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Finance Glossary
Canadian Finance Glossary
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Finance Glossary
Canada Deposit Insurance Corporation (CDIC)
A federal Crown corporation that was established in 1967 to protect Canadian currency financial deposits against the possible failure of CDIC member financial institutions. As a general rule, eligible financial deposits are protected up to a maximum of $60,000 per person, including principal and interest, at each member institution. For more information, visit the CDIC Web site at http://www.cdic.ca/ . (SADC)
Capital taxes
The federal government taxes the capital of all large corporations (large corporations tax) and of large financial institutions (financial institutions capital tax). The financial institutions capital tax acts as a minimum tax and ensures that large financial institutions pay tax every year. All provinces levy capital taxes on financial institutions and seven provinces levy a capital tax on other corporations. Provinces rely more heavily on corporate capital taxes than the federal government.
Closely held bank
A bank in which a single shareholder can own more than 10 per cent of outstanding shares. Typically, a closely held bank is controlled (but not necessarily 100-per-cent owned) by a single shareholder. A common example would be a domestically incorporated subsidiary of a foreign bank, controlled by the parent institution. Note: On June 25, 1999, the government released its new policy framework for the financial services sector and indicated its intention to amend the definition of closely held so that it applies to any institution that is not required to be widely held as defined in the entry for widely held bank.
Coercive tied selling
A practice that imposes undue pressure, or coerces a person to obtain a product or service from a bank and any of its affiliates, as a condition for obtaining a loan or any other product from that same bank. Section 459.1 of the Bank Act, which was proclaimed in September 1998, prohibits coercive tied selling in sales contracts.
Competition Bureau
A unit of the federal Department of Industry, headed by the Commissioner of Competition, whose mandate is to ensure that Canadian businesses are in conformity with the laws under its jurisdiction. The Competition Bureau maintains and encourages fair competition in Canada through the administration and application of four statutes: the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act.
Credit union
A co-operative financial institution that is owned by its members and operates for their benefit. Credit unions are subject to provincial regulation and are usually small and locally oriented.
Demutualization
The process of converting from a mutual company to a stock company. A mutual company is owned by its voting policyholders while a share company is owned by its shareholders.
Deposit-taking institution
A bank, trust company, credit union, caisse populaire or other financial institution that accepts financial deposits from the public and provides regular banking services such as chequing and savings accounts.
E-commerce or electronic commerce
Conducting business communication and transactions over networks and through computers. Electronic commerce is the buying and selling of goods and services, and the transfer of funds, through digital communications. It also includes buying and selling over the World Wide Web and the Internet, electronic fund transfers, smart cards, digital cash and all other ways of doing business over digital networks.
Foreign branch banking
An option that permits a foreign bank to operate in Canada through branches rather than subsidiaries and to focus on commercial banking and broader lending activities. Foreign bank branches are not permitted to take financial deposits under $150,000, which are defined as retail financial deposits.
Holding company
A company that has control over other companies through ownership of a sufficient proportion of those companies' common stock.
Joint venture
A project undertaken by two or more parties to achieve a mutual objective.
Monoline
Financial company that specializes in a single line of products such as credit cards, mortgages or home equity loans, and that may use direct marketing practices and statistical models to target specific customers. In many cases, monolines have no expensive overheads from large branch networks and have low-cost financing open to them by securitizing their loans on the capital markets, thus making these companies highly competitive.
Office of the Superintendent of Financial Institutions (OSFI)
A federal agency established under the Financial Institutions and Deposit Insurance Amendment Act to supervise all federally regulated financial institutions. These include all banks, all federally incorporated or registered insurance and trust and loan companies, co-operative credit associations, and fraternal benefit societies. OSFI is also responsible for monitoring federally regulated pension plans. For more information, visit the OSFI Web site at http://www.osfi-bsif.gc.ca/ .
Payments system
An electronic clearing and settlement system that enables cheques and other methods of payment to be used in transactions throughout the economy. This financial network includes the cheques payment system, the Visa and MasterCard credit card systems, the automated banking machine and debit card networks of Interac, and the separate clearing systems for debt and equities and for mutual funds. One part of the financial network was established in 1980 under the Canadian Payments Association Act to operate a national clearing and settlement system. The membership of the Canadian Payments Association is made up of the banks, trust companies, government savings institutions and major credit unions.
Prudential
Exercising shrewdness, caution, skill and good judgment in the management of business matters.
Public float or publicly floated stocks
The public float of a company's stock refers to shares that are listed and posted for trading on a recognized stock exchange in Canada and that are not owned or controlled by persons who have a significant interest in any class of voting shares.
Public Interest Impact Assessment
Required to be submitted to the Minister of Finance for proposed mergers between large banks (i.e., banks with more than $5 billion in equity). The Assessment will (i) describe their business plan and objectives; (ii) clearly identify the benefits and costs to the nation and the public; and (iii) outline any mitigating steps in respect of public interest costs and any assurances in respect of public interest benefits.
Schedule I bank
Financial institution regulated under the federal Bank Act. Schedule I banks are widely held, which means that no individual can own more than 10 per cent of the outstanding shares of these banks. Note: On June 25, 1999, the government released its new policy framework for the financial services sector and indicated its intention to raise the 10-per-cent limit to 20 per cent for voting shares and 30 per cent for non-voting shares. In addition, the widely held requirement will apply only to Canadian banks and demutualized life insurance companies with more than $5 billion in equity.
Schedule II bank
Financial institution regulated under the federal Bank Act. Schedule II banks may be closely held and/or wholly owned by non-residents. Canadian Schedule II banks are owned by financial institutions that are themselves widely held. Note: On June 25, 1999, the government released its new policy framework for the financial services sector and indicated its intention to replace the present Schedule II concept by a size-based ownership regime.
Self-dealing
Refers to transactions between a financial institution and persons who are in positions of influence over, or in control of, the institution. A key part of the 1992 financial sector reform was the implementation of comprehensive controls on such transactions.
Strategic alliance
Alliance between companies, primarily for the purpose of achieving cost efficiencies, and to allow them to become more competitive in the face of rapid changes and pressures in the market.
Trust company
A financial institution that operates under either provincial or federal legislation and conducts the same activities as a bank. Like a bank, it operates through a network of branches. However, because of its fiduciary role, a trust company can administer estates, trusts, pension plans and agency contracts, which banks cannot do.
Widely held bank
A bank owned by many shareholders, with no individual owner holding sufficient shares to exercise control over the bank. Under the Bank Act, no shareholder can own more than 10 per cent of any class of shares of this type of bank. Note: On June 25, 1999, the government released its new policy framework for the financial services sector and indicated its intention to raise the 10-per-cent limit to 20 per cent for voting shares and 30 per cent for non-voting shares.
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