DOCSLIB.ORG

Canadian Markets for U.S. Dollars

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Canadian Markets for U.S. Dollars Canadian Markets for U.S. Dollars Oscar L. Altman* HE OPERATIONS of Canadian banks in foreign currencies, T principally in U.S. dollars, have been growing rapidly in recent years.1 Foreign currency deposits (liabilities) increased by US$680 million in 1961, and by US$330 million in the first six months of 1962, reaching a total of US$3.7 billion.2 Approximately 16 per cent of this total consisted of deposits of banks. Deposits of nonbanking enter- prises and of individuals accounted for the remainder and were a larger proportion than they had been for several years. Although a substantial part of these foreign currency (principally U.S. dollar) deposits were made in accordance with normal customer and trade relationships, the increases in recent years are largely the result of the willingness of Canadian banks to pay interest rates higher than those paid by New York banks and of their ability to find profitable outlets for these additional funds. In 1961, two other factors served to stimulate the growth of U.S. dollar deposits: the Canadian withholding tax on corporate dividends (i.e., tax deducted at the source) was increased from 5 per cent to 15 per cent, and some deposits in Canadian dollars were shifted to U.S. dollars in anticipation of changes in the Canadian exchange rate. In 1961, increases in deposits with other banks and in loans other * Mr. Altman, Advisor in the Research and Statistics Department, is a graduate of Cornell University and the University of Chicago. He taught economics at Ohio State University and was on the staff of the National Resources Planning Board and of the French Supply Council. He was Director of Administration of the Fund until 1954. He is the author of Savings, Investment, and National Income and of a number of papers published in technical journals. 1 The role of Canada as a foreign market for U.S. dollars was discussed in "Foreign Markets for Dollars, Sterling, and Other Currencies," by Oscar L. Alt- man, in Staff Papers, Vol. VIII (1960-61), pp. 313^2. A number of points have here been corrected or clarified; and the discussion has been brought to date and made more comprehensive. This paper is an adjunct to one on "Recent Developments in Foreign Markets for Dollars and Other Currencies" which will appear in the next issue of Staff Papers. 2 In published reports, foreign currency assets and liabilities of the Canadian chartered banks are given in Canadian dollars. Because of the variations in the exchange rate, the figures are restated in this paper in U.S. dollars, to measure flows of funds more accurately. Therefore, all dollar figures quoted are U.S. dollars, unless otherwise specified. At the end of June 1962, foreign currency deposits stated in Canadian dollars were $4 billion (Appendix I). 297 ©International Monetary Fund. Not for Redistribution 298 INTERNATIONAL MONETARY FUND STAFF PAPERS than "street" loans (call and short-term loans to brokers and dealers in New York) were unusually large and accounted for practically all of the increase in foreign currency assets ($716 million). Deposits with other banks increased by $431 million, to $965 million. These deposits represented funds placed in Euro-dollar markets, largely London, but also Paris and other continental centers; they further increased the important role of Canadian banks as suppliers of Euro-dollars. Other current loans increased by $208 million, to $1,025 million. This in- crease largely represented commercial loans made in U.S. dollars to U.S. and Canadian corporations in Canada and to corporations in the United States. Foreign currency assets (largely dollars) of Canadian banks at the end of 1961 consisted of deposits with other banks, 28 per cent; securities, mostly short-term U.S. Government securities, 19 per cent; "street" loans, 23 per cent; other loans, 30 per cent. Considerably more than half of the total represented liabilities of the U.S. Government and U.S. residents. A sharp decline in the volume of "street" loans in New York in the second quarter of 1962 paralleled that of prices in the stock market. Although the share of the Canadian banks in outstanding "street" loans remained about the same, their amount decreased to $547 million, and to 15 per cent of total assets. Holdings of securities increased to 27 per cent of the total. Canadian statistics report the assets and liabilities of commercial (chartered) banks in foreign currencies, but provide no detail on the distribution by currency or by residence of owner. This is unfortunate in view of the large operations of Canadian banks in foreign currencies and their importance for better understanding of capital movements and the