Big Five banks
Encyclopedia
Big Five is the name colloquially given to the five largest bank
s 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. The banks' shares are widely held, with any entity allowed to hold a maximum of twenty percent.
on the Toronto Stock Exchange
as of December 21, 2010, with their current corporate brand names and corporate profiles according to their latest annual report, all monetary amounts are in billions of Canadian dollar
s, are:
In modern history, Royal Bank has always been the largest by a significant margin. Up to the late 1990s, CIBC was the second largest, followed by Bank of Montreal, Scotiabank, and TD Bank. During the late 1990s and beyond, this ranking changed due to several reorganizations. Royal Bank acquired Royal Trust, then the second-largest trust in Canada, in 1993, while Scotiabank purchased National Trust in 1997. As Scotiabank found no merger partners among the other banks in the big five group, it instead expanded its international operations and passed the Bank of Montreal in size. TD Bank merged with Canada Trust
, which was for a long time the largest trust in Canada, thus vaulting TD temporarily into the number two spot. While there were no major changes to Bank of Montreal, CIBC's unsuccessful foray into the US market led it to shed its assets there, dropping it to the number five spot.
The term Big Six Banks is frequently used as well. The "Big Six" also includes the National Bank of Canada
which is the sixth largest bank in Canada and the leading bank in Quebec. The National Bank was listed as the strongest bank in North America and ranked third in the world in the June 2011 issue of Bloomberg Markets Magazine (in the June 2011 Bloomberg rating, CIBC was rated second-strongest in North America, and fourth place worldwide). It has branches in most Canadian provinces. The Big Six chartered banks participate in the Large Value Transfer System
(LVTS) together with eight other banks (including the Bank of Canada
).
This would have left Canada with only three major national banks. Thus, the mergers were reviewed by the Competition Bureau of Canada. The Competition Bureau declared that negative effects (such as higher user fees and local branch closures) from the mergers would far outweigh the benefits of allowing the mergers. Ultimately, it was then Finance Minister
Paul Martin
who rejected both proposed mergers. The issue since has not been revisited by succeeding Finance Ministers.
Due to the recent 2007 Subprime mortgage financial crisis, Royal Bank of Canada has now eclipsed Morgan Stanley
in terms of market valuation. According to figures compiled by a recent Bloomberg report, investors today are willing to pay about $2.60 for every dollar of book value at a Canadian bank, compared with $1.70 in the United States. That ratio is about the reverse of where it stood in late 1999.
The last time the U.S. financial markets were weak, many Canadian bank CEOs were criticized for not making a more concerted buying effort. Some believed that these CEOs preferred to wait for Ottawa to bless domestic mergers before expanding into the US. The federal government ended up refusing to allow the mergers, and is unlikely to do so now. Analysts also pointed out that Canadian banks have much stronger balance sheets today than they did 10 or 15 years ago, putting them in an even better position to be aggressive.
In October 2007, TD purchased Commerce Bancorp
, a medium sized US bank with a strong branch network
in the middle Atlantic and Florida.
As of March 2008, their stated plan was to merge Commerce with their existing TD Banknorth subsidiary, calling the new bank TD Commerce Bank. However, the name was challenged by a "Commerce Bank" in New England. As a result, TD renamed its US banks TD Bank at end of 2009. TD is the sixth-largest bank by branch network in North America, after JPMorgan, Bank of America, Wells Fargo, PNC, and US Bank.
Under the new legislation an individual investor will now be permitted to own up to 20 per cent of any class of voting shares of a widely held bank and up to 30 per cent of any class of non-voting shares, subject only to a “fit and proper” test designed to evaluate the applicant’s character and suitability. This will allow widely held banks to enter into strategic alliances and joint ventures involving significant share exchanges. At the same time, the Bank Act will continue to prohibit control of a large financial institution by any single shareholder or group of shareholders. The Government has signalled its intention to issue guidelines that will clarify for investors and institutions the factual criteria and policy objectives to be taken into consideration in assessing control. The Government will be developing these guidelines in consultation with representatives of financial institutions and the broader investment community.
The new framework also enables banks to organize under a regulated holding-company structure that provides them with greater flexibility to compete with large specialized or unregulated firms. Both holding companies and banks structured along the traditional parent-subsidiary model are permitted to have a broader range of investments than under the previous regime.
Furthermore, the previous regime of Schedule I and Schedule II banks is now replaced by a new size-based ownership regime under which:
The new size-based ownership regime also allows for the creation of community-based banks with services tailored to the needs of a specific clientele. These banks will still be able to compete with the major banks in local or regional markets. The new regime also allows commercial enterprises (for example, those with a significant retail presence) to own a bank.
To encourage competition, the legislation also reduces the minimum capital requirement to start a bank from $10 million to $5 million.
