Canadian Banking System Overview
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Questions and Answers

Which of the following is NOT one of Canada’s Big Six Banks?

  • Bank of Montreal (BMO)
  • CIBC Bank of America (correct)
  • Royal Bank of Canada (RBC)
  • National Bank of Canada

    • What is the maximum percentage of voting shares a single shareholder can own in a medium-sized bank?

  • 45%
  • 75%
  • 65% (correct)
  • 20%

    • Which of the following services is NOT typically offered directly by Canadian banks?

  • Mortgages
  • Wealth management services
  • Retail clothing sales (correct)
  • Investment dealer activities

    • What is required for voting shares of large Schedule I banks in Canada?

    <p>They must be widely held.</p> Signup and view all the answers

    How does the Canada Deposit Insurance Corporation (CDIC) protect consumers?

    <p>By providing insurance on savings deposits.</p> Signup and view all the answers

    Which statement about small banks in Canada is true?

    <p>They can be fully owned by one person or organization.</p> Signup and view all the answers

    What is one of the reasons Canada's Big Six Banks have achieved large asset sizes?

    <p>By establishing numerous retail branches and ATMs.</p> Signup and view all the answers

    What does the Bank Act control concerning Canadian banks?

    <p>The sharing of customer information.</p> Signup and view all the answers

    What is a characteristic of capital that impacts its location choices?

    <p>Scarcity</p> Signup and view all the answers

    Which of the following services is likely to be handled by a subsidiary of a Canadian bank?

    <p>Self-directed investing</p> Signup and view all the answers

    Which option best describes indirect investment?

    <p>Purchasing stocks or bonds issued by organizations.</p> Signup and view all the answers

    Which of the following services is NOT typically offered by financial intermediaries?

    <p>Self-directed trading accounts</p> Signup and view all the answers

    What is a factor in country risk evaluation relating to the economic climate?

    <p>Inflation rate</p> Signup and view all the answers

    What distinguishes a closed-end fund from an open-end fund?

    <p>Closed-end funds trade on an exchange like stocks.</p> Signup and view all the answers

    Which of the following represents representational capital?

    <p>Stocks held by an investor</p> Signup and view all the answers

    What is a key feature of robo-advisors as opposed to traditional investment services?

    <p>They provide algorithm-based portfolio management.</p> Signup and view all the answers

    How do pension plans function within the financial services sector?

    <p>They act as a type of institutionalized savings for employees.</p> Signup and view all the answers

    What might attract capital to invest in a specific country?

    <p>Favorable investment opportunities</p> Signup and view all the answers

    Which investment strategy is primarily focused on productive use of representational capital?

    <p>Securities investment through a brokerage</p> Signup and view all the answers

    In the context of cryptocurrency, what term best describes Bitcoin's dual role?

    <p>Medium of exchange and store of value.</p> Signup and view all the answers

    Which of the following financial concepts is associated with the electronic trading systems mentioned?

    <p>Equity and fixed-income trading.</p> Signup and view all the answers

    How do favorable conditions influence capital?

    <p>They attract capital by ensuring stable environments.</p> Signup and view all the answers

    Which statement about direct investment is true?

    <p>It focuses on acquiring ownership of physical assets.</p> Signup and view all the answers

    Which of the following best describes the distinction between primary and secondary markets?

    <p>Primary markets are where securities are created, while secondary markets are where they are traded.</p> Signup and view all the answers

    In the context of capital, what does the term 'mobility' refer to?

    <p>The ease with which capital can be moved or invested.</p> Signup and view all the answers

    Which type of financial services is NOT classified under financial intermediaries?

    <p>Investment banking.</p> Signup and view all the answers

    What primary purpose do loan companies serve within the financial ecosystem?

    <p>They directly extend cash loans to consumers.</p> Signup and view all the answers

    Which of the following roles does an investment advisor play in indirect investment?

    <p>Advising on the purchase of securities to ensure productive investments.</p> Signup and view all the answers

    What defines the term 'mutual funds' in financial terms?

    <p>They allow the public to invest in diversified portfolios of securities.</p> Signup and view all the answers

    What type of funds are primarily generated by non-financial domestic corporations?

    <p>Corporate earnings</p> Signup and view all the answers

    Why are internally generated funds typically not utilized by corporations to invest in other companies’ stocks?

    <p>They are retained for internal use.</p> Signup and view all the answers

    What is one role some governments play in the capital markets when operating at a surplus?

    <p>They invest their profits, becoming suppliers of capital.</p> Signup and view all the answers

    Which group has traditionally viewed Canada as an attractive place for investment?

    <p>Foreign investors</p> Signup and view all the answers

    How do foreign users typically access Canadian capital markets?

    <p>Through borrowing from Canadian banks or selling their securities</p> Signup and view all the answers

    When is Canadian capital most attractive to foreign users?

