Banking in Canada - Past, Present, and Future

Canada's banking history dates back to 1817, when the Bank of Montreal was founded.

The country's banking system has undergone significant changes over the years, with the first chartered bank, the Bank of Nova Scotia, established in 1832.

In the early 20th century, the Canadian banking system was dominated by a few large banks, including the Royal Bank of Canada, which was founded in 1869.

Today, Canada has a diverse banking system with many large and small banks, including the Big Five: Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and Bank of Montreal.

Canada's banking system is well-developed and mature, with a strong focus on regulation and conservative practices.

The Canadian banking system is governed by both federal and provincial regulations, with the Office of the Superintendent of Financial Institutions Canada (OSFI) serving as the primary regulator and supervisor of federally regulated institutions.

Canada has a large number of banks, with approximately 35 domestic banks, 21 foreign bank subsidiaries, 28 full service foreign bank branches, and four foreign bank lending branches.

These institutions manage a combined total of over C$4.6 trillion in assets, with banks accounting for more than 70 percent of the total assets of the Canadian financial services sector.

The six largest domestic banks have a significant presence outside of Canada, operating in areas such as the United States, Latin America, the Caribbean, and Asia.

Canada's banks operate through an extensive network, with over 6,200 branches and 18,300 automated banking machines (ABMs) across the country.

Here are some key statistics about the banking system in Canada:

This high number of branches and ABMs, combined with high penetration levels of electronic channels such as debit cards, internet banking, and telephone banking, has enabled Canadians to perform much of their banking transactions using these channels, with nearly 26% of Canadians reporting that they do so.

Bank failures are a rare occurrence in Canada, with only two small regional banks failing since 1923. This is a testament to the country's robust banking system.

The Security Home Mortgage Corporation is a notable exception, closing its doors in 1996 and leaving 2,600 Canadians without access to their savings.

Canada's Big Six banks are designated as domestic systemically important banks (D-SIBs), meaning their failure could have a serious impact on the economy. This designation comes with strict regulations to ensure their stability.

The federal government has taken steps to mitigate risk by restricting the range of business activities banks can engage in through the Bank Act. This has helped to maintain depositors' safety and prevent bank failures.

Here are the largest Schedule I chartered banks in Canada, generating revenues greater than $1 billion:

Bank failures in Canada are extremely rare. Only two small regional banks have failed since 1923, when the Home Bank of Canada failed.

In fact, there were no bank failures in Canada during some of the most significant global crises, including the Great Depression, World War II, the 1979 Energy Crisis, the Dot-com Bubble, the Sept 11th Attacks, or the Subprime Mortgage Crisis.

The most recent bank failure in Canada occurred in September 1985, when both the Canadian Commercial Bank and Northland Bank failed.

A smaller financial institution, the Calgary-based Security Home Mortgage Corporation, closed its doors in June 1996, leaving about 2,600 Canadians without access to their savings, totaling $42 million in deposits.

Prior to Confederation in 1867, banks in Canada were chartered by royal assent, with their daily affairs monitored and supervised by the governments of Upper and Lower Canada.

The Bank Act, passed by Parliament in 1871, regulates Canada's chartered banks with three main goals: protecting depositors' funds, insuring the maintenance of cash reserves, and promoting the efficiency of the financial system through competition.

The federal government's agency for supervising and regulating all chartered banks is the Office of the Superintendent of Financial Institutions (OSFI), which reports to the minister of finance.

Chartered banks are regularly inspected for their financial health and to ensure they are following the rules of the Bank Act.

The Bank Act was updated every 10 years until 1992, when the frequency was changed to every five years.

Banks are classified into three categories: Schedule I banks (widely owned by the Canadian public), Schedule II banks (foreign-owned banks or closely held Canadian-owned banks), and Schedule III banks (branches of foreign-owned banks).

Here is a list of the largest Schedule I banks in Canada:

The federal government often restricted the range of business activity banks could enter into through the Bank Act, in its efforts to manage the risk of the chartered banks and ensure depositors' safety.

Chartered banks were initially restricted from issuing mortgages not insured under the National Housing Act until the 1967 Bank Act revision. This change allowed chartered banks to grow dramatically.

Chartered banks began competing by introducing new products for their customers, such as credit cards. Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Royal Bank, and National Bank of Canada jointly introduced Chargex (later renamed VISA) in 1968.