In support of these various initiatives, the policy framework also contains provisions to ensure that financial institutions continue to manage their risks prudently. To this end, the Superintendent of Financial Institutions has been given additional supervisory powers to deal with institutions that do not meet certain supervisory or regulatory requirements. These include the power to remove directors and senior officers of a bank in instances of misconduct, and the power to administer financial penalties against institutions and individuals that do not comply with undertakings or violate the legislation and regulations governing financial institutions.
The framework also includes merger review guidelines that outline a formal and transparent review process for merger proposals between banks with equity in excess of $5 billion. This new process consists of a review of the merger proposal by the Competition Bureau, the Office of the Superintendent of Financial Institutions and the Department of Finance, and of a full public review by the House of Commons Standing Committee on Finance and the Standing Senate Committee on Banking, Trade and Commerce.
Bill C-8 also contains consumer protection measures as well as measures to ensure that the regulatory environment responds to the evolution of the sector in today’s rapidly changing marketplace. The Financial Consumer Agency of Canada will be established to enforce the consumer-oriented provisions of the federal financial institution statutes, to monitor the industry’s self-regulatory initiatives designed to protect the interests of consumers and small businesses, to promote consumer awareness and to respond to general consumer inquiries. This will consolidate and strengthen existing oversight activities in a dedicated new agency.
A new Canadian Financial Services Ombudsman was also established to handle consumer and small business complaints related to dealings with financial institutions. This independent body operates at arm’s-length from government and the financial sector, and a majority of the members of its board of directors are from outside the financial services sector. This organization eventually evolved to become the Ombudsman for Banking Services and Investments (OBSI).
Additional consumer protection measures include better access to basic financial services, the provision of low-cost accounts, notice provisions for branch closures, and a broadening of the existing Bank Act provision on coercive tied selling. Moreover, federal financial institutions with equity in excess of $1 billion will be required to provide annual public accountability statements that describe their contributions to the Canadian economy and society.
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s that dominate the banking industry of 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...
. The five banks are operationally headquartered in Toronto
Toronto
Toronto 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...
, Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
. They are all classified as Schedule I banks that are domestic banks operating in Canada under government charter. The banks' shares are widely held, with any entity allowed to hold a maximum of twenty percent.
Overview
The Big Five banks, listed in order of market capitalizationMarket capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
on the Toronto Stock Exchange
Toronto Stock Exchange
Toronto Stock Exchange is the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalisation. Based in Canada's largest city, Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities...
as of December 21, 2010, with their current corporate brand names and corporate profiles according to their latest annual report, all monetary amounts are in billions of Canadian dollar
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...
s, are:
| Official names | Bank brand | Headquarters | Assets | Deposits | Capitalization | Branches (Canada only) |
Employees (Full-time equivalent) |
Reference |
|---|---|---|---|---|---|---|---|---|
| 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,... Banque Royale du Canada |
RBC Royal Bank RBC Banque Royale |
Montreal Montreal Montreal 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... (legal) Toronto Toronto Toronto 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... (operational) |
$726.2 | $433.0 | $74.6 | 1,209 | 72,126 | |
| 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... Banque Toronto-Dominion |
TD Canada Trust | Toronto Toronto Toronto 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... |
$619.5 | $430.0 | $65.3 | 1,127 | 65,930 | |
| Bank of Nova Scotia 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,... Banque de Nouvelle-Écosse |
Scotiabank Banque Scotia |
Toronto Toronto Toronto 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... (operational) Halifax (domicile) |
$526.7 | $361.7 | $59.6 | 1,024 | 70,772 | |
| 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... Banque de Montréal |
BMO Bank of Montreal BMO Banque de Montréal |
Montreal Montreal Montreal 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... (legal) Toronto Toronto Toronto 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... (operational) |
$411.6 | $249.3 | $32.6 | 913 | 37,947 | |
| 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.... Banque Canadienne Impériale de Commerce |
CIBC | Toronto Toronto Toronto 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... |
$352.0 | $246.7 | $30.8 | 1,076 | 42,354 |
In modern history, Royal Bank has always been the largest by a significant margin. Up to the late 1990s, CIBC was the second largest, followed by Bank of Montreal, Scotiabank, and TD Bank. During the late 1990s and beyond, this ranking changed due to several reorganizations. Royal Bank acquired Royal Trust, then the second-largest trust in Canada, in 1993, while Scotiabank purchased National Trust in 1997. As Scotiabank found no merger partners among the other banks in the big five group, it instead expanded its international operations and passed the Bank of Montreal in size. TD Bank merged with Canada Trust
Canada Trust
CT Financial Services Inc. was a trust company that was founded in London, Ontario and later had its headquarters in Toronto, Ontario and operated in Canada through subsidiaries including Canada Trustco Mortgage Company and The Canada Trust Company...
