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Chapter 18 Notes (on Finance)

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University of Toronto Mississauga
James Appleyard

MGM Chapter 18 NotesThe Financial Services Industry in CanadaFinancial Services sector plays important role in Canadian economy employing 600000 and representing 6 of GDPBefore Canada had four distinct groups of financial institutionsbanks trust companies insurance companies and securities dealersBut now it is increasingly difficult to distinguish firms by type of functionParticipants in the Financial Services IndustryA credit union is a nonprofit memberowned financial cooperativethat offer a full variety of banking services to their membersA trust company is a financial institution that conducts activities like a bankBut it can administer estates pension plans and agency contracts which banks cannot doAs a result many banks are acquiring trust companiesNonbanks are financial organizations that accept no deposits but offer many services provided by regular banksExamples of nonbanks include pension funds insurance companies commercial finance companies consumer finance companies and brokerage housesPension funds are amounts of money put aside by corporations non profit organizations or unions to cover part of the financial needs of their members when they retireLife insurance companies provide financial protection for policyholders who periodically pay premiumsCommercial and consumer finance companies offer shortterm loans to businesses and individuals who cannot meet the credit requirements of regular banks or have exceeded their credit limitInterest rates are very highDividing line between banks and nonbanks are becoming less apparentMany former nonbanks now take depositsHow the Financial Services Industry is RegulatedRegulation techniques include legislative and selfregulatory initiativesNo single body that regulatesBanks are regulated by federal government everything else is provincially regulatedWhy Money is ImportantWhat happens to any major countrys economy has an effect on the Canadian economy and vice versaTo understand Canadian economy one must understand global money exchanges and the creation and management of moneyWhat is MoneyMoney is anything that people accept as payment for goods and servicesMoney started with the barter systemTodays form of money has to the meet the requirementsPortability Divisibility Stability Durability and UniquenessCoins and bills fulfill these requirementsNot all money is equally stableRussian currency is so unstable that no other country would accept itEcash is the latest form of money
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