balance of payments. It is nevertheless estimated that in 1961 deposits held by residents of the United States increased by at least $150 million, and perhaps by as much as $250 million. These figures may be compared with the U.S. balance of payments deficit of $2.4 billion reported by the Department of Commerce for 1961. Position of Canadian Agencies in New York The New York agencies of Canadian banks, like other agencies of foreign banks, cannot accept deposits in the United States. They can, however, obtain large volumes of deposits denominated in U.S. dollars for their Canadian offices.8 When a U.S. depositor, or a Canadian or other 3 These may be the head offices or designated Canadian branches. In what follows, these are summarily referred to as the "head offices." ©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOR U.S. DOLLARS 29 foreign depositor, transfers his deposit denominated in U.S. dollars from a U.S. bank to a Canadian bank, the depositor is credited with a deposit denominated in U.S. dollars, and the head office acquires a deposit in a U.S. bank. If the head office subsequently (or simultaneously) advances these funds to the New York agency, the agency acquires the deposit in a U.S. bank and shows a corresponding amount as due to the head office in Canada. The head offices supervise with close attention—and often trans- action by transaction—the activities of agencies and branches with respect to obtaining deposits. They determine the amount of deposits sought, the rates of interest to be paid, and the investment of the deposited funds. In addition, the head offices may themselves obtain U.S. dollar deposits. The assets represented by any of these deposits may be invested by the head offices, by the New York agencies, or by foreign branches in Europe. They may be invested in the United States, in Canada, or in other countries. The New York agencies of foreign banks, Canadian and other, are not required to maintain reserves in the United States against funds advanced to them by their head offices. Reserves are required against deposits, and advances are legally not deposits. Legislation adopted by New York in 1961 made it possible for foreign banks to have branches in New York, which can accept deposits. Though a number of foreign banks have since established branches in New York, or converted their agencies to branches, the Canadian banks have not. The latter can attract such a large volume of dollar deposits—to some extent through their head offices, but principally through their New York agencies—that they see little advantage in converting their agencies to branches. Indeed, given this ability, there is some advantage in retaining agency status. It is sometimes said that Canadian agencies have a competitive advantage in the New York money market by virtue of the fact that U.S. banks must maintain reserves against their deposits while Cana- dian agencies need not do so against advances by their head offices. A detailed examination of this proposition (Appendix II) suggests, however, that any such competitive advantage is not of major signifi- cance. Foreign Currency Deposits in Canadian Banks In Canadian banks, deposits denominated in foreign currencies have for many years been increasing much more rapidly than those de- ©International Monetary Fund. Not for Redistribution 300 INTERNATIONAL MONETARY FUND STAFF PAPERS nominated in Canadian dollars. Thus, since 1956, the former increased by 165 per cent, and the latter by 25 per cent. Between the end of 1960 and the end of June 1962, Canadian dollar deposits increased by 10 per cent and foreign currency deposits (expressed in U.S. dollars), by 35 per cent (Table 1). TABLE 1. CANADA: DOLLAR AND FOREIGN CURRENCY DEPOSITS OF CHARTERED BANKS, END OF YEAR OR QUARTER, 1956-62 Foreign Currency Deposits Canadian Dollar Deposits Amount Increase (billion Can. dollars) (billion U.S. dollars) (million U.S. dollars) 1956 11.2 1.4 369 1957 11.4 1.9 429 1958 12.7 2.2 298 1959 12.3 2.5 336 1960 12.9 2.7 175 1961 14.2 3.3 681 1962 I 13.9 3.6 254 II 14.2 3.7 77 Sources: Canadian dollar deposits are from Bank of Canada, Statistical Summary; foreign currency deposits are data from Appendix I, infra, converted to U.S. dollars at the exchange rate prevailing at the end of the period. The foreign currency deposits are given in U.S. dollars in Table 1, because their amount varies with additions and withdrawals in foreign currency (largely U.S. dollars). The difference between changes in deposits stated in the two currencies is substantial, since the exchange rate of the Canadian dollar fluctuated between approximately US$0.95 and US$1.08 during the period. For example, in 1961, the increase in foreign currency deposits measured in Canadian dollars was $835 million; but restated in U.S.