Chartered banks started marketing personal chequing accounts to their clients in the late 1950s and early 1960s, and daily interest savings accounts in the late 1970s. These innovations greatly added to the growth of chartered bank assets.

The banks' foreign deposits and foreign loans as a proportion of total assets and liabilities more than doubled between 1960 and 1970, to 21 per cent and 10 per cent respectively. Their total foreign deposits as a percentage of total Canadian deposits also doubled to almost 50 per cent by 1970.

The 1980s saw the banks allowed to enter the investment banking and stock brokerage industry, dubbed "Canada's Little Bang".

Canadian banks emerged relatively unscathed from the 2008 global financial crisis, thanks to a regulatory framework that had been overhauled in the mid-1980s.

The regulatory framework required Canadian banks to maintain low debt-to-equity ratios, which shielded them from the financial crisis and ensuing recession.

In 2012, five of Canada's chartered banks were ranked among the safest 25 banks in the world by Global Finance magazine.

The World Economic Forum consistently ranks Canada's chartered banks as the soundest in the world.

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.

The World Economic Forum ranked Canada 1st in the "Soundness of banks" indicator ranking as the world's soundest banking system for six consecutive years (2007-2013).

Royal Bank of Canada was ranked number 10 among the world's safest banks and Toronto-Dominion Bank was ranked number 15 by Global Finance magazine in 2010.

Canada's banking system is renowned for its stability and efficiency. It's no surprise that a survey of 12,000 corporate executives ranked Canada's banking system as the best in the world, scoring 6.8 out of 7 in the Global Competitiveness Report.

The Canadian banking system has a long history of stability, with some banks paying dividends to shareholders for over a century. The Bank of Montreal, for example, has been paying dividends every year since 1829.

One key indicator of a bank's efficiency is its return on equity (ROE). In 2024, the largest banks in Canada reported an ROE of 14.5%, 13.8%, 12.9%, 12.5%, and 11.9% respectively.

Here are the ROE percentages of the largest banks in Canada in 2024:

The Canadian banking system's stability is also reflected in its ability to maintain a strong common equity tier 1 (CET1) ratio. In 2024, the largest banks in Canada reported a CET1 ratio of 12.2%, 11.9%, 11.5%, 11.2%, and 10.9% respectively.

Canada's banking system is a model of efficiency, with a strong track record of stability and profitability.

In the 21st century, Canadian chartered banks have taken a significant turn in their business strategies.

Many Canadian chartered banks have grown by expanding into other financial markets, both within and outside of Canada. They've done this by buying banks in the United States and other countries to expand their business.

As a result, these banks have become more diversified and can now offer a wider range of financial services to their customers.

In the 21st century, the Canadian chartered banking landscape underwent significant changes.

The Royal Bank of Canada and the Bank of Montreal attempted to merge in 1998, but the federal government prohibited it.

Many Canadian chartered banks have expanded into other financial markets, buying banks in the United States and other countries.

Chartered banks have also diversified into the asset management business, offering mutual fund and pension fund management.

They can have subsidiaries in the insurance business, but cannot sell certain types of insurance in their branches.

Fintech in Canada is a growing force that's changing the banking landscape. Fintech companies are offering online banking services, including online lending and retail payment services, that are eating into the profits of chartered banks.

These fintech firms are able to operate with a low cost of service and relative lack of regulation, which allows them to loosen the banks' relationship with their established clients. Chartered banks are responding by either acquiring or partnering with fintech firms.

Some of the services offered by fintech firms include online lending, retail payment services, and robo-advisors. These services are making banking more accessible and convenient for customers.

Here are some key characteristics of fintech firms in Canada:

Canadian banks have a reputation for being sound and stable, and for good reason. They emerged relatively unscathed from the 2008 global financial crisis.

The regulatory framework in Canada's banking sector has been a key factor in their stability. This framework was overhauled in the mid-1980s, following the collapse of two chartered banks.

Canadian banks are expected to maintain low debt-to-equity ratios, which has helped shelter them from financial crises. This regulation has been a major contributor to their stability.

In fact, five of Canada's chartered banks were ranked among the safest 25 banks in the world by Global Finance magazine in 2012. This is a testament to the strength of Canada's banking system.

The World Economic Forum's Global Competitiveness Report consistently ranks Canada's chartered banks as the soundest in the world. This reputation is well-deserved, given the banks' strong track record.

