THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 309

CHAPTER 11

Banking Industry: Structure and Competition

277

Columbia up to $100 000, in Nova Scotia and Newfoundland and Labrador up to
$250 000, and in Alberta, Saskatchewan, and Manitoba there are no limits on the
amount of coverage provided. In Qu bec, the Qu bec Deposit Insurance Board,
the same provincial government agency that insures deposits in other deposittaking financial institutions in Qu bec, also provides deposit guarantees for caisses
populaires, on terms similar to the CDIC s.
The main source of funds of credit unions and caisses populaires is deposits they
account for almost 85% of liabilities followed by members equity (about 7% of liabilities). Their asset portfolio is made up largely by residential and nonresidential
mortgages (close to 55% of the balance sheet) and cash loans to members (about
13%). Low-risk assets, such as cash and deposits (primarily with central credit unions)
also represent a significant proportion of the balance sheet (close to 15%). The rest of
the balance sheet consists of fixed assets, and shares in central credit unions.

Government
Savings
Institutions

In addition to the near banks (trust and mortgage loan companies and credit
unions and caisses populaires), there are some government-operated deposittaking institutions such as the Province of Ontario Savings Office and the Alberta
Treasury Branches.
The Province of Ontario Savings Office was established in 1921 with the objective to gather funds from the public and lend them to farmers. Today, however,
the Savings Office only lends funds to the Treasurer of Ontario for provincial government purposes. In fact, its deposit liabilities are a debt of the province of
Ontario and are guaranteed by the province. In 2003, the Province of Ontario
Savings Office was sold to Desjardins Credit Union.
The province of Alberta established Treasury branches back in 1938 in response
to Albertans needs in remote areas. Today, there are 162 branches in 244 communities across the province operating in three target markets: individual financial services, agricultural operations, and independent business. Alberta Treasury Branches

(with assets in excess of $16 billion) are funded almost entirely by demand, notice,
and fixed-term deposits, and their risk asset portfolio is made up largely of residential mortgages and personal, commercial, and agricultural loans.

IN T ERN ATI O NA L BAN KI NG
Canadian banks have a well-developed presence in the global financial services
marketplace, which varies among the individual institutions. From its inception,
for example, the Bank of Montreal found some of its best opportunities in international operations and was soon joined by the Canadian Imperial Bank of
Commerce and the Bank of Nova Scotia. The spectacular growth in international
banking can be explained by three factors.
First is the rapid growth in international trade and multinational (worldwide) corporations that has occurred in recent years. When Canadian firms operate abroad,
they need banking services in foreign countries to help finance international trade.
For example, they might need a loan in a foreign currency to operate a factory
abroad. And when they sell goods abroad, they need to have a bank exchange the
foreign currency they have received for their goods into Canadian dollars. Although
these firms could use foreign banks to provide them with these international banking services, many of them prefer to do business with the Canadian banks with which
they have established long-term relationships and which understand Canadian business customs and practices. As international trade has grown, international banking
has grown with it.