, which was for a long time the largest trust in Canada, thus vaulting TD temporarily into the number two spot. While there were no major changes to Bank of Montreal, CIBC's unsuccessful foray into the US market led it to shed its assets there, dropping it to the number five spot.
The term Big Six Banks is frequently used as well. The "Big Six" also includes 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....
which is the sixth largest bank in Canada and the leading bank in Quebec. The National Bank was listed as the strongest bank in North America and ranked third in the world in the June 2011 issue of Bloomberg Markets Magazine (in the June 2011 Bloomberg rating, CIBC was rated second-strongest in North America, and fourth place worldwide). It has branches in most Canadian provinces. The Big Six chartered banks participate in the Large Value Transfer System
Large Value Transfer System
The Large Value Transfer System, or LVTS, is a system in Canada for electronic wire transfers of large sums of money; it permits the participating institutions and their clients to send large sums of money securely in real-time with complete certainty that the payment will settle...
(LVTS) together with eight other banks (including 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...
).
Other banks with substantial operations in Canada
All monetary amounts are in billions C$| Official names | Headquarters | Assets | Deposits | Capitalization | Branches (Canada only) |
Employees (Full-time equivalent) |
Reference |
|---|---|---|---|---|---|---|---|
| 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.... Banque Nationale du Canada |
Montreal Montreal Montreal 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... |
$145.3 | $81.8 | $11.1 | 442 | 18,322 | |
| 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... Banque HSBC Canada |
Vancouver Vancouver Vancouver 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,... |
$71.3 | $50.2 | 145 | 6000 | ||
| Laurentian Bank of Canada Laurentian Bank of Canada The Laurentian Bank of Canada is a Schedule I bank in the province of Quebec. . LBC's Institution Number is 039.-History:... Banque Laurentienne du Canada |
Montreal Montreal Montreal 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... |
$23.8 | $19.7 | $1.1 | 157 | 3,643 | |
| Vancity Vancity Vancouver City Savings Credit Union, commonly referred to as Vancity, is a member-owned financial institution in Vancouver, British Columbia and the largest English-speaking credit union in Canada... |
Vancouver Vancouver Vancouver 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,... |
$14.5 | $12.8 | 62 | 2,397 | ||
| Canadian Western Bank Canadian Western Bank The 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:... |
Edmonton Edmonton Edmonton is the capital of the Canadian province of Alberta and is the province's second-largest city. Edmonton is located on the North Saskatchewan River and is the centre of the Edmonton Capital Region, which is surrounded by the central region of the province.The city and its census... |
$12.7 | $10.8 | $1.9 | 39 | 1,716 |
Proposed mergers
In 1998, the Bank of Montreal proposed a merger with Royal Bank around the same time that CIBC proposed to combine with the Toronto-Dominion Bank. The banks argued that these mergers would enable them to compete globally with other financial institutions.This would have left Canada with only three major national banks. Thus, the mergers were reviewed by the Competition Bureau of Canada. The Competition Bureau declared that negative effects (such as higher user fees and local branch closures) from the mergers would far outweigh the benefits of allowing the mergers. Ultimately, it was then Finance Minister
Minister of Finance (Canada)
The Minister of Finance is the Minister of the Crown in the Canadian Cabinet who is responsible each year for presenting the federal government's budget...
Paul Martin
Paul Martin
Paul Edgar Philippe Martin, PC , also known as Paul Martin, Jr. is a Canadian politician who was the 21st Prime Minister of Canada, as well as leader of the Liberal Party of Canada....
who rejected both proposed mergers. The issue since has not been revisited by succeeding Finance Ministers.
Potential foreign forays
The strength of the Canadian dollar and relative weakness of U.S. bank prices have led commentators to suggest that the big five banks could consider an expansion into the United States. The weakness of the Canadian dollar, as well as high U.S. bank stock prices, were commonly cited as obstacles to purchasing assets south of the border.Due to the recent 2007 Subprime mortgage financial crisis, Royal Bank of Canada has now eclipsed Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
in terms of market valuation. According to figures compiled by a recent Bloomberg report, investors today are willing to pay about $2.60 for every dollar of book value at a Canadian bank, compared with $1.70 in the United States. That ratio is about the reverse of where it stood in late 1999.
The last time the U.S. financial markets were weak, many Canadian bank CEOs were criticized for not making a more concerted buying effort. Some believed that these CEOs preferred to wait for Ottawa to bless domestic mergers before expanding into the US. The federal government ended up refusing to allow the mergers, and is unlikely to do so now. Analysts also pointed out that Canadian banks have much stronger balance sheets today than they did 10 or 15 years ago, putting them in an even better position to be aggressive.
