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10 Reasons Why Not to Rely Solely on Traditional Banks

  • Chad Johnston
  • Aug 7
  • 2 min read


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As financial technologies evolve, more businesses are discovering the limits—and hidden costs—of banking exclusively with legacy institutions. Here are ten thought provoking reasons to diversify beyond traditional banks.

1. Unlimited Money Printing


  • Diluted purchasing power: Through quantitative easing and low-rate policies, the Bank of Canada’s M2 money supply surged over 20 percent in 2021.

  • Erosion of cash reserves: More currency in circulation means each dollar you hold is worth less over time.

    Source: Bank of Canada M2 Money Supply Statistics

2. Lack of Customer Control


  • Zero governance rights: As a depositor, you have no say over loan approvals, fee changes, or investment decisions.

  • Unilateral policy shifts: Banks can adjust rates or introduce new charges without customer input.

    Source: Canadian Bankers Association governance disclosures

3. “Bank Holiday” Powers


  • Emergency freezes: Regulators can suspend withdrawal access under Bank Act Section 458—most recently seen during the 2020 BMO-HSBC merger.

  • Risk of deposit seizure: In extreme cases, deposits may be frozen or seized until the bank is stabilized.

    Source: Bank Act Section 458; 2020 BMO-HSBC account freezes case

4. Insurance Caps & Coverage Gaps


  • CDIC limits: Canada Deposit Insurance Corporation protection tops out at CAD 100,000 per category—nowhere near the balances held in many corporate treasuries.

  • Uninsured exposure: Any funds above that threshold remain at risk if a bank fails.

    Source: CDIC Coverage Rules

5. Opaque Reserve Reporting


  • Quarterly disclosures only: Banks publish reserve data every three months, with no real-time proof that deposits are fully backed.

  • Off-chain opacity: There’s no blockchain-style audit trail to verify reserve levels or risk exposure.

    Source: OSFI quarterly bank financial data


6. Slow Onboarding & Withdrawals


  • Lengthy account setups: Opening a corporate account can take 10–15 business days.

  • Delayed transfers: Domestic and international wires often require 1–3 business days plus manual AML reviews.

    Source: Major Canadian banks’ corporate KYC timelines


7. Counterparty Risk


  • Concentrated exposures: Banks face credit, market, and operational risks—and in 2008 needed government backstops to avoid collapse.

  • Systemic vulnerability: One bank’s troubles can cascade, threatening all depositors.

    Source: OSFI 2008 Financial Crisis Review


8. High Fees & Low Yields


  • Fee-heavy services: Maintenance, wire transfers, FX conversions, and lending fees often outpace any interest earned on deposits.

  • Near-zero rates: With deposit yields at or near zero, your cash actually shrinks after fees.

    Source: Canadian Bank Fee Survey; Bank of Canada Interest Rate Bulletins


9. Limited Innovation


  • No on-chain integration: Traditional banks don’t natively support blockchain assets or smart-contract workflows.

  • Lagging fintech: While DeFi platforms offer tokenized lending, instant settlement, and fractionalization, banks move at a regulatory crawl.

    Source: FinTech Canada Adoption Report


10. Regulatory Friction for New Assets


  • Patchwork rules: Cross-border collateral, crypto custody, and tokenized real estate face conflicting provincial and federal regulations.

  • Service refusals or delays: Many banks simply decline new asset classes rather than invest in compliance infrastructure.

    Source: CSA Staff Notice 46-307; FATF VASP Guidance

 
 
 

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