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Encyclopedia > Banking in Canada

Banking in Canada is one of the most efficient and safest banking systems in the world. According to the Ministry of Finance, Canada’s banks have over 8,000 branches and almost 18,000 automated banking machines (ABMs) 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". An NCR interior, multi-function ATM in the USA Smaller indoor ATMs dispense money inside convenience stores and other busy areas, such as this off-premise Wincor Nixdorf mono-function ATM in Sweden An on-premise NCR interior, multi-function through-the-wall ATM at a CIBC branch in Canada... This article needs cleanup. ... Online banking (Internet banking) is a term used for performing transactions, payments etc. ...

Contents


History

Origins

View of a ScotiaBank facade in Amherst, Nova Scotia. This structure was erected in 1907.
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View of a ScotiaBank facade in Amherst, Nova Scotia. This structure was erected in 1907.

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 The Nova Scotia welcome centre in Amherst, Nova Scotia Amherst is a town in Cumberland County, Nova Scotia, Canada, approximately 194 kilometres northwest of Halifax, Nova Scotia and 3 kilometres from the New Brunswick border. ... Bank of Montreal TSX: BMO NYSE: BMO is Canadas fifth largest and the oldest chartered bank. ... For other uses, see Bank (disambiguation). ... The British North America Acts 1867–1975 are a series of Acts of the British Parliament dealing with the government of Canada. ... The Bank of Canada Building in Ottawa The Bank of Canada is Canadas central bank. ... Banking system in early Canada (British North American and New France)was non existence, so money was managed by the military and the crown. ...


Despite various loss events (such as the Latin American debt crisis, the collapse of Olympia and York, and Enron-related liabilities), the big five banks have proven to be safe and stable companies. For example, in securities prospectuses the Royal Bank of Canada says it has paid a dividend in every year since 1870, the year after it received its banking charter. The Latin American debt crisis refers to a period in the early 1980s (and for some countries starting in the 1970s) where countries in the region reached a point where their foreign debt exceeded their earning power and they were not able to repay it. ... Olympia and York was a major property firm. ... Enron Corporation is an American energy company based in Houston, Texas, United States. ... The Royal Bank of Canada (TSX: RY, NYSE: RY) is Canadas largest chartered bank. ... 1870 (MDCCCLXX) was a common year starting on Saturday (see link for calendar) of the Gregorian calendar or a common year starting on Monday of the 12-day-slower Julian calendar. ...


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. The Home Bank of Canada was a Canadian bank that was incorporated 1903 in Montreal. ... The Great Depression was a worldwide economic downturn, starting in 1929 (although its effects were not fully felt until late in 1930) and lasting through most of the 1930s. ...


Recent history

In the 1980's and 1990's, 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. ING Direct Canada is the marketing name of ING Bank of Canada, a branchless bank in Canada founded in 1997. ...


Canadian banks

First Canadian Place
First Canadian Place

Banks in Canada are generally referred to in two categories: the five large national banks, and smaller second tier banks. Image File history File links Download high resolution version (672x1023, 131 KB)Taken by SimonP in April 2005 File history Legend: (cur) = this is the current file, (del) = delete this old version, (rev) = revert to this old version. ... Image File history File links Download high resolution version (672x1023, 131 KB)Taken by SimonP in April 2005 File history Legend: (cur) = this is the current file, (del) = delete this old version, (rev) = revert to this old version. ...


The largest five banks in Canada are the Royal Bank of Canada, the Toronto Dominion Bank, the Bank of Montreal, the Bank of Nova Scotia, and the Canadian Imperial Bank of Commerce. 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 largley 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 Royal Bank of Canada (TSX: RY, NYSE: RY) is Canadas largest chartered bank. ... The Toronto-Dominion Bank (or TD Bank) offers a range of financial products and services. ... Bank of Montreal TSX: BMO NYSE: BMO is Canadas fifth largest and the oldest chartered bank. ... Founded in Halifax, Nova Scotia in 1832, the Bank launched its branch banking system by opening in Windsor, Nova Scotia. ... The Canadian Imperial Bank of Commerce TSX: CM NYSE: BCM, better known to most customers as CIBC, is one of Canadas major banks. ... National Bank of Canada is the sixth largest bank in Canada, and so is one of the Big Six banks. ... The Mouvement Desjardins (Desjardins Movement or Desjardins Group in English) is the largest association of credit unions in North America. ... A credit union is a co-operative financial institution that is owned, controlled and administered by its members. ... 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. ... ING Direct Canada is the marketing name of ING Bank of Canada, a branchless bank in Canada founded in 1997. ... // Government Bank of Canada (Central Bank) Business Development Bank of Canada “Big six” banks Royal Bank of Canada Toronto-Dominion Bank Canadian Imperial Bank of Commerce Bank of Montreal Bank of Nova Scotia National Bank of Canada Many of these banks have diversified into financial services that used to be...


