Banking in Canada
Encyclopedia
Banking in Canada is widely considered the most efficient and safest banking system in the world, ranking as the world's soundest banking system for the past three years according to reports by the World Economic Forum. Released at October 2010, Global Finance magazine put Royal Bank of Canada at number 10 among the world's safest bank and Toronto-Dominion Bank at number 15. According to the Department of Finance, Canada
’s banks, also called chartered banks, have over 8,000 branches and almost 18,000 automated banking machines (ATMs) across the country. In addition, "Canada has the highest number of ABMs per capita in the world and benefits from the highest penetration levels of electronic channels such as debit cards, Internet banking and telephone banking
".
Banking in Canada began to migrate in earnest from colonial overseas banking operations to a local banking system with the founding of the Bank of Montreal
in 1817. Other banks soon followed and began business and after a lengthy approval process began unregulated banking business. These institutions issued the only local currency notes until amendments in the British North America Act allowed federal and provincial governments to begin to introduce their own notes starting in 1866. Official Canadian currency took the form of the Canadian dollar in 1871, overriding the currency of individual banks. The establishment of the Bank of Canada
in 1935 was also an important milestone in banking and monetary governance. See full article, Early Canadian banking system
Despite various loss events (such as the Latin American debt crisis
, the collapse of Olympia and York
, Enron
-related liabilities, and the U.S. Subprime mortgage crisis
), the big five banks have thus far proven to be safe and stable companies. For example, in securities prospectuses the Royal Bank of Canada
says it has paid a common share dividend in every year since 1870, the year after it received its banking charter.
According to the Department of Finance, two small regional banks failed in the mid-1980s, the only such failures since 1923, which is the year Home Bank
failed. There were no bank failures during the Great Depression
compared to 9000+ in the US.
After large bank mergers were ruled out by the federal government, some Canadian banks turned to international expansion, particularly in various U.S. markets such as banking and brokerage.
Two other notable developments in Canadian banking were the launch of ING Bank of Canada (which relies mostly on a branchless banking model), and the slow emergence of non-bank mortgage origination companies.
A survey conducted by the World Economic Forum
called the Global Competitiveness Report of twelve-thousand corporate executives, in 2008, concluded that Canada
has the best banking system in the world, receiving a score of 6.8 out of possible seven.
In everyday commerce, the banks in Canada are generally referred to in two categories: 1) the five large national banks and 2) smaller second tier banks (notwithstanding that a large national bank and a smaller second tier bank may share the same legal status and regulatory classification - see Safety and Soundness below.)
The five largest banks in Canada are:
Notable second tier banks include the National Bank of Canada
, the Laurentian Bank, the Desjardins Group (technically not a bank but an alliance of credit unions), HSBC Bank Canada
, and ING Bank of Canada. These second tier organizations are largely Canadian domestic banking organizations. Insurance companies in Canada have also created deposit-taking bank subsidiaries. For a complete list of institutions see: List of banks in Canada
are not just Canadian banks, but are instead better described as international financial conglomerates
, each with a large Canadian banking division. In fiscal 2007, RBC's Canadian segment called "Personal Financial Services" (the segment most related to what was traditionally thought of as retail banking) had revenue of only CAD
$5,082 million (or 22.6%) of a total revenue of CAD
$22,462 million.http://www.rbc.com/investorrelations/pdf/ar_2007_e.pdf Canadian retail operations of the Big Five comprise other activities that do not need to be operated from a regulated bank. These other activities include mutual funds, insurance, credit cards, and brokerage activities. In addition, they have large international subsidiaries. The Canadian banking operations of the Big Five are largely conducted out of each parent company, unlike U.S. banks that use a holding company structure to hold their primary retail banking subsidiaries.
* Marketing brands are shown rather than division names. For example, for internal and investor relation purposes, CIBC uses CIBC Retail Markets as a division name, but this does not normally appear in advertisements and does not feature prominently on account statements. Brand names are sometimes used across legal entities within a financial group. Intermediate umbrella brands (such as RBC Investments that includes the brands RBC Funds, RBC Action Direct, and RBC Dominion Securities) are not shown.
