Banking in Canada

The towers atBayandKing Streetin Toronto are home to four of Canada's five largest banks.

Banking in Canadais one of Canada's most important industries with severalbanksbeing among its largest and most profitable companies.

It is dominated by a small number of large banks, with the six largest combining for 93% of the banking assets.The two largest, theRoyal Bank of Canadaand theToronto Dominion Bankare among the world's 25 largest banks.It has been considered to be one of the safest and soundest banking systems in the world, and avoided major problems in theFinancial crisis of 2007–2008.

Canada's banks have high service levels and investments in technology. A report released by the office of theMinister of Financein 2002 states "Canada has the highest number of ATMs per capita in the world and benefits from the highest penetration levels of electronic channels such asdebit cards,Internet bankingandtelephone banking".More recent data published by theWorld Bankshows that as of 2017 Canada has 227.82 ATMs per 100,000 adults, which ranks the country third worldwide.

Early history

Main article:Early Canadian banking system

View of aScotiabankfacade inAmherst, 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 theBank of Montrealin 1817.Other banks soon followed and began business, and after a lengthy approval process began unregulatedbankingbusiness. These institutions issued their own local bank notes as currency. However throughout the 1850s and early 1860s a number ofbank failurescaused a loss of confidence in bank notes. The passing of The Provincial Notes Act in 1866allowed federal and provincial governments to begin to introduce their own notes. With theCanadian Confederationtaking place in 1867, the new Dominion government gained complete control over currency and banking.In 1871 the federal government passed theBank Actwhich started the process of bringing all charted banks in the country under common regulation. The establishment of theBank of Canadain 1935was also an important milestone in banking and monetary governance.

Ranking with other countries

A survey conducted by theWorld Economic Forumcalled the Global Competitiveness Report of twelve-thousand corporate executives, in 2008, concluded thatCanadahas the best banking system in the world, receiving a score of 6.8 out of possible seven.The Canadian banking system has long been regarded by industry experts to be one of the strongest and most stable banking systems in the world.

TheBank of Montrealhas been paying dividends to share holders every year since 1829 (195 years ago),Scotiabanksince 1833 (191 years ago),Toronto-Dominion Banksince 1857 (167 years ago),Canadian Imperial Bank of Commercesince 1868 (156 years ago)andRoyal Bank of Canadasince 1870 (154 years ago)respectively.

Bank failures

In Canada, only two small regional banks havefailedsince 1923 when theHome Bank of Canadafailed. This was bothCanadian Commercial BankandNorthland Bankin September 1985.To put this into perspective there were no bank failures in Canada during theGreat Depression,World War II,the1979 Energy Crisis,theDot-com Bubble,theSept 11th Attacksor theSubprime Mortgage Crisis.

On June 4, 1996, the Calgary-based Security Home Mortgage Corporation closed its doors for good. About 2,600 Canadians discovered that their savings were not immediately available from their financial institution, in which they had entrusted a total of $42 million in deposits.

Regulation

Canada's federal government has sole jurisdiction for banks according to theCanadian Constitution,specifically Section 91(15) ofThe Constitution Act, 1867(30 & 31 Victoria, c.3 (UK)), formerly known as theBritish 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, orchartered banks,is theBank 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 below); associated brands of the Big Five such asTangerineandSimplii Financial;and smaller second-tier banks such asNational Bank of Canada,Laurentian Bank of Canada,andCanadian 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 specialsecurity interestdescribed and provided for under theBank Actand 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 includeAMEX Bank of Canada,Bank of China (Canada),Citibank Canada,HSBC Bank Canada,ICICI Bank Canada andWalmart Canada Bank.Like the Schedule I banks, the Schedule II banks are incorporated under theBank Act.
• Schedule III:Foreign banks permitted to carry on business in Canada. Examples includeCitibank N.A.,Bank of America,Capital One,Credit SuisseandDeutsche Bank AG.Unlike the Schedule I and Schedule II banks, the Schedule III banks are NOT incorporated under theBank Actand they operate in Canada, usually within the country's largest cities (being Toronto,Montreal,CalgaryandVancouver), under certain restrictions mentioned in theBank Act.

