The Banking Sector in The Banking Sector in CanadaCanada

Group 12Group 12

Anil TurkenAnil TurkenRichard GauthierRichard Gauthier

Ilhan OsmanIlhan OsmanNazem HabashNazem Habash

Sossy AssadourianSossy Assadourian

Financial institutions attemptFinancial institutions attempt

to build long term relationships with their to build long term relationships with their customerscustomers

try to maintain a good and loyal reputation try to maintain a good and loyal reputation for the public eyefor the public eye

Definition of a bankDefinition of a bank

A business that provides financial A business that provides financial services, acts as a holder of money for services, acts as a holder of money for individuals and businesses, it is a medium individuals and businesses, it is a medium of exchange of foreign currencies, and of exchange of foreign currencies, and they provide lending and investing they provide lending and investing instruments along with financial advice.instruments along with financial advice.

Chartered banks provide these Chartered banks provide these services in three different areas:services in three different areas:

Personal financesPersonal finances

Small business bankingSmall business banking

Corporate and institutional bankingCorporate and institutional banking

Personal finance services include:Personal finance services include: means of savingmeans of saving investinginvesting BorrowingBorrowing Financial planning and adviceFinancial planning and advice

For businesses, they provide the same types of For businesses, they provide the same types of products and financial solutions to help their clients products and financial solutions to help their clients manage their small business’s needs. manage their small business’s needs.

For their corporate, government and institutional For their corporate, government and institutional clients; clients;

- They aid them in capital raising, - They aid them in capital raising,

- Investing,- Investing,

- Advisory and market research. - Advisory and market research.

Examples of chartered banks in Examples of chartered banks in Canada Canada

The Bank of MontrealThe Bank of Montreal

The Toronto Dominion The Toronto Dominion BankBank

The Bank of Nova The Bank of Nova Scotia Scotia

The Royal Bank of The Royal Bank of Canada.Canada.

Bank of Canada Act

Origins of Banking SystemOrigins of Banking System

First chartered BankFirst chartered Bank

Bank of Montreal 1817Bank of Montreal 1817

Canadian Bankers AssociationCanadian Bankers Association

Bank Act of 1900Bank Act of 1900

Foreign Banks in CanadaForeign Banks in Canada

The first class is composed of financial The first class is composed of financial institutions in which no single shareholder institutions in which no single shareholder can exceed 10% of the voting shares can exceed 10% of the voting shares

The second class is made up of financial The second class is made up of financial institutions in which individuals can hold institutions in which individuals can hold more than 10% of shares. more than 10% of shares.

Critique of “protectionism”Critique of “protectionism”

Richard J. Ross, who was the vice Richard J. Ross, who was the vice president of Corporate Banking at president of Corporate Banking at Hong Hong Kong Bank of CanadaKong Bank of Canada, in 1992 stated, “ , in 1992 stated, “ For a foreign bank, competing in Canada For a foreign bank, competing in Canada is like being David against Goliath, only in is like being David against Goliath, only in this version you have no stone, no sling, this version you have no stone, no sling, one arm is tied behind you, and you must one arm is tied behind you, and you must fight from a two foot deep hole.” fight from a two foot deep hole.”

History of Banking

The History of the Bank of Canada

The situation before the creation of Bank of Canada:

-A few banks, each bank had many branches.

-Each bank issued his own bank notes.

-The government did not have much control over the banks.

-The situation remained like this for a long time.

What were the reasons for creating What were the reasons for creating the bank of Canada?the bank of Canada?

The great depression The great depression in 1930s.in 1930s.

Each bank acting in it’s own interest.Each bank acting in it’s own interest.

The growing number of banks.The growing number of banks.

The creation of the Bank:The creation of the Bank:

1913 - First try to establish bank failed.1913 - First try to establish bank failed.

1933 - A commission studied the general situation. 1933 - A commission studied the general situation.

1935 - Finally, the bank was established.1935 - Finally, the bank was established.

Objectives of Bank of CanadaObjectives of Bank of Canada

Keep inflation low and Keep inflation low and stable.stable.

Long-lasting growth.Long-lasting growth.

Job Creation.Job Creation.

Prevent “boom and bust” cycles.Prevent “boom and bust” cycles.

How does the bank do it?How does the bank do it?

Monetary policies: Adjusting inflation-Monetary policies: Adjusting inflation-control target.control target.

Ranges between 1 – 3 %.Ranges between 1 – 3 %.

Adjusting the target influences interest rates and exchange price of Adjusting the target influences interest rates and exchange price of Canadian dollar.Canadian dollar.

Government Programs That stimulated economic growth

through the Canadian Banking system

Canadian governmental programs Canadian governmental programs

C.M.H.C Canadian Mortgage & Housing C.M.H.C Canadian Mortgage & Housing CorporationCorporation

C.D.I.C Canadian Deposit Insurance C.D.I.C Canadian Deposit Insurance CorporationCorporation

Canadian Mortgage & Housing Canadian Mortgage & Housing CorporationCorporation

Established by the Federal Government in 1946. Established by the Federal Government in 1946.

Primarily designed to build low cost housing.Primarily designed to build low cost housing.

