor sales in a foreign country, do they rates their prices back home – definitely not. This seems to be unique to the Canadian banking system.