Chartered banks

The biggest players in Canada's financial industry are chartered banks. Regulated by the Bank Act, these institutions must meet strict regulatory requirements.

As of July 2002, the banking industry included 14 domestic banks, 33 foreign bank subsidiaries and 20 foreign bank branches operating in Canada through over 8,000 branches. In total, these institutions manage over $1.7 trillion in assets.

Collectively, chartered banks account for over 70% of the total assets of the Canadian financial services sector. They are also among Canada’s leading employers. In 2000, the industry employed over 235,000 people and had a payroll of about $16.1 billion.

It is the traditional 'Big Six', however, that continue to dominate the industry: the Canadian Imperial Bank of Commerce, the Bank of Nova Scotia, the Bank of Montreal, the National Bank of Canada, TD Canada Trust and the Royal Bank of Canada account for 90% of the total assets held by the banking industry.

In June 1999, the federal government announced a new policy framework for the financial services sector. It allows banks to adopt a more flexible ownership structure and permits them to form strategic alliances. Other financial institutions, such as credit unions, were also provided more ownership flexibility.

Foreign banks operating in Canada account for almost 7% of the assets held by the Canadian banking industry. Until recently, foreign bank activity in Canada was permitted only through separately capitalized subsidiaries operating on essentially the same basis as Canadian banks.

The legislation passed in June 1999 also allows foreign banks to establish operations in Canada without having to set up Canadian incorporated subsidiaries. Under this legislation, foreign banks can establish either full-service branches or lending branches. Full-service branches are only permitted to take deposits greater than $150,000, while lending branches are not permitted to take any deposits and are restricted to borrowing only from other financial institutions. Foreign banks face the same policy framework as domestic banks in areas such as permitted investments and business powers.

Canada has the highest number of automated bank machines (ABMs) per capita in the world—close to 18,000. We also benefit from the world’s highest penetration levels of electronic banking channels such as debit cards, Internet banking and telephone banking.

In 2001, Canadians conducted 2.2 billion debit card transactions from over 328,000 merchants. From 1997 to 2000, the number of Internet banking customers registered with the six major banks increased 262% to over 5.8 million customers. Telephone banking, which permits customers to make account inquiries, transfers and bill payments over the phone 24 hours a day, is also becoming increasingly popular, with over 9.7 million customers using the service in 2000.

Electronic systems now permit 'virtual banks.' By linking with other retail institutions, some banks now provide services in grocery, hardware and convenience stores. Others do not have physical branches, but still cover complete deposit and loan services via the telephone and the Internet.

The Financial System Stability Assessment, undertaken in 2000 by the International Monetary Fund, concluded that Canada has a stable and highly advanced financial system that is among the soundest in the world. It is supported by a well-developed regulatory and supervisory framework that shows a high degree of compliance with major international standards. Service fees, credit card costs and interest spreads on intermediated credit compare favourably with those of major banks in the industrialized world.

Canada’s major domestic banks are among the best-capitalized in the world. They maintain capitalization levels that exceed the minimum standards set by the Bank for International Settlements.

The largest portion of the chartered banks’ assets is used to finance direct loans to consumers and businesses. At the end of 2002, 35% of bank assets were in non-mortgage loans and a further 20% in mortgages.