Big Five (banks)

Overview

The Big Five banks, listed in order of market capitalization on the Toronto Stock Exchange as of December 1st, 2016, with their current corporate brand names and corporate profiles according to their latest annual report, all monetary amounts are in billions of Canadian dollars, are:

In modern history, Royal Bank (RBC) has always been the largest by a significant margin, although TD Bank has caught up to RBC in recent years. Up to the late 1990s, CIBC was the second largest, followed by Bank of Montreal, Scotiabank, and TD Bank. During the late 1990s and beyond, this ranking changed due to several reorganizations. Royal Bank acquired Royal Trust in 1993, while Scotiabank purchased National Trust in 1997. As Scotiabank found no merger partners among the other banks in the big five group, it instead expanded its international operations and passed the Bank of Montreal in size. TD Bank merged with Canada Trust, which was for a long time the largest trust in Canada, thus vaulting TD into the number two spot. While there were no major changes to Bank of Montreal, CIBC's first unsuccessful foray into the US market led it to shed its assets there, dropping it to the number five spot.

In the province of Quebec, these financial institutions are overtaken by Caisses Populaires Desjardins. Since the 1990s, Desjardins was able to have an account in the Bank of Canada. However, Desjardins is not a bank, but a credit union.

Other large Canadian banks

All monetary amounts are in billions C$.

Proposed mergers

In 1998, the Bank of Montreal proposed a merger with Royal Bank around the same time that CIBC proposed to combine with the Toronto-Dominion Bank. The banks argued that these mergers would enable them to compete globally with other financial institutions. This would have left Canada with only three major national banks. The mergers were reviewed by the Competition Bureau of Canada, which declared that negative effects (such as higher user fees and local branch closures) from the mergers would far outweigh the benefits of allowing the mergers. Ultimately, it was then Finance Minister Paul Martin who rejected both proposed mergers. The issue since has not been revisited by succeeding Finance Ministers; it has been cited as a reason that the Canadian economy easily weathered the 2007 subprime mortgage financial crisis compared to other nations, and the aforementioned recognition of numerous Canadian banks on the Bloomberg 2011 list of twenty strongest large banks in the world.

Potential foreign forays

The weakness of the Canadian dollar and high U.S. bank stock prices were commonly cited as obstacles to purchasing assets south of the border. However the 2007 subprime mortgage crisis reversed this trend. In the aftermath of the crisis, the Canadian dollar steadily climbed against the U.S. dollar, achieving parity in early 2008 and trading as high as 30 cents above the USD in late 2008. The strength of the Canadian dollar and the relative weakness of U.S. bank prices have led commentators to suggest that the big five banks could consider an expansion into the United States.

Because of the recent recession, Royal Bank of Canada has now eclipsed Morgan Stanley in terms of market valuation. According to figures compiled by a recent Bloomberg report, investors today are willing to pay about $2.60 for every dollar of book value at a Canadian bank, compared with $1.70 in the United States. That ratio is about the reverse of where it stood in late 1999.

The last time the U.S. financial markets were weak, many Canadian bank CEOs were criticized for not making a more concerted buying effort. Some believed that these CEOs preferred to wait for Ottawa to allow domestic mergers before expanding into the US. The federal government ended up refusing to allow the mergers and is unlikely to do so now. Analysts also pointed out that Canadian banks have much stronger balance sheets today than they did 10 or 15 years ago, putting them in an even better position to be aggressive.

In October 2007, TD purchased Commerce Bancorp, a medium-sized US bank with a strong branch network in the middle Atlantic and Florida. As of March 2008, their stated plan was to merge Commerce with their existing TD Banknorth subsidiary, calling the new bank TD Commerce Bank. However, Commerce Bank based in Worcester, Massachusetts challenged the new name. As a result, TD renamed its US banks TD Bank at end of 2009. TD is the sixth-largest bank by branch network in North America, after JPMorgan, Bank of America, Wells Fargo, PNC, and US Bank. It is also the largest foreign bank in the United States holding almost $200 billion (USD) in deposits.

Banking regulation

Canada's federal government has sole jurisdiction for banks according to the Canadian Constitution, specifically Section 91(15) of The Constitution Act, 1867 (30 & 31 Victoria, c.3 (UK)), formerly known as the British North America Act, 1867. Meanwhile, credit unions/caisses populaires, securities dealers and mutual funds are largely regulated by provincial governments.

The main federal statute for the incorporation and regulation of banks, or chartered banks, is the Bank Act (S.C. 1991, c.46), where Schedules I, II and III of this Act list all banks permitted to operate in Canada under these three distinct categories.