The main federal statute for the incorporation and regulation of banks, or chartered banks, is the Bank Act
(S.C. 1991, c.46), where Schedules I, II and III of this Act list all banks permitted to operate in Canada under these three distinct categories:
The bank regulator is the Office of the Superintendent of Financial Institutions
(best known as OSFI), whose authority stems from the Bank Act. The financial groups are also governed by regulatory bodies (bank regulators, securities regulators, insurance regulators, etc.) in each country they operate in.
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
’s banks, also called chartered banks, have over 8,000 branches and almost 18,000 automated banking machines (ATMs) across the country. In addition, "Canada has the highest number of ABMs per capita in the world and benefits from the highest penetration levels of electronic channels such as debit cards, Internet banking and telephone banking
Telephone banking
Telephone banking is a service provided by a financial institution, which allows its customers to perform transactions over the telephone.Most telephone banking services use an automated phone answering system with phone keypad response or voice recognition capability...
".
Origins
Bank of Montreal
The Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it...
in 1817. Other banks soon followed and began business and after a lengthy approval process began unregulated banking business. These institutions issued the only local currency notes until amendments in the British North America Act allowed federal and provincial governments to begin to introduce their own notes starting in 1866. Official Canadian currency took the form of the Canadian dollar in 1871, overriding the currency of individual banks. The establishment of the Bank of Canada
Bank of Canada
The Bank of Canada is Canada's central bank and "lender of last resort". The Bank was created by an Act of Parliament on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada...
in 1935 was also an important milestone in banking and monetary governance. See full article, Early Canadian banking system
Early Canadian banking system
The early Canadian banking system was regulated entirely by the colonial government. Primitive forms of banking emerged early in the colonial period to solve the drain of wealth caused by the application of mercantilist theory...
Despite various loss events (such as the Latin American debt crisis
Latin American debt crisis
The Latin American debt crisis was a financial crisis that occurred in the early 1980s , often known as the "lost decade", when Latin American countries reached a point where their foreign debt exceeded their earning power and they were not able to repay it.-Origins:In the 1960s and 1970s many...
, the collapse of Olympia and York
Olympia and York
Olympia & York was once a major international property development firm based in Canada. The firm built major financial office complexes like Canary Wharf in London, the World Financial Center in New York City and First Canadian Place in Toronto...
, Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
-related liabilities, and the U.S. Subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
), the big five banks have thus far proven to be safe and stable companies. For example, in securities prospectuses the Royal Bank of Canada
Royal Bank of Canada
The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,...
says it has paid a common share dividend in every year since 1870, the year after it received its banking charter.
According to the Department of Finance, two small regional banks failed in the mid-1980s, the only such failures since 1923, which is the year Home Bank
Home Bank
The Home Bank of Canada was a Canadian bank that was incorporated July 10, 1903 in Toronto. It failed August 18, 1923 and was the subject of a Canadian Royal Commission initiated by Prime Minister Mackenzie King in 1924....
failed. There were no bank failures during the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
compared to 9000+ in the US.
Recent History
In the 1980s and 1990s, the largest banks acquired almost all significant trust and brokerage companies in Canada. They also started their own mutual fund and insurance businesses. As a result, Canadian banks broadened out to become supermarkets of financial services.After large bank mergers were ruled out by the federal government, some Canadian banks turned to international expansion, particularly in various U.S. markets such as banking and brokerage.
Two other notable developments in Canadian banking were the launch of ING Bank of Canada (which relies mostly on a branchless banking model), and the slow emergence of non-bank mortgage origination companies.
A survey conducted by the World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....
called the Global Competitiveness Report of twelve-thousand corporate executives, in 2008, concluded that Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
has the best banking system in the world, receiving a score of 6.8 out of possible seven.
Canadian Banks
The five largest banks in Canada are:
- Royal Bank of CanadaRoyal Bank of CanadaThe Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,...
- Toronto Dominion Bank
- Bank of Nova Scotia
- Bank of MontrealBank of MontrealThe Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it...
- Canadian Imperial Bank of CommerceCanadian Imperial Bank of CommerceThe Canadian Imperial Bank of Commerce is one of Canada's chartered banks, fifth largest by deposits. The bank is headquartered at Commerce Court in Toronto, Ontario. CIBC's Institution Number is 010, and its SWIFT code is CIBCCATT....
Notable second tier banks include the National Bank of Canada
National Bank of Canada
National Bank of Canada is the 6th largest bank and 8th largest financial institution in Canada. The bank's headquarters are in Montreal, Quebec....
