The Canadian Banking System - Banque du Canada

March 1998

The Canadian Banking System*

Charles Freedman

* Revised version of a paper delivered at the Conference on Developments in the Financial System:

National and International Perspectives The Jerome Levy Economics Institute of Bard College Annandale-on-Hudson, New York, 10?11 April 1997. The views expressed in this report are solely those of the author. No responsibility for them should be attributed to the Bank of Canada.

ISSN 0713-7931 ISBN 0-662-26464-9

Printed in Canada on recycled paper

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CONTENTS

ACKNOWLEDGMENTS .................................................................................v

ABSTRACT / R?SUM? ................................................................................ vii

1 INTRODUCTION .......................................................................................... 1

2 BACKGROUND ........................................................................................... 2

3 THE SERIES OF BANK ACT AMENDMENTS............................................ 6 3.1 The 1954 amendments ........................................................................... 7 3.2 The 1967 amendments ............................................................................ 7 3.3 The 1980 amendments ............................................................................ 8 3.4 The 1987 amendments ........................................................................... 9 3.5 The 1992 amendments ...........................................................................12 3.6 The 1997 amendments ...........................................................................15 3.7 Current studies........................................................................................15

4 THE OUTCOMES.......................................................................................... 17 4.1 Deposits................................................................................................. 17 4.2 Consumer loan market ......................................................................... 22 4.3 Residential mortgage market................................................................. 22 4.4 Commercial lending ...............................................................................27 4.5 Effect on bank activities of the 1987 and 1992 legislative changes.......29 4.6 Changes over time in the balance sheet of the banking sector: a summary ..............................................................................................33 4.7 Other changes and challenges ................................................................36

REFERENCES ................................................................................................38

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ACKNOWLEDGMENTS

I am grateful to Nikola Swann for research assistance and to a number of my colleagues at the Bank of Canada and at other Ottawa agencies who commented on earlier versions of this paper. The analysis in this paper draws heavily on earlier analyses of the Canadian financial system in Freedman (1987; 1992; 1996), Daniel, Freedman, and Goodlet (1992-93), and Armstrong (1997).

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