Banking Services in Canada: Credit Unions & Foreign Banks
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Questions and Answers

What is a significant role of foreign-owned banks in Canada?

  • They provide banking services exclusively to international corporations.
  • They specialize in consumer banking only.
  • They primarily support local small businesses.
  • They facilitate the investment of foreign capital in Canada. (correct)

    • What federal legislation governs the activities of credit unions in Canada?

  • Financial Institutions Act
  • Investment Canada Act
  • Cooperative Credit Associations Act (CCAA) (correct)
  • Bank Act

    • Which of the following is NOT typically offered by credit unions and caisses populaires?

  • Investment dealer services
  • Wages payment services (correct)
  • Insurance
  • Mutual funds

    • What is one of the restrictions imposed by the CCAA on credit unions?

    <p>They cannot acquire substantial investments in unauthorized entities.</p> Signup and view all the answers

    Which services do trust companies provide that overlap with chartered banks?

    <p>Estate planning</p> Signup and view all the answers

    What types of assets can trust companies manage as trustees?

    <p>Individual assets such as property, stocks, and bonds</p> Signup and view all the answers

    Which statement about the investment regulations for credit unions is accurate?

    <p>They must adhere to a 'prudent portfolio approach.'</p> Signup and view all the answers

    Trust companies in Canada are unique because they are the only entities authorized to conduct which type of business?

    <p>Corporate trust business</p> Signup and view all the answers

    Which of the following describes the lending capabilities of credit unions?

    <p>They offer loans to members and entities with substantial investment.</p> Signup and view all the answers

    What distinguishes an auction market from a dealer market?

    <p>In auction markets, clients' bid and ask quotations are channeled to a stock exchange.</p> Signup and view all the answers

    Which of the following is NOT a characteristic of primary markets?

    <p>Concerns transactions of previously issued securities.</p> Signup and view all the answers

    What is a principle of regulation within the Canadian securities industry?

    <p>Ensuring fair access and transparency in capital markets.</p> Signup and view all the answers

    Which entity typically oversees remediation options for dissatisfied investors?

    <p>Self-regulatory organizations.</p> Signup and view all the answers

    What is one of the ethical standards expected of participants in the financial services industry?

    <p>Ensuring accurate and honest communication with clients.</p> Signup and view all the answers

    Which of the following best describes the function of bond markets?

    <p>Enabling the issuance and trading of debt securities.</p> Signup and view all the answers

    Which of the following is NOT a common source of retirement income for Canadians?

    <p>Public transportation savings plan</p> Signup and view all the answers

    What percentage of their pre-tax income do individuals typically need to save during their working years according to recommendations?

    <p>10% to 20%</p> Signup and view all the answers

    What was the debt-to-income level in Canada approximately in the year 2000?

    <p>100%</p> Signup and view all the answers

    Which statement about household debt levels is accurate?

    <p>Debt-to-income levels have remained steady for the past three years.</p> Signup and view all the answers

    How much have recent studies indicated Canadian savings levels have fallen to?

    <p>Around 6%</p> Signup and view all the answers

    Which of the following factors does NOT contribute to an individual's inability to service debt?

    <p>Long-term financial planning</p> Signup and view all the answers

    Which of the following best describes the impact of education on financial advisors?

    <p>Education can help advisors distinguish themselves among competitors.</p> Signup and view all the answers

    Which retirement income source involves the sale of a business?

    <p>Creation of a succession plan</p> Signup and view all the answers

    In a survey, what did most clients agree is important when selecting a financial advisor?

    <p>Industry designations</p> Signup and view all the answers

    Which option represents a misconception about the retirement income needs of Canadians?

    <p>Retirement income needs are universal across all individuals.</p> Signup and view all the answers

    What is a key characteristic of the unlisted equity market compared to stock exchanges?

    <p>It does not have minimum listing requirements.</p> Signup and view all the answers

    How do market makers in the unlisted equity market generally operate?

    <p>They hold an inventory of securities to facilitate trades.</p> Signup and view all the answers

    Which of the following is NOT a feature of the OTC derivatives market?

    <p>Traders meet in person to negotiate transactions.</p> Signup and view all the answers

    What role do investment dealers play in trading unlisted securities?

    <p>They consult bid and ask prices to identify trade opportunities.</p> Signup and view all the answers

    Which statement about liquidity in the unlisted equity market is true?

    <p>Market makers provide liquidity through their quoted bid and ask prices.</p> Signup and view all the answers

    What is a common limitation of unlisted stocks compared to listed stocks?

    <p>They are generally more speculative and have lower liquidity.</p> Signup and view all the answers

    Which of the following best describes the nature of OTC derivative products?

    <p>They tend to be complex and customized for specific needs.</p> Signup and view all the answers

    What is a significant aspect of trade reporting in the unlisted equity market in Canada?

