THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 302

PA R T I I I

270

Financial Institutions
Moreover, the 2001 changes to bank ownership laws encouraged the establishment of new banks. For example, Canadian Tire established a banking
subsidiary (Canadian Tire Bank), as has Loblaws (President s Choice Bank).
Western Financial Group, a holding company for a network of insurance
agencies, created Bank West, and the Wheaton Group, a chain of car dealerships,
launched a new bank called General Bank of Canada. In addition, a large
number of private-sector competitors (for example, General Motors Acceptance
Corporation, Ford Credit, GE Capital Group, CIT Group, and Dell Financial
Services) participate in Canada s financial services market and offer similar
products and services as Canada s banks, including credit cards, residential and
commercial mortgages, equipment leasing, and motor vehicle financing.

COM PA RISO N W IT H TH E U NI T ED STAT ES
The structure of the commercial banking industry in Canada, although similar to
that in many other industrialized countries, is radically different from that in the
United States. There are approximately 7100 commercial banks in the United
States, far more than in any other country in the world. Japan, for example, has
fewer than 100 commercial banks a mere fraction of the number of banks in the
United States, even though its economy and population are half the size of the
United States and, as already noted, Canada has seventy-three banks. Moreover,
as Table 11-2 indicates, the United States has an extraordinary number of small
banks; 40% of its commercial banks have less than US$100 million in assets, and
the 10 largest U.S. banks (listed in Table 11-3) together hold just over 50% of the
assets in the industry.
The presence of so many commercial banks in the United States reflects past regulations that restricted the ability of these financial institutions to open branches. The
result was that many small banks stayed in existence because a large bank capable
of driving them out of business was often restricted from opening a branch nearby.

Indeed, it was often easier for a U.S. bank to open a branch in a foreign country than
to open one in another state in the United States! In fact, most industries in the
United States have far fewer firms than the commercial banking industry. For example, Microsoft dominates the computer software industry and General Motors, Ford,
Chrysler, Toyota, and Honda dominate the automobile industry.

TA B L E 11- 2

Size Distribution of Insured Commercial Banks in the U.S.,
September 30, 2008

Assets

Number
of Banks

Share of
Banks (%)

Share of
Assets Held (%)

Less than US$100 million

2882

40.3

1.9

US$100 million US$1 billion

3755

52.5

11.4

425

6.0

12.8

84

1.2

73.9

7146

100.0

100.0

US$1 billion US$10 billion
More than US$10 billion
Total

Source: Federal Deposit Insurance Corporation, FDIC Quarterly Banking Profile,

www2.fdic.gov/qbp/2008sep/cb4.html.