COMMERCE 4FP3 Lecture Notes - Lecture 4: Canada Deposit Insurance Corporation, Credit Union, Wealth Management

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PERSONAL FINANCE
COMMERCE 4FP3
CHAPTER 4: BANKING SERVICES OF FINANCIAL INSTITUTIONS
OBJECTIVES
Compare the different types of financial institutions
Describe the banking services offered by these institutions
Explain how to select an institution
Describe the savings alternatives offered by different institutions
INTRODUCTION
Depository institutions: financial institutions that accept deposits and provide loans to individuals and
businesses
In Canada we have almost 3000 different companies that can provide this service
You may only know the big 5 (TD, CIBC, RBC, Scotia, BMO)
o Types of institutions: chartered banks, trust and loan companies, credit unions and caisses
populaires
Non-Depositary institutions: provide some financial services but are not incurred by the CDIC (Canada
depository insurance corporation)
o Types of non-depository institutions: finance and lease companies, mortgage companies,
investment dealers, insurance companies, mutual fund companies, payday loan companies,
cheque cashing outlets and even pawnshops
CHARTERED BANKS
Schedule 1 banks: domestic banks (RBC, scotia, CIBC)
Schedule 2 banks: foreign banks that have subsidiaries operating in Canada (HSBC, ING bank of
Canada- been brought out by scotia and is now known as tangerine)
Schedule 3 banks: subsidiaries of foreign banks that are restricted in their authority to accept deposit
(e.g. Citibank, capital one)
Financial institutions that accept deposit and use the funds to provide business and personal loans
o These deposits are insured by Canada deposit insurance corporation (CDIC) up to $100,000
per depositor
Banks look to capture all of consumers need by providing a ‘1 stop shop’ approach
Provide services for: personal banking, business banking, international banking, investing, insurance,
wealth management and estate planning
TRUST COMPANIES
Offer same services as banks but can act as a trustee in charge of corporate or individual property,
stocks and bonds (e.g. Manulife)
CREDIT UNION/CAISSES POPULAIRES
User owned, non profit
Becoming more popular as fees are cheaper and returns are higher (e.g. first Ontario)
NON-DEPOSITORY INSTITUTIONS
Finance and lease companies: specialize in providing personal loans or leases to individuals (e.g.
Toyota lease company)
Mortgage companies: specialize in providing mortgage loans to individuals
Insurance companies: non depository institutions that sell insurance to protect individuals or firms from
risks that can incur financial loss (e.g. TD meloche monnex)
o Life and health insurance companies provide insurance in the event of a persons death,
disability or critical illness
o Property and causality insurance companies provide insurance damage to property including
automobiles and homes
Mutual fund companies sell units to individuals (pool of funds) and use the proceeds to invest ins tocks
to create mutual funds (e.g. Assante wealth management)
o Minimum investment amount is typically between $500 - $5000
Payday loan companies: provide single payment, short term loans at high cost (don’t use this service)
Cheque cashing outlets: 3rd party cheques cashed for a fee (e.g. money mart)
SUMMARY
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