The World Economic Forum ranked Canada as having the most sound banking system in the world for four consecutive years. What sets banks apart in Canada is the fact that from a global perspective, they are one of the best capitalized, allowing banks to continue to lend while still having a cushion against potential loan losses. Canadian banks make sound decisions, and do not lend loosely – they operate on a case-by-case decision-lending basis. This is an essential part of Canada’s economic& banking strategy, which has allowed its banking system to flourish while banks in the US, UK and Europe struggle to survive. From a leveraging standpoint, Canadian banks are at 18 to 1, US banks are at 26 to 1, and European banks are at 61 to 1. Canada has a diverse system of national institutions, which provides a balance if there is a downturn in one area of the economy. Funds are moved from areas of excess deposits to areas of growth and demand. The five largest banks in Canada are Bank of Montréal, Royal Bank of Canada, Toronto Dominion Bank, Bank of Nova Scotia, and Canadian Imperial Bank of Commerce.
Canada’s banking regulatory system is comprised of two main components – the Office of the Superintendent of Financial Institutions (OSFI) for prudential regulation and the Financial Consumer Agency of Canada (FCAC) for consumer matters. To confirm that the regulatory system is keeping up with industry changes, the Canadian Bank Act is reviewed and revised every five years. The banking regulatory system’s framework is one that promotes business creation and job growth. To start a business in Canada, there is no minimum capital requirement, and in recent years, licensing costs have been cut in half. It is evident that Canada’s banking system is pro-growth, and truly aspires for continued prosperity.