What is happening when Banks don’t do what they’re told?
Many people feared that when the Bank of Canada dropped interest rates by .75% that the big banks may not follow suit. I have to admit I didn’t see this. I thought that the Bank of Canada had unprecedented power over the retail banks due to the current credit tightening and liquidity pressures. I figured that the retail banks would not want to poke their finger in daddies eye?Anyway it happened they did not match the banks rate drop fully, only dropping .50%. So now what? Well the banks say openly that they would rather keep some of the drop for shareholders and not pass on to customers. My feeling is that if they continue to do this the Bank will get annoyed. There will be continued pressure put on through the press I predict, and finally the Bank will drop rates even more then they planned so that when the retail banks only come down a little bit they will be at the level that Bank wanted anyway? Something to watch for I think.
