Banking in Canada

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Banking in Canada is widely considered one of the safest banking systems in the world,[1] ranking as the world's soundest banking system for the past six years according to reports by the World Economic Forum.[2] Released in October 2010, Global Finance magazine put Royal Bank of Canada at number 10 among the world's safest banks and Toronto-Dominion Bank at number 15.[3] Canada’s banks, also called chartered banks, have over 8,000 branches and almost 18,000 automated banking machines (ATMs) across the country.[4] In addition, "Canada has the highest number of ATMs per capita in the world and benefits from the highest penetration levels of electronic channels such as debit cards, Internet banking and telephone banking".[4]



View of a Scotiabank facade in Amherst, Nova Scotia. This structure was erected in 1907.

Banking in Canada began to migrate in earnest from colonial overseas banking operations to a local banking system with the founding of the Bank of Montreal in 1817. Other banks soon followed and began business, and after a lengthy approval process began unregulated banking business. These institutions issued their own local currency until amendments in the Dominion Notes Act [5]allowed federal and provincial governments to begin to introduce their own notes starting in 1866. Official Canadian currency took the form of the Canadian dollar in 1871, overriding the currency of individual banks. The establishment of the Bank of Canada in 1935 was also an important milestone in banking and monetary governance.

Despite various loss events (such as the Latin American debt crisis, the collapse of Olympia and York, Enron-related liabilities, and the U.S. Subprime mortgage crisis), the big five banks have thus far proven to be safe and stable companies. For example, in securities prospectuses the Royal Bank of Canada says it has paid a common share dividend in every year since 1870, the year after it received its banking charter.

According to the Department of Finance, two small regional banks failed in the mid-1980s, the only such failures since 1923, which is the year Home Bank failed. There were no bank failures during the Great Depression compared to 9000+ in the US.

Recent history[edit]

In the 1980s and 1990s, the largest banks acquired almost all significant trust and brokerage companies in Canada. They also started their own mutual fund and insurance businesses. As a result, Canadian banks broadened out to become supermarkets of financial services.

After large bank mergers were ruled out by the federal government, some Canadian banks turned to international expansion, particularly in various U.S. markets such as banking and brokerage.

Two other notable developments in Canadian banking were the launch of ING Bank of Canada (which relies mostly on a branchless banking model), and the slow emergence of non-bank mortgage origination companies.

A survey conducted by the World Economic Forum called the Global Competitiveness Report of twelve-thousand corporate executives, in 2008, concluded that Canada has the best banking system in the world, receiving a score of 6.8 out of possible seven.[6]

Between July and September 2016, three new domestic Schedule 1 banks (Wealth One Bank of Canada, Exchange Bank of Canada, and UNI Financial Corp) have begun operating in Canada with an additional fourth bank poised to announce its commencement in the following month. When the fourth bank begins operations (Impak Finance Inc), it will be almost a 15% increase in domestic banks from 27 to 31. The new banks have identified niches compared to the wider reach of the "Big Five". Wealth One Bank of Canada aims to service the country's growing Chinese Canadian population with full Mandarin and Cantonese supported speakers. Exchange Bank of Canada deals exclusively in foreign currency services on a wholesale level to financial institutions and businesses. UNI Financial Corp. was formed as Caisses populaires acadiennes become the first Canadian credit union to obtain a federal bank charter.[7]

Canadian banks[edit]

First Canadian Place

In everyday commerce, the banks in Canada are generally referred to in two categories: 1) the five large national banks and 2) smaller second tier banks (notwithstanding that a large national bank and a smaller second tier bank may share the same legal status and regulatory classification.

