A Comparison Of Canada's Branch Banking System To The Unit Banking System Of The United States

2976 words - 12 pages

Banks play a vital role in North America's financial systems and the economicdevelopment of Canada and the United States. Many events and technology advancementshave effected the way Canadians and Americans go about banking. Some of the topics that willbe explored throughout this presentation are as follows: How September 11th effected theeconomy and the banks in both Canada and the United States, online banking and theadvancement of banking technology, what NAFTA has done and how it has influenced theNorth American banking systems, how the government controls the banking industry of theirrespective countries. And finally a comparison of a unit banking system to a branch bankingsystem. This ...view middle of the document...

America's banks arecategorized under National, Central, and Private. A National Bank is any bank commercialbank that is chartered and supervised by the federal government. A central bank is a bankwhose main purpose is to give out loans and mortgages, an example of this would be theBank of the United States. And finally, a private bank performs many of the same roles as acentral bank, however it is privately owned business, but is still chartered be the state.The piece of legislation that controls the Canadian Banks is the Bank of Canada Act.The Bank of Canada Act was created on July 3, 1934. The act changed the legal frameworkfor Canada's chartered banks. Our banks are now obliged to maintain a specified ratiobetween five and ten percent, between current savings accounts and their claims on papercurrency. The banks also lost permission to borrow from the government on demand asspecified in the Finance Act of 1914. Instead, they now have to borrow from the Bank ofCanada, which manages the national monetary system. This is why the Bank of Canada hasoften been called Canada's central bank. The Bank Act divided Canada's banks into twomain groups, schedule A and schedule B. Schedule A banks are widely held which meansthat no single person can control more than ten percent of the bank, or ten percent of the banksvoting stock. These banks are mostly domestically owned. Schedule B banks are closely heldand primarily owned by foreign companies. The Bank Act allows the government to controlthe size of type B banks. The act also sets out regulations for entry into the banking industry.In contrast, the American banks are controlled by the Federal Reserve System. The Federal Reserve, was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable financial system. The Federal Reserve Banks exercise control over their member banks. A Federal Reserve Bank is responsible for examining the state member banks in their district. These banks are central banks, rather than commercial banks. They do not carry deposits and normally only lend to member banks, not the general public. The assets held by the Federal Reserve Banks consist mainly of gold certificates and treasury securities. Another government regulator of the American banking system is the Federal Deposit insurance Corporation (FDIC). The FDIC has authority over all banks including the Federal Reserve Banks.Banks play a very large role in Canada's financial system and economicdevelopment. In Canada, the banking industry includes thirteen domestic banks, thirty fourforeign bank subsidiaries and eleven foreign bank branches currently operating in Canada.All the banks in Canada have a combined 1.6 trillion in total assets. These banks account forroughly seventy percent of the total assets held by the financial service sector. Canada'sbanks operate through a large network that includes roughly eight thousand branches andapproximately seventeen thousand Automatic Banking...

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