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BU111 Study Guide - Final Guide: International Monetary Fund, Primary Market, Ontario Securities Commission

Course Code
Sofy Carayannopoulos
Study Guide

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Canadian Financial System
-Financial instuons facilitate the ow of money from surplus to decit
-Lines between the 4 nancial instuons has been blurred since changes in the Bank Act
more compeon and less regulaon
-4 pillars:
Chartered Banks (allowed to enter other businesses, bought trust companies, and
became investment dealers)
Alternate Banks
Specialized Lending/Saving Intermediaries
Investment Dealers (stockbrokers, underwriters)
Pillar #1: Chartered Banks
-Publicly traded, prot-seeking companies can buy their stocks (e.g. BMO)
-Largest and most important instuon (we put and borrow money, and ask them for nancial
-Serves businesses, individuals, and others (large business, government)
-Concentrated and highly regulated industry
The 5 largest Canadian banks = 90% of total bank assets
Bank Act: Limits foreign controlled banks to less than 8% of total domesc bank assets
oForeign banks can increase compeon but limits populaon in invesng money
in foreign banks
-Major source of short-term loans for businesses
Secured vs. Unsecured loans
oSecured: Callable; When you’re borrowing money from the bank, the bank can
sell your personal assets if you don’t pay them back lower interest rates for
secured loans
oUnsecured: You’re promising the bank for repayment backed by your promise;
only for most credit-worthy borrowers
-Expand money supply through deposit expansion
When you deposit money in bank, bank pays you interest, takes your deposit and loan it
to someone else, then they pay interest to the bank expands total supply of money
-Changes in banking
Deregulaon: Allowed banks to alter role as mediators between depositors and
Changes in consumer demands: As consumers, we demand more services from banks
Compeon from foreign banks: Consumers can sll put money in foreign banks even if
those banks aren’t allowed to operate in Canada
-Bank of Canada
Canada’s central bank managed by board of governors, crucial in managing economy
Banks borrow money from Bank of Canada
Open Market Operaons
oBUY government securies: Increase bank reserves and ability to make loans to
businesses and consumers
oSELL government securies: Decrease bank reserves and ability to make loans to
businesses and consumers
Bank Rate
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