The first incarnation of the Canadian banking system was regulated by colonial governments in the days of New France and British North America.
Putting down roots
The shift from colonial overseas control to a local banking system began when businessman John Richardson and a group of merchants signed the Articles of Association to establish the Bank of Montreal in 1817.
Other regional banks swiftly followed, issuing their own local currency until amendments in the Dominion Notes Act allowed federal and provincial governments to introduce notes from 1866. The official Canadian currency took the form of the Canadian dollar from 1867, marking the federation between the Province of Canada, New Brunswick and Nova Scotia - the birth of a nation.
The Canadian dollar is today one of the world’s major reserve currencies, increasingly popular due to Canada’s economic stability and the government’s strong sovereign position.
Following Royal Assent to the Bank of Canada Act, the country’s central bank started operations in 1935. The creation of the Bank of Canada was a major milestone in monetary governance, with its role to promote the economic and financial welfare of the young nation.
In 1946, the Canada Savings Bonds programme was launched, in tandem with the Payroll Savings scheme. The Canada Savings Bonds programme has undergone a number of changes over the years, but remains a popular way for Canadians to save.
Throughout the 1980s and 1990s, the country’s largest banks acquired the majority of the major trust and brokerage companies in Canada.
They subsequently started their own mutual fund and insurance businesses, and as a result Canada’s ‘Big Five’ banks (Royal Bank of Canada, Toronto Dominion Bank, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce) are not just banks, but rather international financial services conglomerates.
Canada’s federal government has sole jurisdiction for banks, in line with the Canadian Constitution, and the regulator is the Office of the Superintendent of Financial Institutions (OSFI).
With large bank mergers ruled out by the federal government, some Canadian banks turned to international expansion, particularly in various US markets such as brokerage.
One notable development in Canadian banking was the launch of ING Bank of Canada (which operated as ING Direct) in 1997. ING Direct relied on a branchless banking model supported by ‘Cafes’, which acted as face-to-face contact points. The bank was acquired by Scotiabank in 2012, and now operates under the name Tangerine.
Stability and innovation
Headquartered in Toronto, the country’s banking sector is seen as one of the strongest and safest. A World Economic Forum survey in 2008 concluded that Canada had the soundest banking system in the world, with a score of 6.8 out of a possible seven. This annual survey, known as the Global Competitiveness Report, ranked Canada first for eight consecutive years through to 2015.
In 2014, Canada’s banking system was also ranked number one in the world for financial strength by Moody’s.
As the business capital of Canada, and one of the world’s largest financial centres, Toronto hosts the Toronto Stock Exchange (TSX) – the third largest stock exchange in the Ameicas by market capitalisation (as of 2015). The world’s first exchange-traded fund (ETF) was listed on the TSX in 1990.
Canada’s FinTech ecosystem is now gaining real momentum in its quest to become a global hub.
The FinTech scene is characterised by a collaborative attitude. Vancouver, for example, is attracting a particularly vibrant and diverse group of startups, whilst more than a quarter of all Foreign Direct Investment in financial services in Toronto is related to FinTech.
This innovation extends to banks. In 2016, a number of challenger banks started operating in Canada, including Wealth One Bank of Canada, Exchange Bank of Canada, and UNI Financial Corp.
These new banks have identified gaps in the wide reach of the Big Five. Wealth One Bank of Canada, for example, aims to service the country’s growing Chinese Canadian population with full Mandarin and Cantonese language services. Exchange Bank of Canada, meanwhile, deals exclusively in foreign currency services on a wholesale level to financial institutions and businesses.
Sven Bossu, Head of Sibos, said:
“We’re really looking forward to Sibos 2017 in Toronto, in the year that Canada celebrates its 150th anniversary. The country’s banking system is rightly lauded for its strength and stability, but the financial ecosystem is also alive with innovation. This mix ensures that Toronto is an ideal host for Sibos.”
For further information about Sibos 2017, stay tuned to sibos.com