In Canada, banking services are offered by a range of institutions, including the Big Five banks: Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and Bank of Montreal.

Banking hours in Canada typically range from 9:30 am to 4:00 pm, Monday to Thursday, and 9:30 am to 5:00 pm on Fridays.

ATMs in Canada are widely available and can be found in most shopping centers, gas stations, and outside banks.

Dispute resolution in the banking sector has undergone changes in recent years. The independent Ombudsman for Banking Services and Investments (OSBI) was responsible for dispute resolution since the late 1990s.

However, some big banks have shifted their dispute resolution processes to the for-profit Chambers Banking Ombuds Office (ADRBO). This change has raised concerns about conflicts of interest and transparency.

The Canadian Foundation for Advancement of Investor Rights (FAIR) has compared ADRBO unfavorably with OSBI. They have serious concerns about the conflicts of interest, misaligned incentives, and level of transparency and accountability at ADRBO.

As of 2021, National Bank of Canada and Digital Commerce Bank are also using ADRBO for dispute resolution. This has led to criticism that banks are avoiding accountability by policing themselves.

In 2018, an incident at TD Bank highlighted the issue. The bank was able to find records of transferred RSP funds, but not where they had gone. This lack of transparency has raised questions about the effectiveness of ADRBO.

Here's a list of banks and their dispute resolution processes as of 2021:

Retail banking has undergone significant changes in recent years, with a growing focus on customer satisfaction and digital channels. The number of customers of the largest banks in Canada is expected to reach 25 million in 2025.

Customer satisfaction with leading Canadian retail banks has been steadily increasing, with a satisfaction rate of 80% in 2024. This is a testament to the efforts of banks to improve their services and meet the evolving needs of their customers.

Bank customer satisfaction in Canada varies by service, with online banking and mobile banking services consistently receiving high ratings. In 2023, 85% of customers were satisfied with online banking services, while 80% were satisfied with mobile banking services.

The average savings per household in Canada has been increasing over the years, with households aged 45-54 having the highest average savings of $143,000 in 2023. This is significantly higher than households aged 25-34, who had an average savings of $63,000 in the same year.

Here's a breakdown of average savings per household in Canada by age group:

Households in Canada have been able to save more money over the years, with an average net savings of $43,000 in 2023. This is a significant increase from the average net savings of $21,000 in 2001.

The average value of new mortgage loans in Canada has been steadily increasing, with an average value of $240,000 in the third quarter of 2024. This is a significant increase from the average value of $180,000 in the third quarter of 2012.

The average mortgage interest rate in Canada has been relatively stable over the years, with an average rate of 2.5% for fixed-rate mortgages in 2023. This is significantly lower than the average rate of 3.5% for variable-rate mortgages in the same year.

Investment banking is a crucial aspect of the financial industry, and Canadian firms are no exception. Investor satisfaction with leading Canadian investment firms in 2024 is a key indicator of their success.

Investor satisfaction with full-service investment firms in Canada in 2024 was a notable aspect of the market. It's essential for investors to be satisfied with their investment firms to ensure long-term success.

The value of M&A deals in Canada has been steadily increasing over the years. From 2006 to 2023, the value of merger and acquisition transactions in Canada grew significantly, reaching a total of billions of U.S. dollars.

Leading financial advisors to M&A deals in Canada in 2023 were notable for their expertise and deal value. The top financial advisors to merger and acquisition transactions in Canada in 2023 were those who handled deals worth billions of U.S. dollars.

Most active private equity firms in Canada in 2023 were busy with a large number of deals. The most active private equity investors in Canada in 2023 were those who completed the most deals, demonstrating their expertise and market presence.

Here's a summary of the leading financial advisors to M&A deals in Canada in 2023, by value of deals (in billion U.S. dollars):

Corporate banking plays a vital role in the Canadian economy, providing businesses with access to credit and loans.

The value of business credit disbursed in Canada from 1st half 2018 to 2nd half 2023, by type of supplier, has seen fluctuations over the years.

According to the data, the value of business credit disbursed by supplier in Canada was highest in the second half of 2023.

Businesses of all sizes can benefit from corporate banking services.

The value of outstanding loans to businesses in Canada from first half 2018 to second half 2023, by business size, shows a significant difference between small and large businesses.