In October 2007, TD purchased Commerce Bancorp
Commerce Bancorp
TD Bank, N.A., is a national banking institution in the United States which offers banking, insurance, brokerage, and investment banking services in Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, South Carolina,...
, a medium sized US bank with a strong branch network
in the middle Atlantic and Florida.
As of March 2008, their stated plan was to merge Commerce with their existing TD Banknorth subsidiary, calling the new bank TD Commerce Bank. However, the name was challenged by a "Commerce Bank" in New England. As a result, TD renamed its US banks TD Bank at end of 2009. TD is the sixth-largest bank by branch network in North America, after JPMorgan, Bank of America, Wells Fargo, PNC, and US Bank.
Banking regulation
The new framework includes revised ownership rules for banks and a new size-based ownership regime. Under the previous framework, a distinction was drawn between Schedule I and Schedule II banks (see Annex 1 for a list of these banks). Shares of Schedule I banks were required to be widely held, with no single shareholder or group of shareholders holding more than 10 per cent of any class of shares, while Schedule II banks could be owned by eligible Canadian or foreign financial institutions.Under the new legislation an individual investor will now be permitted to own up to 20 per cent of any class of voting shares of a widely held bank and up to 30 per cent of any class of non-voting shares, subject only to a “fit and proper” test designed to evaluate the applicant’s character and suitability. This will allow widely held banks to enter into strategic alliances and joint ventures involving significant share exchanges. At the same time, the Bank Act will continue to prohibit control of a large financial institution by any single shareholder or group of shareholders. The Government has signalled its intention to issue guidelines that will clarify for investors and institutions the factual criteria and policy objectives to be taken into consideration in assessing control. The Government will be developing these guidelines in consultation with representatives of financial institutions and the broader investment community.
The new framework also enables banks to organize under a regulated holding-company structure that provides them with greater flexibility to compete with large specialized or unregulated firms. Both holding companies and banks structured along the traditional parent-subsidiary model are permitted to have a broader range of investments than under the previous regime.
Furthermore, the previous regime of Schedule I and Schedule II banks is now replaced by a new size-based ownership regime under which:
- large banks (banks with equity in excess of $5 billion) must remain “widely held” as outlined in the new definition;
- medium-sized banks (i.e., banks with equity between $1 billion and $5 billion) are allowed to have individual shareholdings of up to 65 per cent, with at least 35 per cent of voting shares being publicly held; and
- small banks (i.e., banks with equity of less than $1 billion) have no ownership restrictions other than “fit and proper” tests.
The new size-based ownership regime also allows for the creation of community-based banks with services tailored to the needs of a specific clientele. These banks will still be able to compete with the major banks in local or regional markets. The new regime also allows commercial enterprises (for example, those with a significant retail presence) to own a bank.
To encourage competition, the legislation also reduces the minimum capital requirement to start a bank from $10 million to $5 million.
In support of these various initiatives, the policy framework also contains provisions to ensure that financial institutions continue to manage their risks prudently. To this end, the Superintendent of Financial Institutions has been given additional supervisory powers to deal with institutions that do not meet certain supervisory or regulatory requirements. These include the power to remove directors and senior officers of a bank in instances of misconduct, and the power to administer financial penalties against institutions and individuals that do not comply with undertakings or violate the legislation and regulations governing financial institutions.
The framework also includes merger review guidelines that outline a formal and transparent review process for merger proposals between banks with equity in excess of $5 billion. This new process consists of a review of the merger proposal by the Competition Bureau, the Office of the Superintendent of Financial Institutions and the Department of Finance, and of a full public review by the House of Commons Standing Committee on Finance and the Standing Senate Committee on Banking, Trade and Commerce.
Bill C-8 also contains consumer protection measures as well as measures to ensure that the regulatory environment responds to the evolution of the sector in today’s rapidly changing marketplace. The Financial Consumer Agency of Canada will be established to enforce the consumer-oriented provisions of the federal financial institution statutes, to monitor the industry’s self-regulatory initiatives designed to protect the interests of consumers and small businesses, to promote consumer awareness and to respond to general consumer inquiries. This will consolidate and strengthen existing oversight activities in a dedicated new agency.
A new Canadian Financial Services Ombudsman was also established to handle consumer and small business complaints related to dealings with financial institutions. This independent body operates at arm’s-length from government and the financial sector, and a majority of the members of its board of directors are from outside the financial services sector. This organization eventually evolved to become the Ombudsman for Banking Services and Investments (OBSI).
Additional consumer protection measures include better access to basic financial services, the provision of low-cost accounts, notice provisions for branch closures, and a broadening of the existing Bank Act provision on coercive tied selling. Moreover, federal financial institutions with equity in excess of $1 billion will be required to provide annual public accountability statements that describe their contributions to the Canadian economy and society.