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Chapter 13

Chapter 13. Banking. Types of Financial Institutions. There are many different types of financial institutions in Canada. The main “deposit-taking” types are: Chartered Banks Trust Companies Caisses Populaires Credit Unions. The Need for Financial Institutions.

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Chapter 13

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  1. Chapter 13 Banking

  2. Types of Financial Institutions There are many different types of financial institutions in Canada. The main “deposit-taking” types are: • Chartered Banks • Trust Companies • Caisses Populaires • Credit Unions

  3. The Need for Financial Institutions • Financial Institutions provide many different services and earn profits by: • Selling products and services (accounts, financial advice, cheques) • Charging interest on money loaned (mortgages, lines of credit, personal and business loans) • Earning interest on their investments (RRSPs, Mutual Funds) • Bank Act: • Outlines rules and regulations that banks have to follow • Gives banks authority to operate • Outlines procedures for opening new banks, forming mergers • Government will revise the act from time to time

  4. Schedule I, II and III3 classes of banks: class determined by who owns it • Schedule I • Owned by Canadian shareholders • “Big 5” (BMO, RBC, BNS, TD, CIBC) Table 13.2 • Schedule II • Foreign owned • Owned by a small number of private shareholders • Same powers as Schedule 1 banks • Government limits # of branches • AMEX, ING, HSBC, State Bank of India • Focus on investment banking, business accounts

  5. Schedule III • Foreign bank branches • Same as schedule II but more restrictions • Capital One, Citibank

  6. Benefits to Branch Banking • Same service everywhere • Small communities linked to financial center • Every branch is fully supported with expertise • We can go to any branch with our PIN and card • Branches help to balance poor economy with good economy

  7. How is Branch Banking Changing? • ABM, online, telephone encouraged • In some areas, retailers are doing banking jobs (ex. PC Financial, cash back feature) • Credit unions are replacing banks in rural areas

  8. The Bank of Canada • Function : • Control money supply to regulate the economy • They do this by changing the BANK RATE also called the PRIME RATE • This causes banks to change their interest rates (this is the minimum they will charge for loans) • Consequence of rising and falling interest rates? • Low interest rate = higher spending, high borrowing • Higher interest rate = higher savings, less spending

  9. Bank of Canada Video • http://www.bankofcanada.ca/en/video_corp/videos.html

  10. Now fill in the rest of your handout using the textbook.

  11. Other Financial Institutions Trust Companies • Like banks, but more like a financial services company • Assist customers with purchasing real estate • Look after the estates of the deceased • Maintain accounts for charitable organizations • Not under the Bank Act

  12. Credit Unions • Organized and owned by a group of people who agree to pool their resources • Offer services like a bank • Only provide services to members and their families • Each member has an equal vote when making decisions

  13. Other Financial Institutions Insurance Companies • Companies that insure risk • Life, health, property and car are often the focus • Age will influence insurance needs • Businesses need insurance too: • Fire, liability, auto, misconduct, malpractice, product liability • Payments from many to pay out claims for a few

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