As of Friday January 5, two-year Canadian government bond yields sat at 1.77%, while five-year government bonds were at 1.97%, and 10-year government bonds settled at 2.15%. The difference of a measly 20 bps between two and five yr rates and 38 bps between the two and 10 year rates represents a flattening yield curve. This is a big deal for financial institutions, where the majority of their revenue comes in via the spread between short-term and long-term yields. A bank’s ability to make money is a function of the ability of a financial institution to borrow at a lower rate short term to lend out said money on a long-term basis (car loans, mortgages) at a higher rate.
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You're talking more specifically about the banks and you're right but don't forget insurance companies. It hurts them even more. Insurance companies do not loan money for a profit but invest it in safe assets like bonds.