The information below provides details about the Canada banking system, and details on opening a Canada bank account. You will find details on the laws and regulations that govern the banking system, as well as a list of local and international banks that operate in Canada.
Banks play a key role in Canada’s financial system and economic development. As of July 2005 the banking industry included 19 domestic banks, 23 foreign bank subsidiaries and 21 foreign bank branches operating in Canada. In total, these institutions managed over $1.8 trillion in assets.
Banks account for over 70 per cent of the total assets of the Canadian financial services sector, with the six largest domestic banks accounting for over 90 per cent of the assets of the banking industry.
Banks are among Canada’s leading employers. In 2003 the industry employed over 237,000 Canadians and had a Canadian payroll of approximately $17 billion. In addition, in 2003 the six largest domestic banks paid $9.5 billion in taxes to all levels of government.
Canada’s banks operate through an extensive network that includes over 8,000 branches and close to 18,000 automated banking machines (ABMs) across the country. Canada has the highest number of ABMs per capita in the world and benefits from the highest penetration levels of electronic channels such as debit cards, Internet banking and telephone banking.
The six major domestic banks also have a significant presence outside Canada, in areas such as the United States, Latin America, the Caribbean and Asia. International operations accounted for approximately 33 per cent of their gross revenues in 2004.
The banking industry in Canada is governed by the federal Bank Act. The Bank Act and other financial services laws are mandated for review every five years. Amendments to the Bank Act in 1992 and 1997 removed some irritants of doing business in Canada for U.S. and other foreign banks. Foreign banks can now opt out of Canada Deposit Insurance, and in February 1999, the federal government introduced legislation to allow foreign bank branching (Bill C-67), which addressed Canada’s commitments in the WTO Financial Services Agreement to pass into law foreign bank branching by June 30, 1999. U.S. and foreign bankers found the deposit requirements and tax applications prohibitive, and the limitations on ownership restrictive. Consequently, the federal government agreed in May 1999 to amend C-67 to make foreign banking in Canada more viable, and the bill was passed by Parliament and received Royal Assent to come into force on June 17, 1999.
There are three types of banking licenses under the Bank Act
Schedule I banks are domestic banks and are authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation.
Schedule II banks are foreign bank subsidiaries authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canada Deposit and Insurance Corporation. Foreign bank subsidiaries are controlled by eligible foreign institutions.
Schedule III banks are foreign bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada. These branches have certain restrictions.
Two types of foreign bank branches are permitted under the new legislation: full-service and lending. Full-service branches are authorized to take non-retail deposits of not less than C$150,000 (est. US$100,000), while lending branches are not allowed to take any deposits and can borrow only from other financial institutions. The purpose of lending branches is to provide new sources of funds to businesses and credit card users. Full-service branches and foreign bank subsidiaries are not allowed to own lending branches.
Canadian banks are federally chartered and regulated and may operate in all ten Canadian provinces and three territories, as well as overseas.
The financial services chapter of the NAFTA, which entered into force on January 1, 1994, establishes a comprehensive set of rules to govern trade and investment in financial services among the three signatory countries (U.S., Canada, and Mexico). U.S. banks now enjoy a right of establishment and a guarantee of national treatment in Canada. NAFTA also established a Financial Services Committee to supervise implementation of the chapter and deal with any banking issues that arise between the two countries. If differences of interpretation cannot be resolved by this committee, the NAFTA parties can take the issue to a dispute settlement mechanism.
Bank of Canada
As the nation’s central bank, the Bank of Canada has five main areas of responsibility:
Financial Institutions Operating
Banks authorized to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation. (Schedule I banks):
To see our available bank account jurisdictions we can help you with, view our Bank Account Opening area.