The Big Five banks

Unlike the smaller Canadian banks, the big five are not just Canadian banks, but are instead better described as large financial conglomerates, each with a large Canadian banking division. Some of the other divisions form large parts of their overall activities and financial results. For example, RBC, TD, and CIBC are all in the top 5 for mutual fund market share in Canada. The Canadian banking operations of the big five are conducted out of each parent company, unlike U.S. banks that use a holding company structure to hold their primary retail banking subsidiaries. In Canada, the term Big Five Banks is frequently used to refer to the five biggest banks that dominate the banking industry in Canada: Royal Bank of Canada, CIBC, Toronto-Dominion Bank, Bank of Montreal and Bank of Nova Scotia. ... Conglomerate is: A large company; see conglomerate (company). ... A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. ... Market share, in strategic management and marketing, is the percentage or proportion of the total available market or market segment that is being serviced by a company. ...


Brands used by the big five by major financial service*

RBC TD BMO BNS CIBC
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 Financial Group TD Bank Financial Group BMO Financial Group Scotiabank Group CIBC
Canadian banking RBC Royal Bank TD Canada Trust BMO Bank of Montreal Scotiabank CIBC
U.S. banking RBC Centura TD Banknorth (51%) Harris
Other major international banking operations Royal Bank of Canada Global Private Banking (Channel Islands) Scotiabank International (in the Americas)
Canadian mutual funds RBC Funds TD Mutual Funds BMO Mutual Funds Scotia Mutual Funds CIBC Mutual Funds
Canadian brokerage RBC Action Direct 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 Dain Rauscher TD Ameritrade (32%) BMO Harris Investor Services
Canadian insurance RBC Insurance TD Insurance BMO Life Scotia Insurance CIBC Insurance
U.S. insurance RBC Insurance
Capital markets RBC Capital Markets TD Securities BMO Capital Markets Scotia Capital CIBC World Markets
Large custodial operations RBC Dexia (50%) CIBC Mellon (50%)

*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. RBC can mean: Real Business Cycle red blood cell Ripper-Burner-Converter Royal Bank of Canada RBC Center - indoor arena in Raleigh, North Carolina RBC Roosendaal,a Dutch football club This page concerning a three-letter acronym or abbreviation is a disambiguation page — a navigational aid which lists other pages... TD or td may stand for: Touchdown Chad, ISO 2-letter country code Tank destroyer Tardive dyskinesia, serious adverse effects usually caused by older antipsychotic drugs <td> (table cell delimiter tag), see HTML Teachta Dála, Member of lower house of Irish Parliament, Dáil Éireann Technical Director, cinematography and... BMO Bank of Montreal (TSX: BMO) (NYSE: BMO), formerly known as simply Bank of Montreal, is Canadas oldest chartered bank. ... Scotiabank (TSX: BNS) (NYSE: BNS), formally known as The Bank of Nova Scotia, is one of Canadas Big Six banks. ... CIBC (NYSE: BCM) is one of Canadas major banks. ... The Royal Bank of Canada (TSX: RY, NYSE: RY) is Canadas largest chartered bank. ... The Toronto-Dominion Bank TSX: TD NYSE: TD TYO: 8640 is the second largest Canadian bank with over 52,000 employees in offices around the world. ... Bank of Montreal TSX: BMO NYSE: BMO is Canadas fifth largest and the oldest chartered bank. ... Founded in Halifax, Nova Scotia in 1832, the Bank launched its branch banking system by opening in Windsor, Nova Scotia. ... The Canadian Imperial Bank of Commerce TSX: CM NYSE: BCM, better known to most customers as CIBC, is one of Canadas major banks. ... The Toronto-Dominion Bank (or TD Bank) offers a range of financial products and services. ... Bank of Montreal TSX: BMO NYSE: BMO is Canadas fifth largest bank, and is classified as a Domestic Chartered Bank (Schedule I). ... CIBC (NYSE: BCM) is one of Canadas major banks. ... TD Canada Trust is the personal, small business and commercial banking operation of The Toronto-Dominion Bank. ... Scotiabank (TSX: BNS NYSE: BNS), formally known as The Bank of Nova Scotia, is one of Canadas Big Five banks. ... CIBC (NYSE: BCM) is one of Canadas major banks. ... The Royal Bank of Canada (TSX: RY) (NYSE: RY) is Canadas largest chartered bank. ... TD Banknorth is a banking and insurance company serving primarily the northeastern area of the United States, with headquarters in Portland, Maine. ... Harris Bank was founded by N.W. Harris. ... The Royal Bank of Canada TSX: RY NYSE: RY is Canadas largest chartered bank. ... The Toronto-Dominion Bank (or TD Bank) offers a range of financial products and services. ... CIBC Wood Gundy was created in 1988 with the purchase of Wood Gundy Inc by CIBC. CIBC Wood Gundy is a division of CIBC World Markets. ... TD Ameritrade Holding Corporation is the owner of Ameritrade Inc. ... CIBC World Markets, is the investment banking division of the Canadian Imperial Bank of Commerce. ...