Load more

Recommended publications
  • The Canadian Banking System, 1890-1966
    JACK CARR FRANK MATHEWSON NEIL QUIGLEY Stabilityin the Absenceof DepositInsurance: The CanadianBanking System, 1890 1966 THESTABILITY OF THE CANADIAN BANKING SYSTEM in the period before the introductionof formaldeposit insurancein 1967, and in particular, the Canadianbanks' immunityfrom the crisis that afflictedthe U.S. bankingsystem in the GreatDepression, are well known. Between 1890 and 1966, only twelve Ca- nadian charteredbanks failed; six of these failures resulted in losses to the deposi- tors. No bank failures occurredafter the suspensionof the Home Bank of Canadain 1923. Explanationsfor the relative stability of Canadianbanking have focused on the structureof the system, particularlythe economies of scale and portfolio diver- sification achieved by the large branch banks in Canada (Friedmanand Schwartz 1963; Haubrich1990) and the creationof a governmentrediscount facility in 1914. Some (Bordo 1986; Shearer, Chant, and Bond 1984; White 1983) suggestthat the Canadianfederal authoritiesand the CanadianBankers Association (CBA) implic- itly guaranteedbank deposits by arrangingmergers. Most recently, Kryzanowski and Roberts (1993, p. 362) claim that all of the major Canadianbanks were insol- vent during the 1930s, and explain the absence of a banking crisis by the fact that the Canadiangovernment provided "an implicit one hundredpercent guaranteeof bank deposits." The authorsthank the staff of The Bank of Nova Scotia Archives, The CanadianBankers Association Library,and the NationalArchives of Canadafor their assistance in compiling our data. Michael Bordo, John Chant, Ian Drummond,Ron Shearer,anonymous referees, and participantsat the l9th Conference on the Use of QuantitativeMethods in CanadianEconomic Historyprovided helpful comments. Funding for this research was provided by the Institutefor Policy Analysis at the University of Torontoand the University of Westem Ontarioas partof a largerproject on deposit insurancein Canada(CalT, Mathew- son, and Quigley 1994a).
    [Show full text]
  • WHY DID the BANK of in Financial Markets and Monetary Economics
    NBER WORKING PAPER SERIES WHY DIDTHEBANK OF CANADA EMERGE IN 1935? Michael Bordo Angela Redish Working Paper No. 2079 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 November 1986 The research reported here is part of the NBER's research program in Financial Markets and Monetary Economics. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research. NBER Working Paper #2079 November 1986 Why Did the Bank of Canada Emerge in 1935? ABSTRACT Three possible explanations for the emergence of the Canadian central bank in 1935 are examined: that it reflected the need of competitive banking systems for a lender of the last resort; that it was necessary to anchor the unregulated Canadian monetary system after the abandonment of the gold standard in 1929; and that it was a response to political rather than purely economic pressures. Evidence from a variety of sources (contemporary statements to a Royal Comission, the correspondence of chartered bankers, newspaper reports, academic writings and the estimation of time series econometric models) rejects the first two hypotheses and supports the third. Michael D. Bordo Angela Redish Department of Economics Department of Economics College of Business Administration University of British Columbia University of South CArolina Vancouver, B.C. V6T lY2 Columbia, SC 29208 Canada Why Did the Bank of Canada Emeroe in 1935? Michael D. Bordo and Angela Redish Three possible explanations for the emergence of the Canadian central bank in 1935 are examined: that it reflected the need of competitive banking systems for a lender of last resort; that it was necessary to anchor the unregulated Canadian monetary system after the abandonment of the gold standard in 1929; and that it was a response to political rather than purely economic pressures.