, the Laurentian Bank, the Desjardins Group (technically not a bank but an alliance of credit unions), HSBC Bank Canada
HSBC Bank Canada
HSBC Bank Canada, formerly the Hongkong Bank of Canada , is a bank in Canada that is part of British banking giant HSBC - one of the largest banking groups in the world. HSBC Canada is the seventh largest bank in Canada, with offices in every province except Prince Edward Island, and is the...
, and ING Bank of Canada. These second tier organizations are largely Canadian domestic banking organizations. Insurance companies in Canada have also created deposit-taking bank subsidiaries. For a complete list of institutions see: List of banks in Canada
The "Big Five" Banks
Unlike the smaller Canadian banks, the Big FiveBig Five banks
Big Five is the name colloquially given to the five largest banks that dominate the banking industry of Canada. The five banks are operationally headquartered in Toronto, Ontario. They are all classified as Schedule I banks that are domestic banks operating in Canada under government charter...
are not just Canadian banks, but are instead better described as international financial conglomerates
Conglomerate (company)
A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate structure , usually involving a parent company and several subsidiaries. Often, a conglomerate is a multi-industry company...
, each with a large Canadian banking division. In fiscal 2007, RBC's Canadian segment called "Personal Financial Services" (the segment most related to what was traditionally thought of as retail banking) had revenue of only CAD
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
$5,082 million (or 22.6%) of a total revenue of CAD
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
$22,462 million.http://www.rbc.com/investorrelations/pdf/ar_2007_e.pdf Canadian retail operations of the Big Five comprise other activities that do not need to be operated from a regulated bank. These other activities include mutual funds, insurance, credit cards, and brokerage activities. In addition, they have large international subsidiaries. The Canadian banking operations of the Big Five are largely conducted out of each parent company, unlike U.S. banks that use a holding company structure to hold their primary retail banking subsidiaries.
Brands used by the big five by major financial service*
| Royal Bank of Canada (RBC) Royal Bank of Canada The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,... |
Toronto-Dominion Bank (TD) Toronto-Dominion Bank The Toronto-Dominion Bank , is the second-largest bank in Canada by market capitalization and based on assets. It is also the sixth largest bank in North America. Commonly known as TD and operating as TD Bank Group, the bank was created in 1955 through the merger of the Bank of Toronto and the... |
Bank of Nova Scotia (BNS) | Bank of Montreal (BMO) Bank of Montreal The Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it... |
Canadian Imperial Bank of Commerce (CIBC) | |
|---|---|---|---|---|---|
| Year Founded | 1864 - Halifax, Nova Scotia | 1955 - Bank of Toronto 1857; Dominion Bank 1869 - Toronto, Ontario | 1832 - Halifax, Nova Scotia | 1817 - Montreal, Quebec | 1961; 1867 Canadian Bank of Commerce Canadian Bank of Commerce The Canadian Bank of Commerce was a Canadian bank cofounded in 1867 by William McMaster. The Canadian Bank of Commerce opened in Toronto with a charter in 1866 that it purchased from the defunct Bank of Canada, which folded in 1858.... 1867 and 1875 Imperial Bank of Canada Imperial Bank of Canada The Imperial Bank of Canada was a Canadian bank based in Toronto in the late 19th Century and early 20th Century.Founded in 1873 as the Imperial Bank in Toronto by Henry Stark Howland, former vice president of the Canadian Bank of Commerce. The bank became the Imperial Bank of Canada in 1874.In... - Toronto, Ontario |
| Original Name | Merchants' Bank of Halifax | Bank of Toronto Bank of Toronto The Bank of Toronto was a Canadian bank, founded on July 8, 1857 by George Gooderham, that merged with The Dominion Bank on February 1, 1955 to form the Toronto-Dominion Bank... , Dominion Bank |
Bank of Nova Scotia | Bank of Montreal Bank of Montreal The Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it... |
Canadian Bank of Commerce Canadian Bank of Commerce The Canadian Bank of Commerce was a Canadian bank cofounded in 1867 by William McMaster. The Canadian Bank of Commerce opened in Toronto with a charter in 1866 that it purchased from the defunct Bank of Canada, which folded in 1858.... and Imperial Bank of Canada Imperial Bank of Canada The Imperial Bank of Canada was a Canadian bank based in Toronto in the late 19th Century and early 20th Century.Founded in 1873 as the Imperial Bank in Toronto by Henry Stark Howland, former vice president of the Canadian Bank of Commerce. The bank became the Imperial Bank of Canada in 1874.In... |
