Who listens to Canada’s bankers?

Canada’s bankers admit that there is no fixed limit to Canada’s debt to gross domestic product (GDP) ratio but they think everyone should follow them in their customary caution. It is probably why more and more cash-rich businesses are eyeing aspects of the banking field for future expansion.

It is certainly why Canadian retailer Loblaw is clearing the way to expanding its banking activities. The food giant has announced that it has ended the relationship with Canadian Imperial Bank of Commerce in its PC Financial operations and is coming out with a self-funded version of PC Money to replace PC Financial. These on-line accounts will include the ability to accumulate loyalty points through Loblaw stores and Shoppers Drug Mart.

Loblaw is expected to gradually expand the banking offerings. This will likely include financial products such as mortgages and insurance.

The one thing that the new Loblaw-based bank might restrain itself from doing is giving our governments advice on handling money. The latest from Canada’s major banks has been to tell the Trudeau government that it has to set a finite limit on budget deficits.

This was a direct challenge to the liberal government as it is trying to plan for new investment to drive pandemic recovery and plan the bolder investments needed for Canada’s future.

The best the banks could come up with was the suggestion that the government should help families pay for child care. This is an old chestnut that most political parties parade through election campaigns and promptly forget once elected. (I certainly agree that there is the need but it is hardly innovative.)

What our Canadian banks tend to ignore is that Canada has the lowest debt to GDP of any of the Group of Seven countries. The real authorities on debt ratios are the bond rating companies. And Canada is doing just fine with those people.

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