    [Show full text]
  • Canada Fintech Report 2021 | Financial Technology | Accenture
    Collaborating to win in Canada’s Fintech ecosystem Accenture 2021 Canadian Fintech report Contents Introduction 3 Executive Summary 4 Part 1: Canadian Fintech Ecosystem Analysis 5 Part 2: Financial Services Industry Outlook and Trends 34 Part 3: Global Fintech Ecosystem Benchmarking 46 Part 4: The Canadian Fintech Ecosystem: Looking Ahead 54 Appendix A: Global Fintech Ecosystem Benchmarking Methodology 58 Appendix B: Definition of Funding Types 61 References 62 2 Introduction As the pace of change continues to accelerate, industry boundaries blur; financial institutions, now more than ever, are adopting the mindset of technology companies. As both market and regulatory forces push these Canadian companies into the spotlight, the financial services ecosystem may be poised to deliver the most personalized and seamless digital experiences Canadians have ever seen. This report offers insights into this ecosystem for 2020 in four parts: Part 1: Canadian Fintech Ecosystem Analysis Part 3: Global Fintech Ecosystem We examine the current state of the Canadian Benchmarking fintech ecosystem - at both the national and Using our benchmarking model, we rank city level - in terms of growth, talent, and four Canadian cities (Calgary, Montreal, investment. We also discuss how incumbent Toronto and Vancouver) against 16 leading financial institutions (FI) are responding and and emerging fintech hubs around the collaborating, the importance of incubators world. This quantitative model draws on 46 and accelerators, and the government’s role in individual data points from various public supporting even further innovation. and proprietary sources, distilled into five key metrics. Part 2: Financial Services Industry Outlook and Trends Part 4: The Canadian Fintech Ecosystem: We elaborate on key emerging trends we Looking Ahead see as influencing the future direction of the Finally, we summarize our findings and explore Canadian financial services industry.
    [Show full text]
  • File Number: in the SUPREME COURT of CANADA (ON APPEAL from the FEDERAL COURT of APPEAL)
    File number: IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE FEDERAL COURT OF APPEAL) BETWEEN: HER MAJESTY THE QUEEN Applicant (Appellant) and LOBLAW FINANCIAL HOLDINGS INC. Respondent (Respondent) APPLICATION FOR LEAVE TO APPEAL (Pursuant to paragraph 58(1)(a) of the Supreme Court Act and subrule 25(1) of the Rules of the Supreme Court of Canada, SOR/2006-203) VOLUME I ATTORNEY GENERAL OF CANADA DEPUTY ATTORNEY GENERAL OF CANADA Department of Justice Canada National Litigation Sector Department of Justice Canada 120 Adelaide Street West, Suite 400 National Litigation Sector Toronto, Ontario 50 O’Connor Street M5H 1T1 Ottawa, Ontario Fax: (416) 973 0810 K1A 0H8 Fax: (613) 954-1920 Per: Elizabeth Chasson Per: Christopher Rupar Aleksandrs Zemdegs Tel.: (613) 670-6290 Laurent Bartleman Email: [email protected] Cherylyn Dickson Isida Ranxi Agent for the Applicant Tel.: (647) 256-7346 (647) 256-7460 Email: [email protected] [email protected] Counsel for the Applicant OSLER, HOSKIN & HARCOURT LLP Barristers & Solicitors Box 50, 1 First Canadian Place Toronto, Ontario M5X 1B8 Fax: (416) 862-6666 Per: Al Meghji Mary Paterson Pooja Mihailovich Robert Raizenne Tel: (416) 862-5677 (416) 862-4924 Email: [email protected] [email protected] Counsel for the Respondent 169 Table of Contents Applicant’s Memorandum of Argument .......................................................................................... 1 Part I – Statement of Facts ...............................................................................................................
