Banking in Canada is widely considered the most
efficient and safest banking system in the world, ranking as the
world's soundest banking system according to a 2008 World Economic
Forum report.
According to the Department of Finance,
Canada
’s banks, also called chartered
banks, have over 8,000 branches and almost 18,000 automated teller 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".
History
Origins
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.
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 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.
Canadian Banks
First Canadian Place
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
Mouvement Desjardins
(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
The "Big Five" Banks
Unlike the smaller Canadian banks, the
Big Five 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.
[333252] 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*
|
RBC |
TD |
BMO |
BNS |
CIBC |
| Year Founded |
1864 -
Halifax, Nova
Scotia |
1955;
Bank of Toronto 1857; Dominion Bank 1869 - Toronto,
Ontario |
1817 -
Montreal,
Quebec |
1832 -
Halifax, Nova
Scotia |
1961;
1867 Canadian Bank of
Commerce 1867 and 1875 Imperial Bank of Canada - Toronto,
Ontario |
| Original Name |
Merchants' Bank of
Halifax |
Bank of Toronto, Dominion Bank |
Bank of Montreal |
Bank of Nova Scotia |
Canadian Bank of
Commerce and Imperial Bank
of Canada |
| Head Office |
Toronto, Ontario; Montreal,
Quebec - legal |
Toronto, Ontario |
Toronto, Ontario; Montreal,
Quebec - legal |
Toronto, Ontario |
Toronto, Ontario |
| Parent legal name |
Royal Bank of Canada |
Toronto-Dominion Bank |
Bank of Montreal |
Bank of Nova Scotia |
Canadian Imperial
Bank of Commerce |
| Group brand |
RBC |
TD Bank Financial
Group |
BMO Financial Group |
Scotiabank Group |
CIBC |
| Canadian retail banking |
RBC Royal Bank |
TD Canada Trust |
BMO Bank of Montreal |
Scotiabank |
CIBC |
| U.S. retail banking |
RBC Bank |
TD Bank |
Harris Bank |
None |
None - Amicus Bank'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 |
| Private banking |
RBC Wealth Management |
TD Waterhouse Private
Banking |
BMO Harris Private
Banking |
Scotia Private Client
Group |
CIBC Private Banking |
| Canadian
mutual funds |
RBC Funds and PH&N Funds |
TD Mutual Funds |
BMO Mutual Funds and Guardian Group of Funds |
Scotia Mutual Funds |
CIBC Mutual Funds |
| U.S. mutual
funds |
Tamarack Funds |
|
|
|
|
| Canadian brokerage |
RBC Direct Investing and
RBC Dominion Securities |
TD Waterhouse |
BMO InvestorLine and BMO Nesbitt Burns |
ScotiaMcLeod |
CIBC Investor's Edge and
CIBC Wood Gundy |
| U.S. brokerage |
RBC Wealth Management
formerly RBC Dain Rauscher |
TD Ameritrade (45%) |
BMO Harris Investor
Services |
|
|
| International Brokerage |
West Indies
Stockbrokers Limited |
TD Waterhouse (UK) |
|
|
|
| Canadian insurance |
RBC Insurance |
TD Insurance |
BMO Life |
Scotia Insurance |
CIBC Insurance |
| U.S. insurance |
RBC Insurance |
TD Insurance |
|
|
|
| Capital markets |
RBC Capital Markets |
TD Securities |
BMO Capital Markets |
Scotia Capital |
CIBC World Markets |
| Major custodial operations |
RBC Dexia (50%) |
|
|
|
CIBC Mellon (50%) |
| Precious metals |
|
|
|
ScotiaMocatta |
|
*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.
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 (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
Canada, Laurentian Bank of
Canada and Canadian Western
Bank. 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 interest described and provided
for under the Bank Act and known to Canadian lawyers and
bankers as the "Bank Act security".
- Schedule III: Foreign banks permitted to carry
on business in Canada. Examples include Bank of America, Capital One, Credit
Suisse 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 Toronto
, Montreal
and Vancouver
), under certain restrictions mentioned in the
Act.
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.
See also
References
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