1. Banking in Canada

2. Three Ways Banks Earn Profit Sell services like financial advising, insurance, Charging interest on money they loan out Invest money and earn interest on those investments.

3. The Bank Act The Canadian constitution of 1867 gave the federal government control over money and banking Government created one set of banking rules that all banks in Canada had to follow Bank Act outlines the rules and regulations all banks have to follow.

4. Bank Act Rules 1) All banks must be have “charter” given to them by the federal government which gives them the right to operate. 2) All banks must make regular reports to the federal minister of finance. 3) All banks must fit into categories: Schedule I, Schedule II, Schedule III. Revisions are made every few years. e.g. 1980 revisions allowed foreign banks to operate in Canada.

5. Schedule I Banks Owned by Canadian shareholders Shares are traded on the major Canadian stock exchange There are 19 Schedule I banks in Canada Including the Big Five These banks accept deposits and offer investment and financial services

6. Schedule II Banks Mostly foreign owned with a small number of shareholders Same services as Schedule I banks but government sets limits on # of branches and assets. Focus is usually investment banking and corporate banking.

7. Schedule III Banks Foreign bank branches with permission to operate in Canada. Lots of restrictions in the Bank Act Like Schedule II banks, investment and corporate banking mostly.

8. The Bank of Canada Not a chartered bank, owned by the government. Helps keep the Canadian economy as stable as possible. Controls the money supply- Prints and issues Canadian bills and coins as needed.

9. Adjusts the bank rate (lending rate) which suggests to chartered banks that they should raise or lower their interest rates to borrowers. Interest rates raised=fewer borrowers, $$ decrease Interest rates lowered= more borrowers, $$ increase

10. Other Financial Institutions Trust Companies First established in late 1800’s to manage and invest funds entrusted to them by consumers. Today they also provide: loans savings and chequing accounts Help with purchase of real estate, estates The Bank Act does not register Trust companies, provinces and federal government decides.

11. Other Financial Institutions Caisses Populaire & Credit Unions Organized by people who decide to pool their money and resources. Members share a common bond such as a particular occupation, geographic area, cultural background. Each member must purchase at least 1 share in the business and then they have a vote on any decisions (co-operative) Services provided: Receive deposits, lend money, offer chequing, provide investments.

12. Other Financial Institutions Insurance Companies Financial institutions that insure risk Life, health, accident, property, car insurance You pay a fee to hold insurance and when you need it, you file a claim and receive $$.

13. Joanne pays $60 of car insurance each month to her insurance company. Insurance Company Other people also pay $$ each month to the insurance company. The amount they pay depends on their age, gender, marital status, car they drive, accident history, colour of car etc.= how risky that person is Michelle is young, single and drives a convertible so she pays $100/month Sean is young, male and drives a brown sedan but he commutes into work a long distance so he pays $140/month Mike is married with children and in his 40’s but he drives a motorcycle so he pays $160. When Joanne gets into an accident and has to repair her car for $5,000, she files a claim with the insurance company and gets $5,000 from the $$ the insurance company gets. Her monthly fee may go up now.

14. More on Insurance The fee you pay to the insurance company you never get back, even if you never get into an accident. Major disasters can quickly drain the insurance company’s pool of money For example: The damage caused by the 1998 ice storms in Eastern Canada nearly caused the insurance companies to go under.

15. Money as Debt http://video.google.com/videoplay?docid=- 2550156453790090544#docid=53521067737 70802849 Debt Collection http://www.youtube.com/watch?v=KJS9c0jgo sQ&feature=related http://www.youtube.com/watch?v=KJS9c0jgo sQ&feature=related