    [Show full text]
  • Canada's New Bank Act: Integration of Foreign Banks Into the Canadian Banking System
    Denver Journal of International Law & Policy Volume 11 Number 1 Fal Article 8 May 2020 Canada's New Bank Act: Integration of Foreign Banks into the Canadian Banking System J. G. Taylor Follow this and additional works at: https://digitalcommons.du.edu/djilp Recommended Citation J. G. Taylor, Canada's New Bank Act: Integration of Foreign Banks into the Canadian Banking System, 11 Denv. J. Int'l L. & Pol'y 105 (1981). This Comment is brought to you for free and open access by the University of Denver Sturm College of Law at Digital Commons @ DU. It has been accepted for inclusion in Denver Journal of International Law & Policy by an authorized editor of Digital Commons @ DU. For more information, please contact [email protected],dig- [email protected]. DEVELOPMENTS Canada's New Bank Act: Integration of Foreign Banks into the Canadian Banking System J.G. TAYLOR' I. INTRODUCTION Following three years of delay and six years of review, the Banks and Banking Law Revision Act was passed in Canada and became effective December 1, 1980.' The Act will, for the first time, enable foreign banks to enter mainstream banking in Canada as chartered banks (licensed by Parliament) while at the same time limiting the role of foreign bank sub- sidiaries to ensure that the Canadian "banking system remains predomi- nantly in Canadian hands." The new Bank Act establishes two separate classes of banks 8 Under the Act, existing chartered banks will become Schedule A banks. Schedule A banks are widely held banks with rela- tively few limitations and encumbrances
    [Show full text]
  • CRITICAL Bulletin ISSUES Bank Mergers
    1998 FRASER INSTITUTE CRITICAL ISSUES bulletin Bank Mergers The Rational Consolidation of Banking in Canada by Jason Clemens, Marc T. Law, and Fazil Mihlar with Johanna Leigh Francis FRASER INSTITUTE CRITICAL ISSUES BULLETIN Critical Issues Bulletins are published from time to time by lies in trying to discover prospects for improvement. The Fraser Institute (Vancouver, British Columbia, Canada) Where markets do not work, its interest lies in finding the as supplements to Fraser Forum, the Institute’s monthly pe- reasons. Where competitive markets have been replaced by riodical. Critical Issues Bulletins are comprehensive studies government control, the interest of the Institute lies in doc- of single issues of critical importance for public policy. umenting objectively the nature of the improvement or de- terioration resulting from government intervention. The The authors have worked independently and opinions ex- work of the Institute is assisted by an Editorial Advisory pressed by them are, therefore, their own, and do not nec- Board of internationally renowned economists. The Fraser essarily reflect the opinions of the members or the trustees Institute is a national, federally chartered, non-profit orga- of The Fraser Institute. nization financed by the sale of its publications and the tax- deductible contributions of its members, foundations, and For additional copies of Critical Issues Bulletins, any of our other supporters; it receives no government funding. other publications, or a catalogue of the Institute’s publica- tions, call our toll-free order line: 1–800–665–3558 or visit To learn more about the Institute, visit our web site at our web site at http://www.fraserinstitute.ca.
    [Show full text]
  • CENTRAL BANKING in CANADA by James Hugh. C R E I G H T O N A
    CENTRAL BANKING IN CANADA by James Hugh. Creighton A Thesis submitted for the Degree MASTER OF ARTS in the Department of Economics and Political Science The University of British Columbia April, 1933 COITE. ITS Chapter I. Introduction. Page 1. The growth of central banks— advocates of a central bank for Canada—opponents of the idea. Chapter 2. The General Functions of a Central Bank. Page 10, (a) As a bankers' bank. (b) As a government's bank. (c) As a "people's"bank. Chap ter 3. The Control of Money and Credit and the Central Bank. Page 17, (a) Objectives— 1. Exchange control. 2. Price level control. (b) Possibilities of control— 1. Evidence for and against exchange control. 2. Evidence for and against price level control. Chapter 4. Monetary Control in Canada Previous Page 49, to 1914. ' . Types of money used—first banks— Act of 1871—gold standard— Dominion notes—the banking system—panic of 1907—the crop- moving provision—war-time emergency measures. Chapter 5. The Finance Act as a Substitute for a Central Bank. Page 57 (Contents cont'd.) Evidence in favor of the Act as an adequate substitute—the history of the Act—the signi• ficance of its passing—the Act as a bankers' bank-—as a govern• ment's bank—as a "people's" bank. Chapter 6. Arguments for and against a Central Bank for Canada. Page 133. lo necessity of disturbing present efficient system—there already is credit control in Csnada--doubt as to efficacy of central banks generally—danger of the political factor--difficulty of securing efficient management—lack of a money market in Canada—a central bank could not increase credit in Canada—cost would be burdensome— capitalization—reserves—profits— competition with the chartered banks—the note issue—what a central bank might accomplish.
