A strong majority of small and medium-sized firms in Canada report no improvement in the levels of bank competition within their communities, according to new research from the Canadian Federation of Independent Business (CFIB).

At the same time, CFIB announced credit unions, HSBC and ATB Financial lead the way among financial institutions overall in meeting the needs of the small business sector, while Desjardins and National Bank are at the lowest end of the ranking scale in ninth and 10th place respectively.

The five major banks are in the middle, with CIBC being the only one to fall back, going to seventh place from being number six in 2000, the last time CFIB conducted the study.

According to the survey, fully 69% of respondents said banking competition levels have remained unchanged since 2000, while 16% said they have declined. Only 15% of small business owners saw an increase in competition. The study was conducted nationally by CFIB between April 1 and May 26, 2003.

“It has now been five years since the MacKay task force report was tabled with its recommendations to boost competition in the banking sector, and despite some policy moves by the federal government in that direction, our study shows clearly that these have not yielded any concrete improvements overall.” said CFIB president, Catherine Swift, in a news release.

In ranking small business satisfaction with the quality of service received from their banking institution, the CFIB study found credit unions received top marks from small business owners. Out of nine performance indicators used to determine which banking institutions are catering to the small business sector, credit unions ranked first in seven of the factors, and second in the remaining two.

With regards to the overall ranking of the financial institutions, TD Canada Trust retained its position in fourth place to lead the ‘big five’, tied with Scotiabank, which made the biggest jump from its seventh place standing of three years ago. The Bank of Montreal moved up to sixth place from being in eighth position in 2000, while the Royal Bank went up one position to seventh spot. CIBC, tied for seventh, was the only major player to lose some ground overall from its standing in 2000 when it came in sixth.

“This study shows that the merger of TD Bank and Canada Trust more than two years ago did not have any positive impact in boosting competition in the market place,” noted Swift, adding that TD Canada Trust’s purchase of Laurentian Bank branches outside of Québec will further restrict choice.

She said the findings are consistent with the CFIB members’ vote of January 2003, when 58% of small business owners said additional competition should be a prerequisite for allowing bank mergers and 30% said banks should not be allowed to merge under any conditions.

The study drew 9,565 responses from the independently-owned and operated business sector across all regions and industry sectors. Overall results are accurate within ± 1.0 percentage point, 19 times out of 20.