COUNTRY PROFILE
Total land area...............: 9,220,970 sq. km.
Official languages...........: English and French
Administrative divisions..: Ten provinces and two territories
Legal system:...................Based on English Common Law, except in Quebec, where
a civil system based on French law prevails; accepts compulsory
ICJ jurisdiction, with reservations.
Executive branch...........: Chief of stateQueen Elizabeth II (since February 6, 1952),
represented by governor general. Head of government
prime minister. CabinetFederal Ministry; chosen by the
prime minister from members of his own party in Parliament.
Legislative branch..........: Bicameral ParliamentSenate (members are appointed to serve
until 75 years of age by the governor general and selected on the
advice of the prime minister, with a normal limit of 104 senators)
and House of Commons.
Judicial branch...............: Supreme Court
ECONOMIC PROFILE
Currency: Canadian dollar (Can$)
GDP (at market prices): Can$ 776.3 billion (1995)
Real GDP growth: 3.0 (1998p)
GDP per capita: US$20,400 (1995p)
Inflation rate (consumer prices): 0.2% (1994)
Fiscal balance: -Can$30.3 million (FY 93/94 p)
Main exports: Newsprint, wood pulp, timber, crude petroleum, machinery, natural gas, aluminum,
motor vehicles and parts, telecommunications equipment.
Main imports: Crude oil, chemicals, motor vehicles and parts, durable consumer goods, electronic
computers, telecommunicati
Nominal exchange rate (Can$/US$): 1.4129 (January 1995)BANKING SYSTEMS
Total number of banks in the system (as of March 31, 1998): 56
Types of banks: Domestic-11; foreign bank subsidiaries-45.
Total amount of assets: Can$1.3 trillion.
Total amount of deposits: Can$894.7 billion.
Total amount of capital or net worth: Can$80.6 billion (As of Q1/98, since some institutions have an
October year-end and others a December year-end.
BANKING INSTITUTIONS
I. Banking Supervision
1. The Office of the Superintendent of Financial Institutions is the only federal supervisor
of banks.
2. The supervisory body is an independent agency.
3. The Office of the Superintendent of Financial Institutions reports to the minister of
finance.
4. Banks are examined annually at a minimum.
5. The only ratings made public by the Office are those under a policy regarding the
stages of intervention. Other ratings are not public information.Bank Rating Definition
STAGE 0 No problems, normal activities.
STAGE 1 Early warning - policy or procedural deficiencies.
STAGE 2 Risk to financial viability or solvency not a threat to immediate viability
but could deteriorate into serious problems.
STAGE 3 Future viability in serious doubt, could pose threat to future financial
viability unless corrected promptly.
STAGE 4 Non-viability/insolvency imminent, severe financial difficulties.6 The Office of the Superintendent of Financial Institutions uses the CAMEL system
in its examination process. The rating system is a combination of quantitative factors,
the primary driver of which has historically been CAMEL. The CAMEL rating system
results in the assignment of a component rating (for each element of CAMEL) and a
composite rating of the entire institution. A numerical scale of 1-5 is applied.II. Consolidated Supervision
1. As a member of the Group of Ten countries (G-10), Canada conducts consolidated
supervision. All returns from cross-border banking establishments are filed on a
consolidated basis.
2. No prior consent from Canada is required to open or close a branch in a foreign
country.
3. Branches cannot be opened in Canada.
4. All returns from cross-border banking establishments are filed on a consolidated
basis.III. Interest Rates
1. Interest rates on loans are determined by the market.
2. Interest rates on deposits are determined by the market.IV. Insurance on Deposits
1. The Canada Deposit Insurance Corporation (CDIC) is in charge of bank deposit
insurance.
2. The CDIC covers each depositor per institution up to a maximum of 60,000
Canadian dollars. However, not all deposits are covered under CDIC insurance
(e.g. foreign currency deposits).V. Trade Finance
1. Canada has no definition or special treatment of trade finance.
2. The risk of export, import, pre-export, working capital and capital goods finance,
letters of credit, acceptances and drafts is borne by banks; however, export finance
can be insured, on commercial terms, by the Export Development Corporation
(EDC).
3. In cases of bank liquidation, regulators treat export, import, pre-export, working
capital and capital goods finance, letters of credit, acceptances and drafts as normal
creditors.
4. The banking system does not make any specific provisions or require reserves for
treatment of trade finance obligations during bank liquidations.VI. Capital Adequacy
1. The Canadian Bank Act requires a minimum capital level of 10 million Canadian
dollars to obtain a letters' patent.
2. Under the Bank Act, the Superintendent may make guidelines respecting the
maintenance of adequate and appropriate forms of liquidity. Banks are required to
maintain both the Basle Concordats for minimum capital level (with a number of more
restrictive features) and compliance with an assets-to-capital ratio:
a) Minimum Capital as percent of Risk-Weighted-Assets (RWA) of 8%.
b) Assets-to-Capital Multiple of no greater than 20 to 1 (may be exceeded with
approval of the Superintendent).
3. Capital adequacy is measured as follows:Risk Weighted On-Balance Sheet Assets & Loan Substitutes
Categories Percentages Categories Ratios
Minimum 8% Maximum 20 to 1
Well-capitalized 10% Well-capitalized 18.5 to 1VII. Asset Quality
1. Loan portfolios are classified as follows:Loan Portfolio Classification Definition
Satisfactory Sustained or improving position, ratios
compare favorably to industry.
Special mention Deteriorating trends, potential difficulty.
Substandard Severe downturn, below industry average,
supervision required
Doubtful Severe downturn with questionable prospects
for turnaround, continuing losses, poor
management, no full security.
Loss Similar to doubtful, with no alternative funding.2. Canada has no minimum reserve requirements on bank assets. The Office of the
Superintendent of Financial Institutions requires provisions for country risk against
a list of designated countries (35% of aggregate) on loans made prior to
November 1,1995. The calculation is based on a percentage of the total portfolio.
All other loans have provisions based on Canadian GAAP, which does not
specify a predetermined percentage.
3. The legal lending limit is 25% of capital, with and without collateral. These limits
are applicable to single exposure.
4. Investments may be categorized as held-for-investment and held-for-trading.
5. The investment categories are as follows:Investment category Valuation method How often valued
a) Held for investment Historical cost* At Balance Sheet date
(Quarterly)
b) Held for trading Mark-to-market Continuously
*Marked down if permanently impairedMark-to-market calculations are required on a daily basis for the trading portfolio.
There is no requirement that market value be used for the investment portfolio under
Canadian GAAP.
6. All mark-to-market calculations are recorded in the profit and loss statement to the
extent that the loan provisions are established or that there is a permanent markdown
in the portfolio.VIII. Liabilities
1. All reserve requirements were removed in the 1992 revisions to the Bank Act.
2. Banks can offer demand, notice and term deposits in both local and foreign
currencies.
3. There are no restrictions or limits on the types of deposits that banks can offer. The
only limits for deposits are based on capital rules.
4. The level of concentration of deposits is unlimited, but institutions are required to
adhere to the prudent portfolio approach.