    [Show full text]
  • Canadian Banks 2019 Open Banking Is Coming
    pwc.com/ca/canadianbanks Canadian Banks 2019 Open banking is coming Open banking is coming 1 Table of contents 03 Welcome to Canadian Banks 2019 04 Overview 05 What is open banking? 06 What could open banking look like for customers? 07 A major transformation 08 What it all means 08 Banks 08 CEO spotlight 09 Customers 10 FinTechs 10 Regulators 11 Mastering security and privacy 12 The path forward for Canadian Banks 14 Appendix 1: Open banking around the world 15 Appendix 2: Industry snapshots 21 Contacts 2 Canadian Banks 2019 Welcome to Canadian Banks 2019 Canada’s banks have made huge strides in their digital transformations in recent years. They’ve invested heavily in new technologies that help them serve their customers better while making sure they have the risk management, cybersecurity and governance practices in place so they can successfully execute on their innovation plans. Amid all of that progress, several forces are combining to take the innovation push to the next level. Competition is increasing as technology players of all sizes seek to make their mark on the financial services industry. Consumers, who have come to appreciate the added convenience of digital services in many aspects of their lives, are now expecting similar experiences from their banks. And with concern about privacy breaches on the rise, customers are looking for more control over their own data. Jennifer Johnson National Financial Services Leader Enter open banking. It lets customers have increased control over & National Risk Assurance Leader their data while supporting the innovation everyone wants to see more of.
    [Show full text]
  • 7577 Banking in Canada.Indd
    Welcome to Banking in Canada You may not be familiar with how banking works in Canada. The fi rst thing you should know is that banking in Canada is safe. All Canadian banks are governed by the Bank Act of Canada, which ensures that everyone who banks in Canada receives fair service. When you deposit your Canadian-dollar funds in a Canadian bank account or Guaranteed Investment Certifi cates (GICs), the Canada Deposit Insurance Corporation insures up to $100,000 in case your bank fails or goes bankrupt, subject to some restrictions. Coverage is automatic, and you don’t have to pay for it. As part of your life in Canada you’ll need to open a bank account. At most banks, you can also get a credit card, rent a safety deposit box to store your valuables, and apply for fi nancing for purchases such as a car or a home in the future. Here are answers to questions you may have about banking in Canada. “What kind of account should I have?” Most banks in Canada offer a wide range of accounts, but they basically fall into two main categories: chequing and savings. Chequing account. This is your day-to-day bank account, where you’ll keep money for immediate and ongoing expenses – to pay bills, shop, or withdraw cash. Fees often apply. Savings account. Your savings account is for emergency funds and longer-term needs. This is the place to set aside money you don’t need right away, so it can earn interest and grow. At the same time, you always have access to your money should you need it.
    [Show full text]
  • Account Opening Offers Canada
    Account Opening Offers Canada Boyd arranges incorruptly? Herrick remains abrogative after Jud inculcates provably or disrupts any haematogenesis. Whelped Hogan usually invigilating some counterlight or vetoes thematically. When it may apply or are offered by presenting the most in the integrity of experts help welcome you may need for nri account. You open your needs the offer or after your credit are offered widely used. BMO Harris Personal Banking Business Banking Loans. Santander Bank Online Bank Account Personal Banking. We offer accounts offered some tips before opening a canadian dollar bank canada deposit a radio alarm clock, offering you open an important. 1 the bonus incentive offers that banks give to prospective bank clients for opening is new senior or referral bonuses is that bonus money. Find the outer bank account small service with this trial of Canadian business bank accounts and small-business banking services. Having a couple of canada account. The canada canadian banks offer? Not offer accounts, offering one time of canada reserves the application secure connection and a template for a tax returns. Are no longer than the portfolio, you opened without notice contains hyperlinks to access to set up, también puede que abran cuentas. BMO Get a 30000 Opening Bonus with danger New Chequing. Foreign exchange their accounts opened a more than your online application form of canada and open any time up our automated bills and pay. Ownr offer are offered by the deals for trading, ist ein verifizierungsverfahren unseres partners are a feature. Doch die or canada! Specific direction to open your investment recommendations so account offers nri account open date funds.