Small businesses have the lowest value of outstanding loans, while large businesses have the highest.

Interest rates on business loans in Canada have been relatively stable over the years.

The monthly interest rate of business loans in Canada from October 2016 to September 2024 has ranged from 4.5% to 6.5%.

Businesses can also expect to see a steady increase in the monthly outstanding value of business loans in Canada.

The monthly outstanding value of business loans in Canada from October 2016 to September 2024 has increased from around $500 billion to over $1 trillion.

In Canada, there are several large banks, but the Big Six are the most well-known. One of these smaller banks is Equitable Bank, which is headquartered in Toronto, Ontario.

Equitable Bank has a relatively small market capitalization of $3.30 billion CAD, but it still manages to generate $0.785 billion CAD in revenue each year. The bank also employs 1,685 full-time equivalent (FTE) employees.

Some other notable banks in Canada include Laurentian Bank, which is headquartered in Montreal, Quebec. With a market capitalization of $1.18 billion CAD, Laurentian Bank is significantly smaller than Equitable Bank, but it still manages to generate $1.03 billion CAD in revenue each year.

Canada has a diverse range of banking institutions, including chartered banks, credit unions, and crown financial institutions. These institutions provide a wide range of financial services to Canadians.

The "Big Five" national banks in Canada are Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), and Canadian Imperial Bank of Commerce (CIBC). These banks operate as international conglomerates with subsidiaries in other countries.

The main competitors to chartered banks are Canada's credit unions and cooperatives, which are owned by their depositors, not public shareholders. Credit unions provide many of the same financial services as chartered banks and mainly operate at the local level.

The Autorité des marchés financiers has designated Desjardins Group as a Domestic Systemically Important Bank (D-SIB). This designation highlights the importance of Desjardins Group in Canada's financial system.

Canada's banking institutions are regulated by the Bank Act, which allows for the creation of federal credit unions. The first federal credit union was established in 2016.

Here's a list of some of the key banking institutions in Canada:

These institutions play a crucial role in Canada's economy, providing financial services to individuals, businesses, and governments.

Banking institutions in Canada have made significant strides in promoting workforce diversity. Bank of Montreal workforce diversity has been improving from 2021 to 2023.

TD Bank Group has a notable gender diversity in its workforce composition, with specific data available for management levels in 2023. Royal Bank of Canada has also seen an increase in diversity from 2019 to 2023. Scotiabank has been working on diversity in its workforce from 2020 to 2023.

TD Bank Group has been tracking racial diversity in its workforce from 2019 to 2023, providing valuable insights into the progress made in this area.

Here's a brief overview of the workforce diversity statistics for these Canadian banking institutions:

Chartered financial institutions receive and hold deposits from the public, paying a fee or interest rate to the depositor. They keep a portion of these deposits in reserve, in case the depositor wants some of the money back.

Banks lend out the balance of the deposit as loans or mortgages to other customers who want to borrow, charging those customers a higher interest rate. This difference in interest rates is where the bank makes its money.

To do this business, chartered financial institutions require a charter from the government.

Customer attitudes towards personal finances in Canada have been a topic of interest, with a significant change observed in the 4th quarter of 2024.

Customer attitude towards personal finances in Canada in the 4th quarter of 2024 is a crucial aspect to consider.

Many Canadians have become more cautious with their finances, likely due to economic uncertainty.

Satisfaction with primary banks in Canada has been steadily increasing, with a share of customers satisfied with their primary banks in Canada from 1st half 2019 to 4th quarter 2024.

According to the data, the share of customers willing to change their primary banks in Canada from 1st half 2019 to 4th quarter 2024 has also been decreasing.

Mobile banking usage has seen a significant increase in Canada, with a share of bank account holders processing banking matters via mobile banking (smartphone or tablet) in Canada from 1st half of 2019 to 4th quarter 2024.

Online banking usage has also been on the rise, with a share of bank account holders processing banking matters via online banking (PC or laptop) in Canada from 1st half 2019 to 4th quarter of 2024.

However, branch banking usage has remained relatively stable, with a share of bank account holders processing banking matters in person in a branch in Canada from 1st half 2019 to 4th quarter 2024.

Interestingly, the frequency of in-person bank branch visits in Canada in 2023 was still a common practice, indicating that many Canadians still prefer to conduct their banking business in person.