| Head Office | Toronto, Ontario | Toronto, Ontario | Toronto, Ontario | Toronto, Ontario | Toronto, Ontario |
| Parent legal name | Royal Bank of Canada Royal Bank of Canada The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,... |
Toronto-Dominion Bank Toronto-Dominion Bank The Toronto-Dominion Bank , is the second-largest bank in Canada by market capitalization and based on assets. It is also the sixth largest bank in North America. Commonly known as TD and operating as TD Bank Group, the bank was created in 1955 through the merger of the Bank of Toronto and the... |
Bank of Nova Scotia | Bank of Montreal Bank of Montreal The Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it... |
Canadian Imperial Bank of Commerce Canadian Imperial Bank of Commerce The Canadian Imperial Bank of Commerce is one of Canada's chartered banks, fifth largest by deposits. The bank is headquartered at Commerce Court in Toronto, Ontario. CIBC's Institution Number is 010, and its SWIFT code is CIBCCATT.... |
| Group brand | RBC Royal Bank of Canada The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,... |
TD Bank Financial Group | Scotiabank Group | BMO Financial Group | CIBC |
| Canadian retail banking | RBC Royal Bank | TD Canada Trust TD Canada Trust TD Canada Trust is the personal, small business and commercial banking operation of the Toronto-Dominion Bank in Canada. TD Canada Trust offers a range of financial services and products to more than 10 million Canadian customers through more than 1,100 branches and 2,600 ATM Green Machines... |
Scotiabank Scotiabank The Bank of Nova Scotia , commonly known as Scotiabank , is the third largest bank in Canada by deposits and market capitalization. It serves some 18.6 million customers in more than 50 countries around the world and offers a broad range of products and services including personal, commercial,... |
BMO Bank of Montreal | CIBC |
| U.S. retail banking | RBC Bank RBC Bank RBC Bank, formerly Centura Banks, is the United States retail banking division of the Royal Bank of Canada. The headquarters for the bank are located in Raleigh, North Carolina. Banking centers and automated teller machines are located throughout the Southeastern United States... *Note: Sold in June 2011 |
TD Bank | None | Harris Bank Harris Bank BMO Harris Bank is a subsidiary of Montreal-based Canadian bank Bank of Montreal. Today the bank holding company is formally named BMO Bankcorp, Inc.... |
None - Amicus Bank Amicus Bank Amicus Bank was a wholly owned subsidiary of CIBC which provided non-traditional banking to customers.Within Canada, Amicus Bank was primarily responsible for operating President's Choice Financial. Amicus Bank briefly provided services under its own name through Bell Sympatico's portal... 's Amicus FSB joint venture Marketplace Bank/Safeway Select Bank 1999-2002 |
| Other major international retail banking operations | RBC Royal Bank of Canada and RBTT (Caribbean branches) | Scotiabank International | FirstCaribbean FirstCaribbean International Bank CIBC FirstCaribbean International Bank , is a publicly held Caribbean financial services company based in Barbados. Formed in 2002 as a merge the Caribbean operations of Barclays Bank PLC and Canadian Imperial Bank of Commerce , in March 2006 both CIBC and Barclays announced that Barclays wished... |
||
| Private banking Private banking Private banking is banking, investment and other financial services provided by banks to private individuals investing sizable assets. The term "private" refers to the customer service being rendered on a more personal basis than in mass-market retail banking, usually via dedicated bank advisers... |
RBC Wealth Management | TD Waterhouse Private Banking | Scotia Private Client Group | BMO Harris Private Banking | CIBC Private Banking |
| Canadian mutual funds | RBC Funds and PH&N Funds | TD Mutual Funds | Scotia Mutual Funds | BMO Mutual Funds and Guardian Group of Funds | CIBC Mutual Funds |
| U.S. mutual funds | Tamarack Funds | ||||
| Canadian brokerage | RBC Direct Investing RBC Direct Investing - External links :... and RBC Dominion Securities RBC Dominion Securities RBC Dominion Securities is the brand used by Royal Bank of Canada for full service brokerage services primarily in Canada. It forms part of RBC's Wealth Management division. Established in Toronto in 1901, it originally focused on government and municipal but diversified into war bonds during... |
