Canadian Banking System Overview

Schedule I Banks in Canada

• More than 30 domestic Schedule I banks operate in Canada.
• Six major Canadian banks, known as Canada's Big Six, dominate the market with significant asset sizes.
• Big Six Banks: Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), National Bank of Canada, Royal Bank of Canada (RBC), Scotiabank, and Toronto-Dominion Bank (TD Bank Group).
• Banks have extensive retail branch and ATM networks, centralizing Canadian savings.

Regulations and Shareholding

• Voting shares of large Schedule I banks must be widely held, with a maximum of 20% control by any single shareholder or group.
• Medium-sized banks (shareholder equity between $2 billion and $12 billion) allow up to 65% ownership by one shareholder, with the remaining 35% publicly traded.
• Small banks (shareholder equity less than $2 billion) can be fully owned by one individual or organization.

Banking Services and Operations

• Canadian banks provide consumer and commercial products, including mortgages, loans, accounts, and investments.
• Savings deposits are covered by deposit insurance from the Canada Deposit Insurance Corporation (CDIC).
• Banks offer financial planning and wealth management services, both directly and through subsidiaries.
• Firewalls restrict information sharing between different services within the same banking group.

Income Generation

• One major income source for banks derives from lending at higher interest rates than those paid on deposits.
• The interest rate spread covers operational costs and generates profit for the banks.

Schedule II and Schedule III Banks

• Schedule II banks are federally-regulated foreign bank subsidiaries operating in Canada, eligible for CDIC deposit insurance.
• Examples of Schedule II banks: AMEX Bank of Canada, Citibank Canada, UBS Bank (Canada).
• Schedule III banks are foreign bank branches permitted under the Bank Act, focusing primarily on corporate finance and investment banking.
• Examples of Schedule III banks: Barclays Bank, Comerica Bank.

Financial Intermediaries

• Financial intermediaries offer various overlapping services including deposit-taking, lending, and investment management.
• Investment funds can sell shares as closed-end or open-end funds, investing in varied securities portfolios.
• Loan companies provide direct cash loans with repayment plans.
• Pension plans serve as institutionalized savings for employees across various organizations.

Emerging Trends

• Robo-advisors provide automated, goal-based online investment management and algorithm-based portfolio creation.
• Bitcoin is slowly integrating into traditional finance as a medium of exchange and a store of value, with various investment vehicles available.

Capital Market Overview

• Capital represents economic value, encompassing both real (tangible assets) and representational (money, stocks, and bonds) wealth.
• Direct investment involves purchasing physical assets, while indirect investment focuses on buying securities that fund productive purposes.
• Three capital characteristics: mobility, environmental sensitivity, and scarcity.
• Capital flow guided by country risk evaluation, assessing political and economic stability.

Electronic Trading Systems

• Alternative trading systems (ATS) operate alongside traditional markets, facilitating automated trade matching and execution.
• ATSs require registration as investment dealers and membership in the Canadian Investment Regulatory Organization (CIRO).
• Fixed-income trading in Canada occurs primarily through dealer markets, with platforms like CanDeal and CBID serving institutional and retail needs.

Discover the essential facts about Canada's banking system, focusing on the Big Six banks that dominate the market. This quiz will explore their asset sizes and highlights of different domestic Schedule I banks in Canada. Test your knowledge about Canadian banking institutions!