1.  Canadian Chartered Banks  A multi-branched, privately owned, chartered financial intermediary that has received a charter by Act of Parliament  Fractional reserve banking system ▪ A banking system with a reserve ratio that is less than 100 percent of the deposit liabilities of a chartered bank  Making Loans ▪ Prime rate 1 ©2013 McGraw-Hill Ryerson Ltd.1Chapter 12.4

2. AssetsLiabilities Reserves (currency and chartered banks’ deposits with Bank of Canada) 0Demand deposits 228 Loans (determined in Canadian dollars)721Savings deposits 272 Canadian securities213Term deposits 216 Mortgages 857 Foreign-currency liabilities 186 Government of Canada deposit 2 Other assets 519 Other liabilities 1406 Total2310Total 2310 ©2013 McGraw-Hill Ryerson Ltd.2Chapter 12.4

3. ©2013 McGraw-Hill Ryerson Ltd.3Chapter 12.4

4.  Other Financial Intermediaries  Trust companies, loan companies, credit unions, and caisses populaires  Insurance companies  Two basic functions  They hold the money deposits of businesses and households  They make loans to the public in an effort to make profits. 4 ©2013 McGraw-Hill Ryerson Ltd.4Chapter 12.4

5.  Mortgage Default Crisis  Many causes  Government programs that encouraged home ownership  Declining real estate values  Bad incentives provided by mortgage-backed bonds ©2013 McGraw-Hill Ryerson Ltd.5Chapter 12.4

6.  Securitization  The process of slicing up and bundling groups of loans into new securities  As loans defaulted, the system collapsed  “Underwater” homeowners abandoned homes and mortgages ©2013 McGraw-Hill Ryerson Ltd.6Chapter 12.4

7.  A cheque is a written order that the drawer uses in making a purchase or paying a debt.  A cheque is collected, or “cleared,” when one or more banks transfers part of the drawer’s chequing account to the chequing account of the recipient.  Canadian Payment Association (CPA) ©2013 McGraw-Hill Ryerson Ltd.7Chapter 12.4