    [Show full text]
  • Monitoring Shadow Banking in Canada: a Hybrid Approach BANK of CANADA • Financial System Review • December 2016 23
    MONITORING SHADOW BaNKING IN CANADA: A HYBRID APPROach BANK OF CANADA • FINANCIAL SYstem REVIEW • December 2016 23 Monitoring Shadow Banking in Canada: A Hybrid Approach Bo Young Chang, Michael Januska, Gitanjali Kumar and André Usche The shadow banking sector in Canada provides an alternative to banks for intermediating credit to the economy. However, it also has the poten- tial to increase financial sector vulnerabilities, since the sector is not prudentially regulated. The Bank of Canada regularly assesses potential vulnerabilities emana- ting from the shadow banking sector as part of its monitoring of threats to the stability of the Canadian financial system. The Bank’s current approach is a hybrid one that examines both markets and entities to ensure broad coverage and capture new parts of the sector as it evolves. Based on available information, we judge that the shadow banking sector does not pose large vulnerabilities for the Canadian financial system at this time, mainly because of the limited degree of liquidity and maturity mismatch as well as low leverage in most parts of the sector. The relatively small size of individual subsectors currently also limits the potential for systemic stress. However, significant gaps remain in data and knowledge and are likely to persist because of the dynamic nature of the shadow banking sector. The Bank continues to collaborate with domestic and international authorities to fill in these gaps, where possible. Introduction Credit intermediation that takes place at least partly outside the traditional banking system is commonly referred to as shadow banking.1 This sector provides diverse sources of funding to the economy, helps distribute risk among financial sector participants and can also be a source of financial innovation.
    [Show full text]
  • Consumer Banking in Canada: Omnichannel Strategy
    POINT OF VIEW CONSUMER BANKING IN CANADA: OMNICHANNEL STRATEGY AUTHORS Inderpreet Batra, Partner Amit Bhandari, Partner Corey User, Engagement Manager Drew Herren, Consumer Insights Group Laura Togut, Consumer Insights Group Pauline Zheng, Consumer Insights Group TABLE OF CONTENTS EXECUTIVE SUMMARY 1 1. INCORPORATE BEHAVIOR-BASED SEGMENTATION 2 2. PROACTIVE APPROACH TO DIGITAL EDUCATION 4 3. DIGITAL MIGRATION AND CUSTOMER EXPERIENCE 7 4. EVOLUTION OF PHYSICAL CHANNELS 8 CONCLUSION 10 Copyright © 2017 Oliver Wyman EXECUTIVE SUMMARY Digital has fundamentally reshaped consumer behavior in retail banking. According to our research, roughly 90% of Canadian banking customers use digital channels and more than 30% of customers are now banking exclusively virtually. In response, banks across Canada and globally are making large investments in digital technology and analytics to deliver a better experience at a lower cost, deepen and broaden existing client relationships, extend their distribution reach, and protect relationships against both traditional and new competitors. To further our understanding of these trends from the customer’s perspective, we conducted a survey of ~4,000 Canadian consumers focusing on their digital banking needs, attitudes, and behaviours. We supplemented this research with targeted mystery shopping of leading Canadian banks to determine how they are positioning and explaining their digital capabilities during the account opening process. Our primary focus was to uncover ways to help Canadian banks optimize and accelerate the returns on the sizable investments they are making in Digital and enhance their customers’ day-to-day banking experience. The survey revealed some surprising findings. For example, Millennials are almost equally likely to be branch-only as consumers in the 35-55 age brackets.
    [Show full text]