Safety and soundness

According to the World Economic Forum’s Global Competitiveness Report, Canada is tied with Australia for the soundest banking system in the world. The World Economic Forum (WEF) is a Geneva-based foundation whose annual meeting of top business leaders, national political leaders (presidents, prime ministers and others), and selected intellectuals and journalists is usually held in Davos, Switzerland. ...


Bank regulation

The Government of Canada has sole jurisdiction for banks while credit unions/caisses populaires, securities dealers and mutual funds are largely regulated by provincial governments. The bank regulator is the Office of the Superintendent of Financial Institutions (best known as OSFI). The financial groups are also governed by regulatory bodies (bank regulators, securities regulators, etc) in each country they operate in. The examples and perspective in this article or section may not represent a worldwide view. ...


Political governance

OSFI's authority stems from federal legislation, namely the Bank Act. Recent regulatory issues considered by federal politicians include:

  1. Bank mergers
    In 1998, the large Canadian banks sought approval for various mergers. These mergers were rejected by the then governing Liberal Party of Canada. The banks have expressed continuing interest in the subject as their global size ranking continues to fall in the face of large bank mergers taking place in other countries.
  2. Insurance distribution channels
    The large Canadian banks all have Canadian insurance subsidiaries but have been prevented from using their branch network to market insurance. The insurance company and insurance broker lobby has been vocal in opposing the banks in order to maintain their market share. The banks have noted that Canadians can buy insurance at any type of store except their primary financial service location and that they eliminate unnecessary middle-men (brokers) and, unlike the commission-paid brokers, the banks are motivated to serve under-insured lower-income customers with smaller insurance needs, while on the other side of the debate, insurance companies say it could ultimately reduce competition if insurance companies declined in prominence. The largest insurance companies in Canada are currently roughly the same size as the large Canadian banks.
  3. Mortgage insurance
    The government has recently approved 3 new entrants into the Canadian mortgage insurance market. This added PMI Mortgage Insurance Canada Company, Triad Guaranty Insurance Corporation Canada, and AIG United Guaranty Canada to the market that had been shared between Canada Mortgage and Housing Corporation (a federal government agency) and Genworth Financial Canada. The government has also moved to increase the loan-to-value limit on banks from 75% to 80% given the banks' increasing ability to securitize or self-insure risk themselves. Other countries such as the U.S. do not impose a loan-to-value limit on banks.

This is a list of some of the major banking company mergers since 1950 in the U.S. References Stephen A. Rhoades, Bank Mergers and Industrywide Structure, 1980-1994, Washington: Board of Governors of the Federal Reserve System, January 1996. ... The Liberal Party of Canada (French: Parti libéral du Canada), colloquially known as the Grits (originally Clear Grits), is a Canadian federal political party positioned around the centre of the political spectrum, combining a generally progressive social policy with moderate economics. ... Insurance is a system to alleviate financial losses by transferring risk of loss from one entity to another. ... An insurance broker sources (brokes) contracts of insurance on behalf of their customers. ... It has been suggested that this article or section be merged with Mortgage. ... American International Group, Inc. ... Canada Mortgage and Housing Corporation (CMHC) is a Canadian government agency. ... Genworth Financial is a financial services organization that offers of a portfolio of primarily consumer focused products, including life insurance, retirement income and investments, long term care, employer benefits, mortgage insurance and payment protection insurance. ... Loan to Value is an expression of the loan amount as a percentage of the total appraised value of a piece of real estate. ... Categories: Possible copyright violations ... Self insurance is a risk management method whereby an eligible risk is retained, but a calculated amount of money is set aside to compensate for the potential future loss. ...

See also

  • Category:Banking in Canada

References

  • Financial Institutions and Markets, Ministry of Finance, URL accessed 6 August 2006

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