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Lecture 17 - Chapter 15

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Rita Cossa

Lecture 17 – Chapter 15 The Financial Services Industry in Canada • Financial institutions provide a variety of products that include o money; o banking; o investing; o insurance; o financing; and o financial planning. • The financial services sector plays a critical role in the economy and it is recognized to be one of the healthiest and safest in the world. Participants in the Financial Services Industry • Traditional banks • Credit unions • Caisses populaires (form of credit union predominately in Quebec) • Trust companies • Non-banks: pension funds, insurance companies, commercial finance companies, and brokerage houses History: The Four Pillars • until the middle of the 1980s, the Canadian regulatory system was known as the four-pillar system made up of: o banks – administer the payments system o trust companies – fiduciary business o insurance industry – protect life, health, property o securities dealers – including underwriting functions o regulation was designed to foster competition within each pillar, but not among them • there was a strong bias foreign ownership and control • by 1992, legislation was in place to re-regulate the financial system Today • a life insurance company can now own a bank or a bank can own an investment dealer • there are now new opportunities for foreign banks to operate in Canada and there are several thousand financial services providers in Canada • partnerships: CIBC & Amex, RBC & AOL Canada • banks: President’s Choice Bank, Canadian Tire Bank • monolines • financial company that deals specifically with one particular branch of the financial industry by choosing one product to focus on (e.g., credit cards) so it can become very specialized in all the aspects of that particular product The Banking Industry of Canada • Chequing and savings accounts • Loans, mortgages • Credit cards • Overdraft protection, lines of credit • Automated teller machines (ATMs) • Life insurance brokerage services • Financial counselling • Telephone and Internet payment options • Safety deposit boxes • Registered retirement accounts (RRSPs, RRIFs) • Travellers’ cheques The Canadian Securities Industry • The Canadian securities industry raises capital for start-up and existing businesses and governments and allows investors to trade with confidence in open and fair capital markets. • Investment dealers play an essential role in the Canadian securities industry by o providing financial advice to investors o raising all forms of capital for new and expanding businesses o underwriting and acting as primary distributors for government debt o creating markets by trading in their own accounts Functions of Securities Markets • A securities market provides long-term funding for businesses and it also creates a place to buy/sell securities (investments). o a security is a transferable certificate of ownership of an investment product • It is divided into primary markets (e.g., IPOs) and the secondary market (e.g., stock exchange) o a stock exchange is an organization whose members can buy and sell (exchange) securities for companies and investors • The industry provides investors with a wide variety of choices within a very competitive market. • More Canadians are turning to the securities industry to ensure their financial security • Canada’s provinces and territories are responsible for the securities regulations within their respective borders but this framework is being reevaluated. The Insurance Industry • Provides insurance protection for most buildings, vehicles, and commercial enterprises. • Insurance shares risk with others through th
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