The five largest banks in Canada are:

Notable second tier banks include ATB Financial, Canadian Western Bank, National Bank of Canada, Laurentian Bank, the Desjardins Group (technically not a bank but an alliance of credit unions), HSBC Bank Canada, and Tangerine Bank (Formerly ING Bank of Canada). These second tier organizations are largely Canadian domestic banking organizations. Insurance companies in Canada have also created deposit-taking bank subsidiaries. For a complete list of institutions see: List of banks in Canada

"Big Five" banks[edit]

Unlike the smaller Canadian banks, the Big Five are not just Canadian banks, but are instead better described as international financial conglomerates, each with a large Canadian banking division. In fiscal 2007, RBC's Canadian segment called "Personal Financial Services" (the segment most related to what was traditionally thought of as retail banking) had revenue of only CAD$5,082 million (or 22.6%) of a total revenue of CAD$22,462 million.[8] Canadian retail operations of the Big Five comprise other activities that do not need to be operated from a regulated bank. These other activities include mutual funds, insurance, credit cards, and brokerage activities. In addition, they have large international subsidiaries. The Canadian banking operations of the Big Five are largely conducted out of each parent company, unlike U.S. banks that use a holding company structure to hold their primary retail banking subsidiaries.

Brands used by the big five by major financial service*[edit]

Royal Bank of Canada (RBC) Toronto-Dominion Bank (TD) Bank of Nova Scotia (BNS) Bank of Montreal (BMO) Canadian Imperial Bank of Commerce (CIBC)
Year Founded 1864 - Halifax, Nova Scotia 1955; Bank of Toronto 1857 and Dominion Bank 1869 - Toronto, Ontario 1832 - Halifax, Nova Scotia 1817 - Montreal, Quebec 1961; Canadian Bank of Commerce 1867 and Imperial Bank of Canada 1875 - Toronto, Ontario
Original Name Merchants' Bank of Halifax Bank of Toronto, Dominion Bank Bank of Nova Scotia Bank of Montreal Canadian Bank of Commerce and Imperial Bank of Canada
Head Office Toronto, Ontario Toronto, Ontario Toronto, Ontario Toronto, Ontario Toronto, Ontario
Parent legal name Royal Bank of Canada Toronto-Dominion Bank Bank of Nova Scotia Bank of Montreal Canadian Imperial Bank of Commerce
Group brand RBC TD Bank Financial Group Scotiabank Group BMO Financial Group CIBC
Canadian retail banking RBC Royal Bank TD Canada Trust Scotiabank BMO Bank of Montreal CIBC
U.S. retail banking RBC Bank *Note: Sold in June 2011 TD Bank None Harris Bank None - Amicus Bank's Amicus FSB joint venture Marketplace Bank/Safeway Select Bank 1999-2002
Other major international retail banking operations RBC Royal Bank of Canada and RBTT (Caribbean branches) Scotiabank International FirstCaribbean
Private banking RBC Wealth Management TD Waterhouse Private Banking Scotia Private Client Group BMO Private Banking CIBC Private Banking
Canadian mutual funds RBC Funds and PH&N Funds TD Investment Services Scotia Mutual Funds BMO Mutual Funds and Guardian Group of Funds CIBC Mutual Funds
U.S. mutual funds Tamarack Funds
Canadian brokerage RBC Direct Investing and RBC Dominion Securities TD Waterhouse ScotiaMcLeod and Scotia iTRADE BMO InvestorLine and BMO Nesbitt Burns CIBC Investor's Edge and CIBC Wood Gundy
U.S. brokerage RBC Wealth Management formerly RBC Dain Rauscher TD Ameritrade (45%) BMO Harris Investor Services
International Brokerage West Indies Stockbrokers Limited TD Waterhouse (UK), TD Direct Investing International (LU)
Canadian insurance RBC Insurance TD Insurance Scotialife Financial BMO Insurance CIBC Insurance
U.S. insurance RBC Insurance TD Insurance
Capital markets RBC Capital Markets TD Securities Scotia Capital BMO Capital Markets CIBC World Markets
Major custodial operations RBC Dexia (June 27, 2012, RBC purchased the remaining 50% from Dexia) CIBC Mellon (50%)
Precious metals ScotiaMocatta

*Marketing brands are shown rather than division names. For example, for internal and investor relation purposes, CIBC uses CIBC Retail Markets as a division name, but this does not normally appear in advertisements and does not feature prominently on account statements. Brand names are sometimes used across legal entities within a financial group. Intermediate umbrella brands (such as RBC Investments that includes the brands RBC Funds, RBC Action Direct, and RBC Dominion Securities) are not shown.