    <p>When the dollar value is low relative to their own currency</p> Signup and view all the answers

    Which of the following is NOT considered a user of capital?

    <p>A government raising funds for surplus</p> Signup and view all the answers

    How do Canadian investors benefit from foreign securities?

    <p>By accessing diversification in their investments</p> Signup and view all the answers

    In the context of capital markets, what defines a surplus for a government?

    <p>Excess revenues over expenditures</p> Signup and view all the answers

    What happens when capital flows out of Canada?

    <p>Foreign businesses take capital out by borrowing or selling their securities.</p> Signup and view all the answers

    What differentiates the primary market from the secondary market?

    <p>The primary market is for newly issued securities sold directly by issuers, while the secondary market involves trading previously issued securities.</p> Signup and view all the answers

    In an auction market, what typically occurs during a trade execution?

    <p>A trade is executed when a buyer's bid matches a seller's ask price.</p> Signup and view all the answers

    What is the bid-ask spread?

    <p>The difference between the highest price a buyer is willing to pay and the lowest price a seller will accept.</p> Signup and view all the answers

    Which of the following statements about the money market is true?

    <p>Only short-term fixed-income securities with a term of one year or less trade in the money market.</p> Signup and view all the answers

    What role do investment dealers play in an auction market?

    <p>They execute buy and sell orders on behalf of clients.</p> Signup and view all the answers

    What is true regarding initial public offerings (IPOs)?

    <p>IPOs refer to the process when companies first sell newly issued securities to investors.</p> Signup and view all the answers

    Study Notes

    Canadian Banking System

    • Over 30 domestic Schedule I banks operate in Canada, with six major banks dominating asset sizes.
    • Canada’s Big Six Banks:
      • Bank of Montreal (BMO)
      • Canadian Imperial Bank of Commerce (CIBC)
      • National Bank of Canada
      • Royal Bank of Canada (RBC)
      • Scotiabank
      • Toronto-Dominion Bank (TD Bank Group)
    • These banks have extensive networks of retail branches and ATMs, attracting savings from Canadians.
    • Schedule I banks have international operations through acquisitions and investments in foreign financial institutions.
    • Large Schedule I banks are required to have widely held voting shares, limiting any shareholder or group to a maximum of 20%.
    • Medium-sized banks (equity $2B to $12B) allow single shareholders up to 65% ownership of voting shares, with 35% needing to be publicly traded.
    • Small banks (equity less than $2B) can be wholly owned by an individual or organization.

    Banking Products and Services

    • Canadian banks offer a variety of consumer and commercial services: mortgages, loans, accounts, and investments.
    • Savings deposits are insured by the Canada Deposit Insurance Corporation (CDIC).
    • Additional offerings include financial planning, cash management, and wealth management services.
    • Subsidiaries within banking groups provide investing, self-directed investing, and insurance product sales.
    • The Bank Act regulates activities and information sharing within banks in the financial services industry.

    Financial Intermediaries and Services

    • Financial intermediaries deliver overlapping services such as deposit-taking, lending, and mutual funds.
    • Investment funds create portfolios from public share sales often through closed-end or open-end structures.
    • Loan companies provide direct cash loans to consumers for repayment in installments.
    • Pension plans serve as a savings mechanism for employees across various organizations.
    • Robo-advisors present a modern approach for online investment management, utilizing algorithms and goal-based portfolios.

    Capital Market Overview

    • Investment capital comprises real (e.g., land, buildings) and representational assets (e.g., stocks, bonds).
    • Indirect investment involves purchasing securities from issuers who use funds for productive purposes.
    • Capital is characterized by mobility, environmental sensitivity, and scarcity, influencing where it is invested.
    • Factors affecting country risk evaluations include political stability, economic trends, and non-financial corporation savings.

    Users and Suppliers of Capital

    • Users include individuals, businesses, and governments; capital can flow in and out of Canada from foreign users.
    • Foreign investors view Canada as an attractive investment destination, seeking to diversify by accessing Canadian markets.
    • Governments may source capital through surplus operations or borrowing in the capital markets.

    Capital Market Structure

    • Primary markets involve the sale of newly issued securities from companies and governments to investors.
    • Secondary markets facilitate trading of existing securities among investors, with the issuing entities not receiving proceeds from these trades.
    • Auction markets involve investment dealers executing buy and sell orders, where bids and offers compete until matched.
    • Bid-ask spread represents the price difference between the highest buyer bid and the lowest seller ask, crucial in securities trading.

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    Canadian Investment Marketplace PDF

    Description

    Explore the structure and features of Canada's banking system, focusing on the Big Six banks and their operations. Understand the classification of Schedule I banks and their ownership regulations, as well as the diverse banking products and services available to Canadians.

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