The Canadian banking system has been the world's safest and most efficient banking system for the past 5 years. The country's banks have over eight thousand branches and nearly 20,000 ATMs throughout the nation. The majority of the Canadian banking system is dominated by the “Big Six” Canadian banks - RBC Royal Bank, TD Bank Financial Group, Scotiabank, CIBC, Bank of Montreal and the National Bank of Canada. Together, these banks account for more than 80 percent of the Canadian banking sector, and directly contribute to the success and stability of Canada's financial system. The following information outlines the differences between schedule I and schedule II banks in Canada, as well as recent changes that have affected the definition of Schedule I and Schedule II banks.
What are Schedule I Banks?
Schedule I banks are defined as banks that are allowed to take deposits, and are not subsidiaries of a foreign bank. Therefore, Schedule I Banks are the true Canadian banks, as the financial institution must be established within Canada to be considered a Schedule I bank. Thus, the aforementioned Big Five banks are considered Schedule I banks. Other popular Schedule I banks in Canada include Canadian Western Bank, National Bank of Canada, and the Laurentian Bank of Canada. The Schedule I banks of Canada are responsible for the sustained success and stability of the Canadian banking system. Although both Schedule I and Schedule II banks are considered to be reputable financial institutions, and both are regulated under Bank Act, many people choose to trust Schedule I banks with their funds because they're Canadian-owned.
What are Schedule II Banks?
Schedule II banks are subsidiaries of foreign banks and are authorized to take deposits in Canada. These banks are regulated within Canada's Federal Bank Act, and may be owned foreignly or domestically. Schedule II banks are the most common bank type in Canada, with most of the smaller trusts, banks and credit unions falling into this category. Popular Schedule II banks include Citibank Canada, AMEX Bank of Canada and ING Bank of Canada, HSBC Bank Canada, and P.C. Financial. Although there are more Schedule II banks than schedule I banks, the majority of deposits and assets held in the Canadian banking system are held by Schedule I banks like the Big Five.
Schedule III Banks and Bill C-8
Schedule III banks are defined as foreign banks that are permitted to conduct business within Canada. Popular Schedule III banks include Capital One and Bank of America. Schedule III banks are not regulated under the Bank Act, and therefore operate in Canada under other government-mandated restrictions. Most Schedule III banks operate primarily in Canada's busiest cities, including Montreal, Toronto, and Vancouver. In 2001, Bill C-8 was passed, which replaced the Schedule I and Schedule II classification system with one based on the size of the institution's equity. Although the Schedule I and Schedule II banking structure as officially been replaced by this new system, many people still use these terms to differentiate between foreign and Canadian owned banks.