Canada's federal government has sole jurisdiction for banks according to the Canadian Constitution, specifically Section 91(15) of The Constitution Act, 1867 (30 & 31 Victoria, c.3 (UK)), formerly known as the British North America Act, 1867. Meanwhile, credit unions/caisses populaires, securities dealers and mutual funds are largely regulated by provincial governments.

The main federal statute for the incorporation and regulation of banks, or chartered banks, is the Bank Act (S.C. 1991, c.46), where Schedules I, II and III of this Act list all banks permitted to operate in Canada under these three distinct categories:

  • Schedule I: Banks allowed to accept deposits and which are NOT subsidiaries of a foreign bank. Examples include "The Big Five" banks (as mentioned above); associated brands of the Big Five such as Tangerine and President's Choice Financial; and smaller second tier banks such as National Bank of Canada, Laurentian Bank of Canada, and Canadian Western Bank. Because the Schedule I banks are not subsidiaries of any foreign bank, they are the true domestic banks and are the only banks allowed to receive, hold and enforce a special security interest described and provided for under the Bank Act and known to Canadian lawyers and bankers as the "Bank Act security".
  • Schedule II: Banks allowed to accept deposits and which are subsidiaries of a foreign bank. Examples include AMEX Bank of Canada, Citibank Canada, HSBC Bank Canada, and Walmart Canada Bank. Like the Schedule I banks, the Schedule II banks are incorporated under the Bank Act.
  • Schedule III: Foreign banks permitted to carry on business in Canada. Examples include Bank of America, Capital One, Credit Suisse and Deutsche Bank AG. Unlike the Schedule I and Schedule II banks, the Schedule III banks are NOT incorporated under the Bank Act and they operate in Canada, usually within the country's largest cities (being Toronto, Montreal, Calgary and Vancouver), under certain restrictions mentioned in the Act.

The bank regulator is the Office of the Superintendent of Financial Institutions (best known as OSFI), whose authority stems from the Bank Act. The financial groups are also governed by regulatory bodies (bank regulators, securities regulators, insurance regulators, etc.) in each country in which they operate.

Financial crisis of 2008[edit]

During the peak of the 2008 financial crisis, the Bank of Canada, along with the Canada Mortgage and Housing Corporation and the US Federal Reserve provided up to $114 billion of liquidity support to Canadian banks. Of this amount, $69 billion was part of the CMHC mortgage insurance program, a facility set up in 1954 to handle such situations.[9][10]

See also[edit]


  1. ^ World Economic Forum - Global Competitiveness Report, World Economic Forum, In the 2010-2011 report Canada is ranked 1st in the "Soundness of banks" indicator
  2. ^ "Canadian banks remain soundest according to World Economic Forum, six years in a row". 2013-09-04. Archived from the original on 2014-07-26. Retrieved 2014-07-18. 
  3. ^ The world's 20 safest bank
  4. ^ a b "Canada's Banks" Canadian Ministry of Finance, 2002
  5. ^
  6. ^ "Canadian banks are the soundest in the world: report". Archived from the original on 2008-10-11. Retrieved 2008-10-09. 
  7. ^ "New banks in Canada look to target niche markets". Retrieved 2016-09-27. 
  8. ^
  9. ^ Banks got $114B from governments during recession, CBC News, 30 April 2012. Retrieved 31 May 2013
  10. ^ Did Canadian banks receive a secret bailout? Financial post, 30 April 2012. Retrieved 31 May 2013

Further reading[edit]

  • Bordo, Michael D., Angela Redish, and Hugh Rockoff. "Why Didn’t Canada Have a Banking Crisis in 2008 (or in 1930, or 1907, or . . .)?" Economic History Review 68#1 (2015): 218–43


External links[edit]