1. Banking Introduction
Banking

2. Think about it… Why do we have banks? Are banks a business?
How do banks make money?

3. The Need for Financial Institutions
All deposit taking institutions invest and lend their customers’ savings and charge fees for services.
Canadian Banking
Banks are businesses that sell services to earn profits
Most bank revenue is from interest on loaned money and investmenets
These institutions accept deposits, encourage saving, and keep money safe.
They provide loans to consumers and to businesses, and they handle millions of business transactions.
Institutions provide different services, banking methods, and hours of operations.
CANADIAN BANKING
Banks loan money to consumers, businesses, and the government.
Banks also invest money that individuals and businesses deposit with them, thereby earning interest.

4. The Bank Act
Canadian Constitution of 1867 created a common, unified banking system controlled by the federal government.
All need to follow the same rules
The Bank Act
The Canadian Constitution of 1867 gave the federal government control over money and banking.
Federal parliament passed the first bank act in 1871.
Receiving a charter allows an institution to use the word “bank”.
The Bank Act outlines procedures for new banks and mergers and gives details about what a bank can and cannot do.
The Bank Act is reviewed and revised every few years.
The last revision occurred in 2001.
In 1980 the revisions allowed foreign banks to operated in Canada for the first time.
See Table 13.1, “The Three Classes of Canadian Banks”, on page 398.
See Table 13.2, “Canada’s 19 Schedule I Banks”, on page 399.

5. Three Classes of Bank Schedule I
Owned by Canadian Shareholders (Domestic) – BMO, CIBC, Scotiabank
Schedule II
Foreign-owned and operate similar to Schedule I Banks
Schedule III
Foreign-owned and have restrictions set by the Bank Act
The Bank Act
The Canadian Constitution of 1867 gave the federal government control over money and banking.
Federal parliament passed the first bank act in 1871.
Receiving a charter allows an institution to use the word “bank”.
The Bank Act outlines procedures for new banks and mergers and gives details about what a bank can and cannot do.
The Bank Act is reviewed and revised every few years.
The last revision occurred in 2001.
In 1980 the revisions allowed foreign banks to operated in Canada for the first time.
See Table 13.1, “The Three Classes of Canadian Banks”, on page 398.
See Table 13.2, “Canada’s 19 Schedule I Banks”, on page 399.

6. Branch Banking
head office in main cities and interconnected “branches” in different parts of the country.
Branch Banking
Schedule I banks have head office in one of Canada’s main cities.
Head offices determine policies and is connected to the branches across the country.
See Table 13.3, “Branch Banking in Canada”, on page 400.
The Bank of Canada
The Bank of Canada is operated by the federal government, it is Canada’s central bank; it controls the money supply.
The Bank of Canada can raise or lower the bank rate.
The bank rate is the minimum rate of interest charged by the Bank of Canada for loans made to the chartered banks; also called the prime lending rate.
If interest rates go up, fewer individuals and business borrow money thereby causing the money supply to contract.
If interest rates go down, individuals and businesses borrow money and it causes more money to enter the economy and thereby increasing the supply.
Money supply is the total amount of money in circulation in Canada, including cash and deposits and savings in financial institutions.

7. The Bank of Canada Not actually a bank
helps to keep the economy stable by regulating the money supply.
Controls bank rate – minimum interest banks can charge for loans
Branch Banking
Schedule I banks have head office in one of Canada’s main cities.
Head offices determine policies and is connected to the branches across the country.
See Table 13.3, “Branch Banking in Canada”, on page 400.
The Bank of Canada
The Bank of Canada is operated by the federal government, it is Canada’s central bank; it controls the money supply.
The Bank of Canada can raise or lower the bank rate.
The bank rate is the minimum rate of interest charged by the Bank of Canada for loans made to the chartered banks; also called the prime lending rate.
If interest rates go up, fewer individuals and business borrow money thereby causing the money supply to contract.
If interest rates go down, individuals and businesses borrow money and it causes more money to enter the economy and thereby increasing the supply.
Money supply is the total amount of money in circulation in Canada, including cash and deposits and savings in financial institutions.

8. Other Financial Institutions
Trust companies – started as investors, now similar to banks
Caisses Populaires and Credit Unions –
co-operative ownership, members have something in common and pool resources
Insurance Companies – insure risk (life, health, property, etc.), works by sharing risk, everyone pays in only few are paid out

9. TO DO
Complete the Comparing Bank Accounts Activity to find out the difference between different institutions