The bank regulator is theOffice of the Superintendent of Financial Institutions(best known asOSFI),whose authority stems from theBank Act.The financial groups are also governed by regulatory bodies (bank regulators, securities regulators, insurance regulators, etc.) in each country in which they operate.

Largest banks

See also:List of banks and credit unions in Canada

Big Five

Main article:Big Five banks of Canada

The top five Canadian banks are collectively referred to as the "Big Five" due to their dominant position and significant influence within the country's banking and financial industry. This term has been used for many years to characterize these major banks, and it highlights their substantial market share and impact on Canada's economy. The financial sector of Canada is especially concentrated in these banks, which has been seen as a result ofprotectionistpolicies of the government and the country's small and dispersed population. These banks grew at an extraordinary rate of 10.7 percent per year, on average, from 2008 to 2018 compared with 3.64 percent for the five largest U.S. banks.While most Canadian banks operate only within Canada, the Big Five are best described as Canadian multinational financialconglomeratesthat each have a large Canadian banking division.

Name	Corporate Headquarters	Head Office	Market capitalization (2023) (CAD) (Billions)	Revenue (2023) (CAD) (Billions)	Net income (2023) (CAD) (Billions)	Employees (FTE)	Source
Royal Bank of Canada	Toronto,Ontario	Montreal,Quebec	187.21$	53.66$	14.86$	95,000+
Toronto-Dominion Bank	Toronto,Ontario	Toronto,Ontario	154.21$	49.20$	10.78$	103,257
Bank of Montreal	Toronto,Ontario	Montreal,Quebec	93.86$	29.02$	4.37$	55,767
Scotiabank	Toronto,Ontario	Toronto,Ontario	76.32$	29.25$	7.41$	89,483
Canadian Imperial Bank of Commerce	Toronto,Ontario	Toronto,Ontario	59.31$	21.31$	5.00$	48,074

Big Six

When people talk about Canada’s Big Six banks, they’re including National Bank of Canada, which focuses primarily on servicing Quebec and New Brunswick. Despite being a regional player, National Bank is the country’s sixth-largest bank.

Name	Corporate Headquarters	Head Office	Market capitalization (2023) (CAD) (Billions)	Revenue (2023) (CAD) (Billions)	Net income (2023) (CAD) (Billions)	Total assets (2023) (CAD) (Billions)	Employees (FTE)	Source
National Bank of Canada	Montreal,Quebec	Montreal,Quebec	29.2$	10.2$	3.34$	424$	31,243

Other large banks (excluding Big Six)

Name	Corporate Headquarters	Head Office	Market capitalization (2023) (CAD) (Billions)	Revenue (2023) (CAD) (Billions)	Net income (2023) (CAD) (Millions)	Total assets (2023) (CAD) (Billions)	Employees (FTE)	Source
Equitable Bank	Toronto,Ontario	Toronto,Ontario	3.30$	0.785$	270$	103$	1,685
Laurentian Bank	Montreal,Quebec	Montreal,Quebec	1.18$	1.03$	181$	49.9$	3,000

Importance of Canada's financial institutions

Domestic systemically important bank (D-SIB)

A domestic systemically important bank (D-SIB) is a bank that could disrupt the domestic economy should it fail. Canada's Big Six are designated as D-SIBs. D-SIBs are so important to the functioning of the financial system and the economy that they cannot be wound up under a conventional bankruptcy and liquidation process should they fail. The failure of any one of Canada’s D-SIBs, with the potential loss of financial services, even for a short period of time, could have a serious impact on Canada’s economy.

Desjardins

TheAutorité des marchés financiers,which oversees Quebec’s financial sector, designatedDesjardins Groupas a D-SIB.

Global systemically important bank (G-SIB)

A global systemically important bank is bank whose systemic risk profile is deemed to be of such importance that the bank’s failure would trigger a wider financial crisis and threaten the global economy. TheBasel Committeehas developed a formula for determining which banks are G-SIBs, deploying criteria including size, interconnectedness and complexity. National regulators subject banks determined to be G-SIBs to stricter prudential regulation such as higher capital requirements and extra surcharges, or more stringent stress tests.

In Canada, theOffice of the Superintendent of Financial InstitutionsdesignatedRoyal Bank of CanadaandToronto-Dominion Bankas G-SIBs as well as D-SIBs.