TD Waterhouse TD Waterhouse TD Waterhouse is the brand used for both Canadian and British brokerages within the TD Bank Financial Group. It was also formerly used for TD's American brokerage.... |
ScotiaMcLeod | BMO InvestorLine and BMO Nesbitt Burns BMO Nesbitt Burns BMO Nesbitt Burns is a Canadian investment firm. Since its formation in 1912, BMO Nesbitt Burns and its predecessor companies have offered aid to investors in meeting their financial goals. In August 1987 the Bank of Montreal took advantage of new banking regulations to acquire Nesbitt Thomson,... |
CIBC Investor's Edge and CIBC Wood Gundy CIBC Wood Gundy CIBC Wood Gundy is the is the Canadian retail brokerage division of CIBC World Markets, a division of the Canadian Imperial Bank of Commerce.CIBC Wood Gundy maintains a network of 1,400 brokers working in over 100 branches across Canada... |
| U.S. brokerage | RBC Wealth Management formerly RBC Dain Rauscher | TD Ameritrade TD Ameritrade TD Ameritrade is an American online broker with over 6 million U.S. customers, and many more internationally, that has grown rapidly through acquisition to become the 746th-largest US firm in 2008. TD Ameritrade Holding Corporation is the owner of TD Ameritrade Inc... (45%) |
BMO Harris Investor Services | ||
| International Brokerage | West Indies Stockbrokers Limited | TD Waterhouse TD Waterhouse TD Waterhouse is the brand used for both Canadian and British brokerages within the TD Bank Financial Group. It was also formerly used for TD's American brokerage.... (UK) |
|||
| Canadian insurance | RBC Insurance | TD Insurance | Scotia Insurance | BMO Life | CIBC Insurance |
| U.S. insurance | RBC Insurance | TD Insurance | |||
| Capital markets | RBC Capital Markets RBC Capital Markets RBC Capital Markets is a Canadian investment bank with assets of $711 billion. It is part of the Royal Bank of Canada and has one of the highest credit ratings in the world by Moody's and Standard & Poor's.,According to Bloomberg, RBCCM is consistently ranked among the top 20 global investment... |
TD Securities TD Securities TD Securities is a leading financial services provider that offers advisory and capital market services to corporate, government, and institutional clients worldwide. They provide expertise in corporate and investment banking, capital markets, and global transaction services... |
Scotia Capital | BMO Capital Markets BMO Capital Markets BMO Capital Markets is a North American financial services provider that offers corporate, institutional and government clients access to a complete range of products and services... |
CIBC World Markets CIBC World Markets CIBC World Markets is the investment banking subsidiary of the Canadian Imperial Bank of Commerce. The firm operates as an investment bank both in the domestic and international equity and debt capital markets... |
| Major custodial operations Custodian bank A Custodian bank, or simply custodian, is a specialized financial institution responsible for safeguarding a firm's or individual's financial assets and is not likely to engage in "traditional" commercial or consumer/retail banking such as mortgage or personal lending, branch banking, personal... |
RBC Dexia RBC Dexia RBC Dexia Investor Services, established in January 2006, is equally owned by Royal Bank of Canada and Dexia.RBC Dexia Investor Services offers institutional investors worldwide an integrated suite of products, including global custody, fund and pension administration, securities lending,... (50%) |
CIBC Mellon CIBC Mellon CIBC Mellon was founded in 1996 as a joint venture between the Canadian Imperial Bank of Commerce and the Mellon Financial Corporation to offer asset servicing to institutional investors... (50%) |
|||
| Precious metals | ScotiaMocatta |
Regulation
Canada's federal government has sole jurisdiction for banks according to the Canadian Constitution, specifically Section 91(15) of The Constitution Act, 1867 (30 & 31 Victoria, c.3 (UK)), formerly known as the British North America Act, 1867. Meanwhile, credit unions/caisses populaires, securities dealers and mutual funds are largely regulated by provincial governments.The main federal statute for the incorporation and regulation of banks, or chartered banks, is the Bank Act
Canada Bank Act
The Bank Act is an Act of the Government of Canada respecting banks and banking.The Act groups banks in three schedules. Schedule I banks are banks allowed to accept deposits that are not a subsidiary of a foreign bank, Schedule II banks are banks allowed to accept deposits that are a subsidiary...
