By MoneySense Editors on September 27, 2022

What is a bank in Canada?

By MoneySense Editors on September 27, 2022

A bank is a bank–even in Canada. But what does that mean exactly?

At its most basic level, a bank is an institution that holds and lends out money and handles financial transactions. When you deposit money into your bank account, the bank pays you a small amount of interest in exchange for using your money to invest or to extend loans to other customers, who in turn pay interest for borrowing the money. But like most things in life, it’s not always that simple, especially in the banking industry in Canada.

What is a chartered bank?

You may have heard the term “chartered bank.” This means that a bank is regulated by Canada’s Bank Act and has authorization from the federal government to operate in this country. Chartered banks fall into three different categories:

Domestic banks (Schedule I)

Schedule I banks are domestic (Canadian-owned) banks that are permitted to receive deposits from the public. They include the Big Five banks (RBC, TD, Scotiabank, BMO and CIBC)—sometimes called the Big Six (when National Bank of Canada is included)—as well as several others (over 30 in all).

This category also includes Canadian online banks (such as Tangerine, EQ Bank and Simplii Financial), which are either Schedule I banks themselves or subsidiaries of Schedule I banks. We also have domestically owned fintechs and neobanks (including the aptly named Neo, Wealthsimple, Koho and others), which offer an alternative to the big traditional banks. They’re not chartered banks, but they offer many similar services.

Schedule I banks offer a wide range of services including savings, chequing, hybrid and registered and non-registered accounts; lines of credit; credit cards; mortgages; and investments, such as guaranteed investment certificates (GICs).

Foreign bank subsidiaries (Schedule II)

Several foreign bank subsidiaries are incorporated and operating in Canada, including Citibank Canada, Amex Bank of Canada, HSBC Bank Canada and others. Like domestic banks, they are regulated by Canada’s Bank Act.

Foreign bank branches (Schedule III)

These foreign bank branches are authorized to operate in Canada. Schedule III banks mainly serve corporations and institutions. Examples include Barclays Bank PLC, State Street Bank and Trust Company, Wells Fargo Bank and others.

How to choose a bank

When choosing a bank, in addition to looking at the fees, services, ATM options, etc., also make sure that your account(s) will be CDIC-insured. That means that your account has coverage from the Canada Deposit Insurance Corporation for up to $100,000 per depositor, per insured category, should one of its member financial institutions fail.

In Canada, all banks are regulated and supervised by the Office of the Superintendent of Financial Institutions (OFSI).

Example: “Jean relies on the statements from her bank to compare to her personal budget, which she created using an Excel sheet.”

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About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.