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Home  »  Bank of Canada  »  Banking in Canada

Banking in Canada

 

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.

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'. 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.

 

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, President's Choice Financial 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'. There are 22 domestic banks as of October, 2010.

Schedule II: Banks allowed to accept deposits and which are subsidiaries of a foreign bank. Examples include AMEX Bank of Canada,
Citibank Canada, HSBC Bank Canada, ING Bank of Canada and Walmart Canada Bank. Like the Schedule I banks, the Schedule II banks are incorporated under the Bank Act. As of October 2010, there were 25 of these banks in Canada, however 4 are in liquidation.

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, Calgary and Vancouver), under certain restrictions mentioned in the Act. As of October 2010, there were 23 such banks in Canada.

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.

 
 

Schedule I Banks (Domestic Banks)

Bank of Montreal CS Alterna Bank Manulife Bank of Canada
Bank of Nova Scotia DirectCash Bank National Bank of Canada
Bank West Dundee Bank of Canada Pacific & Western Bank of Canada
Bridgewater Bank First Nations Bank of Canada President's Choice Bank
Canadian Imperial Bank of Commerce General Bank of Canada Royal Bank of Canada
Canadian Tire Bank HomEquity Bank Toronto-Dominion Bank
Canadian Western Bank Jameson Bank    
Citizens Bank of Canada Laurentian Bank of Canada    

Schedule II Banks (Canadian Banks that are Subsidiaries of Foreign Banks)

AMEX Bank of Canada Habib Canadian Bank Mega International Commercial Bank (Canada)
Bank of America Canada (VL) HSBC Bank Canada Mizuho Corporate Bank (Canada)
Bank of China (Canada) ICICI Bank Canada Shinhan Bank Canada
Bank of Tokyo-Mitsubishi UFJ (Canada) ICBC (Canada) Société Générale (Canada)
Bank One Canada (VL) ING Bank of Canada State Bank of India (Canada)
BNP Paribas (Canada) JP Morgan Bank Canada Sumitomo Mitsui Banking Corporation of Canada
Citco Bank Canada Korea Exchange Bank of Canada UBS Bank (Canada)
Citibank Canada MBNA Canada Bank Walmart Canada Bank
CTC Bank of Canada        

Schedule III Banks (Foreign Banks with Branches in Canada)

Bank of America, N.A Fifth Third Bank Northern Trust Company, Canada Branch
Barclays Bank First Commercial Bank Rabobank Nederland
Bank of New York Mellon Glitnir banki hf. Royal Bank of Scotland N.V
Capital One Bank (Canada Branch) HSBC Bank USA N.A State Street Bank
Citibank N.A (Canada Branch) JP Morgan Chase Bank N.A Société Générale (Canada Branch)
Comerica Bank M&T Bank U.S. Bank N.A
Deutsche Bank AG Maple Bank UBS AG (Canada Branch)
Dexia Crédit Local S.A

Mizuho Corporate Bank, Ltd., Canada Branch United Overseas Bank Limited

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