(S.C. 1991, c.46), where Schedules I, II and III of this Act list all banks permitted to operate in Canada under these three distinct categories:
- Schedule I: Banks allowed to accept deposits and which are NOT subsidiaries of a foreign bank. Examples include "The Big Five" banks (as mentioned above) and smaller second tier banks such as National Bank of CanadaNational Bank of CanadaNational Bank of Canada is the 6th largest bank and 8th largest financial institution in Canada. The bank's headquarters are in Montreal, Quebec....
, Laurentian Bank of CanadaLaurentian Bank of CanadaThe Laurentian Bank of Canada is a Schedule I bank in the province of Quebec. . LBC's Institution Number is 039.-History:...
, President's Choice FinancialPresident's Choice FinancialPresident’s Choice Financial is a banking service provided by Loblaw Companies . Several different organizations provide individual financial services under the President's Choice Financial umbrella:...
and Canadian Western BankCanadian Western BankThe Canadian Western Bank is a bank that is based in Edmonton, and which operates primarily in western Canada. The bank serves personal and commercial clients in Western Canada.-History:...
. Because the Schedule I banks are not subsidiaries of any foreign bank, they are the true domestic banks and are the only banks allowed to receive, hold and enforce a special security interestSecurity interestA security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation, usually the payment of a debt. It gives the beneficiary of the security interest certain preferential rights in the disposition of secured assets...
described and provided for under the Bank Act and known to Canadian lawyers and bankers as the "Bank Act security".
- Schedule II: Banks allowed to accept deposits and which are subsidiaries of a foreign bank. Examples include AMEX Bank of Canada, Citibank CanadaCitibank CanadaCitibank Canada is a unit of Citigroup of New York City. The Canadian unit has been operating since 1954, with Canadian headquarters in Toronto...
, HSBC Bank CanadaHSBC Bank CanadaHSBC Bank Canada, formerly the Hongkong Bank of Canada , is a bank in Canada that is part of British banking giant HSBC - one of the largest banking groups in the world. HSBC Canada is the seventh largest bank in Canada, with offices in every province except Prince Edward Island, and is the...
, ING Bank of Canada and Walmart Canada Bank. Like the Schedule I banks, the Schedule II banks are incorporated under the Bank Act.
- Schedule III: Foreign banks permitted to carry on business in Canada. Examples include Bank of AmericaBank of AmericaBank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
, Capital OneCapital OneCapital One Financial Corp. is a U.S.-based bank holding company specializing in credit cards, home loans, auto loans, banking and savings products...
, Credit SuisseCredit SuisseThe Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
and Deutsche Bank AG. Unlike the Schedule I and Schedule II banks, the Schedule III banks are NOT incorporated under the Bank Act and they operate in Canada, usually within the country's largest cities (being TorontoTorontoToronto is the provincial capital of Ontario and the largest city in Canada. It is located in Southern Ontario on the northwestern shore of Lake Ontario. A relatively modern city, Toronto's history dates back to the late-18th century, when its land was first purchased by the British monarchy from...
, MontrealMontrealMontreal is a city in Canada. It is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest in North America...
, CalgaryCalgaryCalgary is a city in the Province of Alberta, Canada. It is located in the south of the province, in an area of foothills and prairie, approximately east of the front ranges of the Canadian Rockies...
and VancouverVancouverVancouver is a coastal seaport city on the mainland of British Columbia, Canada. It is the hub of Greater Vancouver, which, with over 2.3 million residents, is the third most populous metropolitan area in the country,...
), under certain restrictions mentioned in the Act.
The bank regulator is the Office of the Superintendent of Financial Institutions
Office of the Superintendent of Financial Institutions
The Office of the Superintendent of Financial Institutions is an independent agency of the Government of Canada reporting to the Minister of Finance created "to contribute to public confidence in the Canadian financial system"...
(best known as OSFI), whose authority stems from the Bank Act. The financial groups are also governed by regulatory bodies (bank regulators, securities regulators, insurance regulators, etc.) in each country they operate in.
See also
:Category:Banking in Canada- Canadian and American economies compared#Banking
Links
- Bank Act, S.C. 1991, c.46, Department of Justice, URL accessed 2 November 2006
- OSFI website, Office of the Superintendent of Financial Institutions, URL accessed 2 November 2006