    <p>There are no reporting requirements for unlisted trades in most regions.</p> Signup and view all the answers

    When a buyer and seller agree on an OTC derivative, what is one of the distinctive benefits?

    <p>They can design custom features within the financial product.</p> Signup and view all the answers

    Why might a company choose to trade its shares in the unlisted market?

    <p>To bypass minimum listing requirements of stock exchanges.</p> Signup and view all the answers

    Which of the following statements is true regarding dealer markets?

    <p>Investment dealers typically act as principals in dealer markets.</p> Signup and view all the answers

    What is a characteristic of dealer markets compared to auction markets?

    <p>The trading volume in dealer markets is generally lower for equity compared to debt securities.</p> Signup and view all the answers

    What service does Cboe Canada NOT provide?

    <p>Conducting trades primarily on the OTC market.</p> Signup and view all the answers

    Which of the following accurately describes TMX Group Limited?

    <p>It is an amalgamation of multiple exchange groups and trade across asset classes.</p> Signup and view all the answers

    Which types of securities are predominantly sold through dealer markets?

    <p>Bonds and debentures.</p> Signup and view all the answers

    Which exchange primarily lists equities of emerging companies?

    <p>The Canadian Securities Exchange.</p> Signup and view all the answers

    What best describes the nature of transactions in dealer markets?

    <p>They are negotiated through market makers who provide bid-and-ask quotations.</p> Signup and view all the answers

    What percentage of all volume traded in Canadian-listed securities occurs through Cboe Canada?

    <p>15%</p> Signup and view all the answers

    What is a disadvantage of dealer markets compared to auction markets?

    <p>Less visibility of trades to the public.</p> Signup and view all the answers

    Which statement regarding unlisted equity business in dealer markets is true?

    <p>It has a significantly smaller volume than stock exchange transactions.</p> Signup and view all the answers

    Study Notes

    Foreign-Owned Banks in Canada

    • Facilitate foreign capital investment in Canada.
    • Serve as an alternative borrowing source for Canadian corporations.

    Credit Unions and Caisses Populaires

    • Offer a range of banking services including deposit-taking, lending, mortgages, mutual funds, and insurance.
    • Cater to member-savers from common interest groups, such as neighborhoods or ethnic backgrounds.
    • Governed by the Cooperative Credit Associations Act (CCAA), which restricts activities to members and certain cooperative institutions.
    • Required to follow a "prudent portfolio approach" for investments.

    Trust and Loan Companies

    • Federally and provincially incorporated trust companies are the only entities in Canada allowed to engage in trust business.
    • Provide services such as asset management, estate planning, savings acceptance, term deposits, and personal/mortgage loans.

    Insurance Companies

    • Operate primarily within two main lines of business.

    Canadian Retirement Income Sources

    • Include employer pension plans, Canada Pension Plan, Quebec Pension Plan, Old Age Security, personal savings accounts, and sale of assets.
    • General recommendation is to save 10% to 20% of pre-tax income during working years, but current savings are below 6%.
    • A common rule of thumb states that 70% of pre-retirement income is needed at retirement.

    Household Debt Levels

    • Defined by Statistics Canada as mortgage and consumer debt, including credit cards and loans.
    • Debt-to-income ratio is approximately 172% of disposable income, having risen from around 100% in 2000.
    • Rising interest rates may escalate servicing costs and bankruptcies.

    Education in Financial Services

    • Important for financial advisors to distinguish themselves in a competitive market.
    • Clients value industry designations as indicators of expertise.

    Canadian Securities Industry

    • ICE NGX Canada provides electronic trading and data services for natural gas and electricity markets.
    • Canadian Securities Exchange lists equities of emerging companies, while Cboe Canada facilitates the trading of a variety of securities.
    • TMX Group Limited integrates multiple exchanges, offering trading and data services across various asset classes.

    Dealer Markets

    • Operate as over-the-counter (OTC) markets, where banks and investment dealers negotiate trades without a centralized auction market.
    • Trading volume for debt securities is greater than that for equities in dealer markets.
    • Unlisted equity markets do not have minimum listing requirements and are often more speculative.

    Over-the-Counter (OTC) Derivatives Market

    • Dominated by major financial institutions, allowing for custom-designed derivative products.
    • Operates 24 hours a day with no physical meeting for trade negotiations.

    Reporting Trades in the Unlisted Market

    • Investment dealers are typically not required to report unlisted trades.
    • Markets facilitate capital transfer between investors in both primary and secondary markets.

    Canadian Regulatory Environment

    • Various regulatory bodies ensure fair and open capital markets.
    • Focus on principles-based regulation, investor remediation options, and ethical standards for financial services industry participants.

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    Canadian Investment Marketplace PDF

    Description

    This quiz explores the role of foreign-owned banks and credit unions in Canada. It emphasizes their contributions to foreign capital investment and various banking services offered to individuals and businesses. Test your knowledge on the dynamics of Canadian banking and how these institutions operate.

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