How does the Canadian banking system work?
The Canadian banking system
has undergone some important regulatory and market driven changes since the end of World War II. In fact, its origins may be traced to 1917 when the Bank of Montreal
was founded. Twentieth centuries witnessed other banks opening doors and beginning to issue local currencies. Amendment to the British North America Act (introduced in 1866) stipulated that the local and provincial authorities may. Five years later, the Canadian dollar became the official currency while the Bank of Canada was established in 1935.
It should be mentioned that at present, the laws that govern the banks in Canada
are subject to regular reassessment and updating on the part of the government. The strategy of progressive upgrading of financial legislation
on the territory of Canada
has enabled banks to efficiently adapt to the changeable and, recently, quite unfavorable climate on the global financial markets.
Another important milestone in the development of the Canadian banking system was the elimination of the ceiling on interest rates on deposits and bank loans, which came into force with the amendments to the Bank Act of 1967.
The primary regulator of system which focuses on consumer issues in the Financial Consumer Agency of Canada. The task of the Office of the Superintendent of Financial Issues is to general regulation of the system. With regard to the organization of the banking system in Canada, it is based on five main groups of financial and banking services providers: chartered banks, trust and loan companies, the co-operative credit movement, life insurance companies, and securities dealers.
Here, it should be noted that the banks in Canada
fall under federal jurisdiction, but the loan and trust companies, as well as the life insurance providers, can be governed by either federal or local regulations. Most lenders in the country have specialized in residential mortgage lending and in term deposits. While the majority of the assets in Canada’s financial sector is controlled mainly by federal agencies, some financial services providers operate under provincial laws. For example, the co-operative credit movement, which includes the credit unions and caisses populaires, are regulated almost exclusively by provincial jurisdiction. The business activities of the credit unions and caisses populaires have been mostly centered on residential mortgages and personal loans
, but they have recently made a move to explore the commercial loan area.
Also, there has been a strong competition between the chartered banks (such as Bank of Montreal and the Canadian Bank of Commerce) and the loan companies in Canada
when it comes to personal deposits. In the past few years, competition among these two groups of financial institutions has grown to encompass business and government deposits, a niche on the market that was previously dominated primarily by the banks.
The majority of life insurance providers in Canada are federally governed, although there are some provincially-regulated insurance companies, as well. The business activities of most insurers in Canada include selling life insurance packages and providing investment advisory and solutions.