Schedule I Bank
What Is a Schedule I Bank?
The term Schedule I bank alludes to one of the structures used to classify financial institutions in Canada. This category is associated with wholly domestic banks. Accordingly, they are neither affiliated with nor are they subsidiaries of foreign institutions. To be classified as a Schedule I bank, an institution must take customer deposits.
The Schedule I assignment is part of Canada's Bank Act, which directs all financial institutions in the country. There are 36 domestic or Schedule I banks in Canada, including the country's largest six institutions.
Understanding Schedule I Banks
The Bank Act was laid out in Canada in 1871 as a method for managing the country's banks and the banking industry. This law is surveyed consistently to address the issues of and changes in Canada's economy and the marketplace. The act covers the type of powers banks have, conventions associated with incorporation, how they're organized, capital structure, corporate governance, and different issues.
Banks and other financial institutions are classified under three distinct categories — Schedule I, Schedule II, and Schedule III banks. Every category connotes a bank's ownership structure. While the last two are connected with foreign banks, Schedule I banks are domestic institutions that must acknowledge deposits from their customers. This means they are not auxiliaries of foreign banks even assuming that there are foreign shareholders who own stock.
Canada's major chartered banks are remembered for the rundown of Schedule I banks. Additionally remembered for the rundown are regional banks and online institutions. The majority of credit unions and certain government-owned institutions are not on the rundown on the grounds that these organizations are regulated by provincial and regional governments as opposed to the federal government.
36
The number of domestic or Schedule I banks in Canada.
Special Considerations
As indicated above, banking regulations are surveyed and amended on a periodic basis. This is to guarantee that the industry stays up with the latest with changes that happen in the economy and the Canadian marketplace.
Prior to 2001, individual shareholders of Schedule I bank stock couldn't hold over 10% of any class of shares and were required to be widely held. Yet, that changed with Bill C-8, which was executed on October 24, 2001. The bill expected to give greater protections to consumers while advancing growth in the financial sector and help competition in Canada. Under the bill, ownership systems of banks depend on equity size where:
- The small banks are those with under $1 billion in equity
- Moderate sized banks have equity running between $1 billion and $5 billion
- Large banks' equity surpasses $5 billion
Institutions with more than $5 billion in equity are required to have no person possessing over 20% of the voting shares or 30% of the non-voting shares. Thusly, they must in any case be widely held. Institutions with equity of $1 billion to $5 billion have less limitations on ownership as they are simply subject to having a public float of 35% of voting shares. Institutions with under $1 billion in equity have no ownership limitations.
Banks are generally viewed as a safe investment, yet they are inclined to operational, liquidity, and market risk.
Schedule I Banks versus Schedule II Banks versus Schedule III Banks
As referenced above, there are two different categories of financial institutions according to the Bank Act. Schedule II banks are auxiliaries of foreign banks that are permitted to carry on with work in Canada.
Like Schedule I banks, these institutions additionally acknowledge deposits yet can be owned by non-occupants. They are just essentially as common as their Schedule I counterparts and are additionally regulated by Canadian banking laws. Changes to banking structures under Bill C-8 likewise impacted Schedule II banks. Shareholders of large Schedule II banks — those with more than $5 billion in equity — are not permitted to claim over 20% of voting shares or 30% of non-voting shares.
Schedule III banks, then again, are foreign institutions that are authorized to carry on with work in Canada with certain limitations. These banks, however, are not regulated under the Bank Act.
Instances of Schedule II banks incorporate Citibank Canada and Amex Bank of Canada. Schedule III banks incorporate Bank of America and Capital One.
Instances of Schedule I Banks
As indicated before, the rundown of Schedule I banks incorporates the country's major chartered banks. Altogether, they're known as the Big Six Banks. They are as per the following:
- Bank of Montreal (BMO), which was laid out in 1817
- Bank of Nova Scotia (Scotiabank), the third-largest Canadian bank by deposits and market capitalization
- Canadian Imperial Bank of Commerce (CIBC), which was laid out in 1961 through the merger of the Canadian Bank of Commerce and the Imperial Bank of Canada
- National Bank of Canada, the 6th largest commercial bank in the country
- Royal Bank of Canada (RBC), which is a diversified financial services organization
- Toronto Dominion Bank (TD), which is one of the top online financial services firms, serving in excess of 25 million customers worldwide.
Features
- The big six banks, for example, the National Bank of Canada and the Royal Bank, make up a large portion of Schedule I banks.
- Schedule I banks are wholly domestic institutions in Canada that must take customer deposits.
- A Schedule I bank is a Canadian financial institution regulated by the Federal Bank Act.