Business lines of banks

While most Canadian banks operate only within Canada, the Big Five are best described as Canadian multinational financialconglomeratesthat each have 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 onlyCAD$5,082 million (or 22.6%) of a total revenue ofCAD$22,462 million.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.

Name	Canadian Retail Banking	CanadianDirect Banking	Canadian Brokerage	US Retail Banking	Private Banking	Investment Bank	Source(s)
Royal Bank of Canada	RBC Royal Bank		RBC Direct Investing	-RBC Bank -City National Bank	RBC Wealth Management	RBC Capital Markets
Toronto-Dominion Bank	TD Canada Trust		TD Direct Investing (Division of TD Waterhouse)	TD Bank	TD Wealth Private Investment Advice (Division of TD Waterhouse)	TD Securities
Bank of Montreal	BMO Bank of Montreal		BMO InvestorLine Self-Directed	BMO Harris Bank	BMO Private Wealth	BMO Capital Markets
Scotiabank	Scotiabank	Tangerine	Scotia iTRADE	Scotiabank	Scotia Wealth Management	Scotia Capital (Division of Scotiabank Global Banking and Markets)
Canadian Imperial Bank of Commerce	CIBC	Simplii Financial	CIBC Investor's Edge	CIBC Bank USA	CIBC Private Wealth	CIBC Capital Markets
National Bank of Canada	NBC		National Bank Direct Brokerage (NBDB)		NBI Private Wealth Management	National Bank Investments
Equitable Bank		EQ Bank

Financial crisis of 2008

During the peak of the2008 financial crisis,theBank of Canada,along with theCanada Mortgage and Housing Corporationand theUS Federal Reserveprovided up to $114 billion of liquidity support to Canadian banks. Of this amount, $69 billion was part of the CMHC mortgage insurance program, a facility set up in 1954 to handle such situations.

TheWorld Economic Forum,In the 2010-2011 report Canada ranked 1st in the "Soundness of banks" indicator ranking as the world's soundest banking system for six consecutive years (2007-2013) according to reports by theWorld Economic Forum.Released in October 2010,Global Financemagazine putRoyal Bank of Canadaat number 10 among the world's safest banks andToronto-Dominion Bankat number 15.

Dispute resolution

Since the late 1990s,dispute resolution across the sector was directed to the independentOmbudsman for Banking Services and Investments (OSBI). As of 2018, Royal Bank of Canada, Toronto-Dominion Bank and Scotiabank direct dispute resolution to the for-profit Chambers Banking Ombuds Office (ADRBO).As reported inThe Globe and Mailin 2018, "[t]he Canadian Foundation for Advancement of Investor Rights (FAIR) has compared ADRBO unfavourably with OBSI," noting a statement from FAIR that they "have serious concerns about the conflicts of interest, misaligned incentives, and level of transparency and accountability at ADRBO".In 2018, John Lawford, executive director of consumer rights group the Public Interest Advocacy Centre, criticized ADRBO for not "[adhering] to the same openness principles" that OBSI brought to the table,adding that customer's are likely to experience "less success with their banking complaints" at ADRBO as a result.As of 2021, National Bank of Canada and Digital Commerce Bank are also reported to use ADRBO.In 2021, concerning an incident where TD Bank was able to find records that RSP funds has been transferred out of a customer's account, but not find records as to where they had gone, Duff Conacher, cofounder of accountability group Democracy Watch, observed that "most of Canada's big banks are avoiding accountability by essentially policing themselves when it comes to consumer complaints."

See also

• Canada Deposit Insurance Corporation
• Canadian and American economies compared
• Canadian Bankers Association
• Credit unions in Canada
• FATCA agreement between Canada and the United States
• List of banks and credit unions in Canada
• Routing number (Canada)

Further reading

• Bordo, Michael D.; Redish, Angela; Rockoff, Hugh (2014). "Why didn't Canada have a banking crisis in 2008 (or in 1930, or 1907, or…)?".The Economic History Review.68(1): 218–243.doi:10.1111/1468-0289.665.S2CID154482588.

External links

• Financial Institutions and Markets,Department of Finance, URL accessed 6 August 2006
• Department of Justice website,Department of Justice, URL accessed 26 January 2014
• OSFI website,Office of the Superintendent of Financial Institutions, URL accessed 2 November 2006