It’s Focus shifted in mid 70’s and enhanced its It’s Focus shifted in mid 70’s and enhanced its mortgage insurance program. mortgage insurance program.

The insurance Increased individuals purchasing The insurance Increased individuals purchasing power by allowing lower down payments on the power by allowing lower down payments on the purchasing of a home.purchasing of a home.

Mortgage InsuranceMortgage Insurance

Maximum a bank will lend an individual is 75% Ltv of the Maximum a bank will lend an individual is 75% Ltv of the property.property.

If individuals do not meet this minimum cash down they If individuals do not meet this minimum cash down they must take the CMHC mortgage insurance.must take the CMHC mortgage insurance.

The insurance covers the bank from any loses that may The insurance covers the bank from any loses that may incur, such as bankruptcies. incur, such as bankruptcies.

The insurance premium to the CMHC that ranges from The insurance premium to the CMHC that ranges from 0.5% to 3.25%0.5% to 3.25%

Insurance premium is a one lump sum payment.Insurance premium is a one lump sum payment.

CMHC Contribution to the CMHC Contribution to the Canadian Financial SystemCanadian Financial System

Increased the number of individuals that can Increased the number of individuals that can purchase homes in Canada. purchase homes in Canada.

Due to rising prices of homes. (Finance needs)Due to rising prices of homes. (Finance needs)

Due to individuals questionable credit.Due to individuals questionable credit.

CMHC guaranteed more than $234 billion in CMHC guaranteed more than $234 billion in Canada Mortgages 2003.Canada Mortgages 2003.

Canadian Deposit Insurance Canadian Deposit Insurance CorporationCorporation

Federal Crown Corporation created in Federal Crown Corporation created in 1967.1967.

Provides deposit insurance at member Provides deposit insurance at member institutions.institutions.

Contributes to the stability of Canada's Contributes to the stability of Canada's financial system.financial system.

What the CDIC DoesWhat the CDIC Does

Reimburses depositors for the amount of their insured Reimburses depositors for the amount of their insured deposits.deposits.

Covers up to a maximum of $60,000 per depositor.Covers up to a maximum of $60,000 per depositor. 1- TD Mortgage Corporation.1- TD Mortgage Corporation. 2- TD Pacific Mortgage Corporation.2- TD Pacific Mortgage Corporation. 3- The Toronto Dominion Bank.3- The Toronto Dominion Bank.

Pays out when a member institution fails.Pays out when a member institution fails.

This eliminates doubts and concerns about ones money This eliminates doubts and concerns about ones money held in their accounts.held in their accounts.

External Economic benefits produced by the External Economic benefits produced by the Canadian financial system or chartered Canadian financial system or chartered

banks.banks.

TD Bank Financial Group 2003TD Bank Financial Group 2003

1.15 billion in income and capital gains taxes paid1.15 billion in income and capital gains taxes paid

24.5 million in charitable donations.24.5 million in charitable donations. 1- Operation enfant soleil.1- Operation enfant soleil. 2- Children’s Hospitals.2- Children’s Hospitals. 3- Scholarships .3- Scholarships .

3.2 million in environmental donations.3.2 million in environmental donations. 1- Friends of the environment.1- Friends of the environment. 2- Environment education & research.2- Environment education & research.

42,500 employees across Canada with a total of 3.8 billion in salaries. 42,500 employees across Canada with a total of 3.8 billion in salaries.

Future of Banking in Canada

The important daysThe important days

Beginning of 1960 & 1970 the was the first credit Beginning of 1960 & 1970 the was the first credit card introduced and also ABM launched.card introduced and also ABM launched.

Then end of 1977 & 1986 as the technology Then end of 1977 & 1986 as the technology advances peoples has the chance to do there advances peoples has the chance to do there own direct deposit of paycheques, national own direct deposit of paycheques, national interact ABM network. interact ABM network.

1997 & 1998 full taking ABM; Internet banking, 1997 & 1998 full taking ABM; Internet banking, telephone banking-to-B Internet postal, email telephone banking-to-B Internet postal, email payment bills….payment bills….

The old technologyThe old technology

20 & 30 years ago there were not such as 20 & 30 years ago there were not such as computer use tech in the banking environment. computer use tech in the banking environment. All banking services used to be done manually. All banking services used to be done manually.

Ex: opening an account, every personal Ex: opening an account, every personal information or detail was done by hand, also not information or detail was done by hand, also not to forget that by the end of their shift they had to to forget that by the end of their shift they had to count every single money and papers written.count every single money and papers written.

The new technologyThe new technology

Canadians banking has improved for Canadians banking has improved for many reasons, up till now their new many reasons, up till now their new technology saved more time and more technology saved more time and more money about 60 to 70 %. The Canadians money about 60 to 70 %. The Canadians government banking has no more reason government banking has no more reason to higher more employees, thanks to their to higher more employees, thanks to their technology use all around the world. technology use all around the world.

How much the bank saves since How much the bank saves since 19981998

More then 60% of their clienteles have More then 60% of their clienteles have been using Internet banking, telephone been using Internet banking, telephone banking, ABM banking, most of those banking, ABM banking, most of those people are very busy to come to see a people are very busy to come to see a tellers or they don’t have the availability tellers or they don’t have the availability during the time the banks are opened.during the time the banks are opened.

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