The Prudent And Robust Canadian Banking Industry

The prudent and robust Canadian Banking Industry is the subject of admiration abroad. Since the onset of the global financial crisis, both Moody's Investor Service and the World Economic Forum have respectively ranked the robust Canadian Banking Industry as the first in the world for financial strength and the most sound in the world. Unlike many foreign banks, Canadian banks have not required injections of public capital. This Canadian industry has made Canada the only G7 country to not need the recourse of a government bail-out in order to survive the financial crisis. Unlike their American counterparts, Canadian banks are well capitalized, have been demonstrably better regulated and better managed. They have proven this as their American counterparts have stumbled and have been propped up by the Federal Government.

Unlike the fragmented regulatory framework in the US, Canada has a single regulator, which monitors bank operations and nips problem spots early. The regulatory policies are reviewed every half decade to keep in step with changes. There are twenty-one domestic banks with the six largest having over ninety percent of all domestic bank assets. The largest banks are Bank of Montreal, Canadian Imperial Bank of Commerce, Royal Bank, Scotiabank and the Toronto Dominion Bank. All of these banks are well capitalized.

The first Canadian bank was the Bank of Montreal founded in the year 1817, which also started the first domestic currency to replace foreign currencies which were acceptable legal tender in Canada at the time. Subsequently new branches were established in other cities. It inaugurated a feature of Scottish banks where a few banks with large capital maintained numerous branches. This feature is shared by the majority of the big six, which has also been a factor in their resiliency in the face of economic stress. Their national range enables transfers of capital from regions with varying economies. These banks also have different types of business lines.

Today, it is believed the financial systems elsewhere are already beginning to move toward the Canadian approach with higher capital holding requirements and more diversified companies. The unique aspects of the Canadian banking system has allowed Canada to better withstand the recent financial crisis than the United States. The Bank Act of 1991 divides banks operating in Canada in three schedules. The Schedule I banks are allowed to accept deposits that are not a subsidiary of a foreign bank. Schedule II banks are a subsidiary of a foreign bank allowed to accept deposits in Canada. The Schedule III banks are foreign banks which can do banking business in Canada.

Generally, management practices have been more conservative in Canada. Both the banks and their customers have an aversion to excessive risk-taking. A culture of fiscal prudence has avoided embracing risky practices. Thus, by April 2009, American mortgage holders were 17 times more likely to be behind in their mortgage payments than those in Canada.

Despite the deterioration of global economic conditions, Canadian banks have been profitable. In 2008, five of the six largest reported a profit and all of the six reported profits for the first quarter of 2009. By August 2009, Canadian banks were breaking profit records in the midst of a recession. Royal Bank of Canada and National Bank of Canada actually produced higher profits than ever before. The relatively conservative risk appetite of Canadian banks has been a boon. Even though loan losses are expected to continue their rise in the near future, a more conservative culture has protected banks from large losses. They did not get involved in a major way in subprime mortgages and they have avoided heavy participation in more exotic and risky financial instruments. Being more cautious, well diversified geographically and across retail, wholesale and wealth management business lines has become their advantage and source of strength.

It has been said that the Canadian system can teach others to be more stable and resilient. But, this is another example of this quality being exhibited by the banks generally once again. In the Great Depression, when 9,000 American banks failed, not even one failed in Canada. During the Savings and Loan Crisis, two small banks failed for the first time since 1923. But, in America, nearly 3,000 failed. Meanwhile, while the number of banks failing is rising in America, Canada is the only industrialized country without a single bank failure.

Canadian Mutual Funds And The Investor

Are you interested in Canadian Mutual Funds? The concept of mutual funds is simple. The fund is made up of money from several investors. The money is then invested by a funds manager. The money is invested in stocks or other financial securities.

Investing in mutual funds is no different from other investments as far as having a short and long term goal. The investor, who does not have a goal, or objective, will not be as successful as the one who does. Also, an investor should not be investing money he should use for the necessities.

In other words, it is not wise to invest money that one cannot afford to lose. The investor should also understand the level of risk. Money that is left over after the bills are paid, is the funds that the investor should use.

No investment is risk free, but some are less risky than others. Usually the investments that have the largest profit margins are the riskiest. The conservative investments might not be as profitable, but they are less risky. There are different types of mutual funds to invest. There is the growth mutual fund which will invest mainly in the stock of a well established company and is intended for long term capital gains.

The income mutual fund invests money in debt securities. An example of this would be an investment in government bonds. The risk is dependent on the credit rating of the debt security. Some investors favor this fund because of its high yield. Some investors like to have a more balanced portfolio and opt for a mix of growth funds and income mutual funds.

There is the no load mutual fund. Investors who do not want financial advice opt for this type. There are no commissions to be paid. The total amount of the investment goes into the fund.

But there are those who need financial advice. They choose the load mutual funds. They have to pay commissions, but they get financial advice. The benefit of the mutual fund is the same whether it is a load or no load fund. The advantage is that there are a pool of investors to share the cost.

But many feel that they are safer with other investors. The bottom line is that the market dictates profit and loss. An investor who has a good handle on the market will do better than the one who does not understand the market trends.




Disclaimer: This article is provided for educational and informational purposes only and should not be considered a substitute for professional and/or financial advice. The information found in this article is provided "AS IS", and all warranties, express or implied, are disclaimed by the author.

Diverse Services Offered By Bank Of Montreal

Bank of Montreal is based Toronto, Canada. It began operations in the city of Montreal. It was founded nearly two hundred years ago. It is therefore the oldest financial institution in Canada. Its deposits make it the fourth largest bank in Canada.

BMO as it is popularly known has over 900 branches. It has more than 7 million clients. Although its operations are mainly in Canada.

There are 3 main divisions of the financial services offered by this bank. The three categories are known as 'client groups'. This name comes from the fact that each of the groups serves and targets a market segment that is different from the other.

Personal and commercial client group is the first category. This department deals with retail financial services of the bank. This means that it offers financial services to businesses and individuals based in Canada. The services include handling checks, savings, personal loans, mortgages, credit cards and debit cards, loan calculators and other retail services.

The retail section also deals with the bank's insurance services. They include travel insurance and life insurance. Those who wish to save for retirement can take out income annuities. Mortgage life insurance cover is offered for home protection upon the policy holder's demise.

Investment banking group caters for those interested in capital markets. It deals with bond markets, securities and equity among other services. Corporates and the government benefit from these services. They are advised on the appropriate financial investments to make so as to maximize profits from the investments they make.

The third is the private client group which is also referred to as wealth management section. This targets clients with sizable assets. This department assists such clients to plan their estates. It also helps them to invest their assets based on their financial goals and personal criteria.

BMO also has strong social responsibility programs. It invests in its neighborhoods through volunteering, donations and sponsorship programs. For example, it donates to projects that support education, health, arts and culture. They also support programs dealing with community development, athletics and sports. Programs that support the conservation and protection of the environment are also sponsored by this bank.

Bank of Montreal gives affordable and accessible financial services to customers. The customer has a variety of services to select from. Potential clients can reach them online for answers to any queries that they may have.