Textbook Notes (368,629)
Canada (162,027)
Commerce (1,696)
Rita Cossa (56)
Chapter 15-16

Commerce - Chapter 15-16 Notes.docx

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Rita Cossa

CHAPTER FIFTEENTHE FINANCIAL SERVICES INDUSTRY IN CANADAThe Financial Services Industry in Canada Participants in the Financial Services IndustryCredit unionso Nonprofit memberowned financial cooperatives o Offer full variety of banking services to membersTrust companyo Administers estates pension plans agency contracts o Banks cannot do thisNonbankso Accept no deposits but offer other services provided by regular banks o Pension funds insurance companiesPension funds money put aside for when employees retireCommercialconsumer finance companieso Offer shortterm loans to businessesindividuals who cannot meet credit requirements of regular bank o Have higher interest ratesHow the Financial Services Industry Is RegulatedFinancial industry is highly regulatedCan be regulated at federal or provincial levelDepartment of Finance federal regulating body has three agencies o The Office of the Superintendent of Financial Institutions monitors daytoday operations of institutions o Canada Deposit Insurance Corporation protects deposits up to 100000 for each customer in each financial institution o The Financial Consumer Agency of Canada monitors institutions to ensure they follow consumer protection measuresWhy Money Is Important What Is MoneyMoney anything people generally accept as payment for goodsservicesBarter trading of goodsservices for other goodsservices directlyStandards of a useful form of currency o Portability o Divisibility o Stability o Durability o Uniqueness hard to copy counterfeitWhat Is the Money SupplyMoney supply amount of money Bank of Canada makes available for people to buy goodsservicesM1 money that can be accessed quickly and easilyM2 M2 M2 broader measures of money supplyWhy Does the Money Supply Need to Be ControlledToo much money being made will cause inflationToo little money causes deflationCould cause recessionControlling money supply affects employment and economic growthdeclineThe Global Exchange of MoneyFalling dollar value means amount of goodsservices can buy with a dollar decreasesRising dollar value means amount of goodsservices can buy with a dollar goes upStrong Canadian economy demand for dollar is high value risesWeak Canadian economy demand for dollar declines value fallsControl of the Money SupplyBank of Canada manages rate of money growth by changing overnight rateChange in overnight rate usually affects interest rates charged by commercial banksPrime rate interest rate banks charge most creditworthy customersRise in interest rateso Consumersbusinesses hold less money borrow less pay back loans o Slower growth in moneyInterest rates fall o Peoplebusinesses encouraged to borrow and spend more o Boosts economyThe Banking Industry Commercial BanksCommercial banko Profitseeking organization that receives deposits from individualscorporations o Uses funds to make loansMake profit if revenue generated by loans exceeds interest paid to depositorsSome Services Provided by BanksChequing accounto Deposit money and can write cheques to pay for stuff o Usually have service charge and demand minimum depositTerm depositso Type of savings account o Earns interest that is delivered at end of specified period o Depositor does not withdraw funds until after specified term
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