CATEGORIES OF BANKS Flashcards
TRUE OR FALSE?
The Schedule I category of banks is the smallest in terms of number of bank companies, but the largest in terms of total branches.
ANSWER: TRUE
The _________ category of banks includes all Canadian subsidiaries of foreign banks. It can also include banks that are Canadian-owned, but are subsidiaries of parent companies that are not banks.
The SCHEDULE II category of banks includes all Canadian subsidiaries of foreign banks. It can also include banks that are Canadian-owned, but are subsidiaries of parent companies that are not banks.
Unlike Schedule I, Schedule II banks are not full-line banks. In many cases, they are best described as __________ financial institutions.
Unlike Schedule I, Schedule II banks are not full-line banks. In many cases, they are best described as “mono-line” financial institutions.
SCHEDULE II BANKS
These banks may have identified a single function or niche as their best opportunity for generating business in Canada. Most of these banks often tend to have as few as one or two offices or branches.
Bank One, for example, started business in Canada for the sole purpose of providing its version of the VISA credit card. Credit Suisse Securities (Canada), on the other hand, concentrates on providing investment banking services for large corporations and government customers. Like Bank One, it focuses on a narrow product or service range.
The other Schedule II banks similarly focus upon a narrow range of services.
HSBC Bank Canada is an exception. It has a strong retail branch network across Canada and is active in a broad range of product and service areas.
SCHEDULE II BANKS
These banks may have identified a single function or niche as their best opportunity for generating business in Canada. Most of these banks often tend to have as few as one or two offices or branches.
Bank One, for example, started business in Canada for the sole purpose of providing its version of the VISA credit card. Credit Suisse Securities (Canada), on the other hand, concentrates on providing investment banking services for large corporations and government customers. Like Bank One, it focuses on a narrow product or service range.
The other Schedule II banks similarly focus upon a narrow range of services.
HSBC Bank Canada is an exception. It has a strong retail branch network across Canada and is active in a broad range of product and service areas.
The _______ banks category comprises the offices of foreign banks that operate in Canada—not as separate subsidiary companies, but as branches of their parent bank.
The SCHEDULE III banks category comprises the offices of foreign banks that operate in Canada—not as separate subsidiary companies, but as branches of their parent bank.
Similar to the overwhelming majority of Schedule II banks, Schedule III banks tend to be niche-oriented.
The ________ account normally provides clients with the following services:
Issue cheques
Effect debit-card transactions
Accommodate pre-authorized payments
Earn interest on excess balances
The savings-chequing account normally provides clients with the following services:
Issue cheques
Effect debit-card transactions
Accommodate pre-authorized payments
Earn interest on excess balances
List 2 characteristics of a savings-chequing account?
The savings-chequing account has the following characteristics:
The ability to issue cheques and make debit-card transactions for low fees, or none, when minimum balances are maintained
Lower interest rates than a pure savings account, because of the ability to write a cheque
What are the advantages of a line of credit?
ANSWER:
Take advantage of short-term purchasing opportunities
Deal with financial emergencies
Consolidate debts or pay unexpected expenses
Use the funds for investment purposes
NOTE ONLY / Certified Cheques
A cheque becomes certified the moment the financial institution guarantees the cheque. This happens when the financial institution withdraws the cheque amount from the issuer’s account and deposits the funds in a special reserve account. When the payee presents the certified cheque, the financial institution embosses the client’s cheque, confirming this information.
NOTE ONLY / Certified Cheques
A cheque becomes certified the moment the financial institution guarantees the cheque. This happens when the financial institution withdraws the cheque amount from the issuer’s account and deposits the funds in a special reserve account. When the payee presents the certified cheque, the financial institution embosses the client’s cheque, confirming this information.
NOTE ONLY / Term Deposits
Term deposits are a safe investment offering a higher than average interest rate. The interest rate is guaranteed for the duration of the term. The term, or the length of time the funds are deposited, can range from 30 to 365 days, or from one to five years. In some cases, the term can be up to seven years.
The length of the term deposit, as well as the prevailing market conditions at the time of the deposit, determines the rate of interest payable.
A term deposit is different from a savings account. The client has restricted access to the funds once they are deposited. The client may withdraw all or any part of the funds deposited, if necessary, but all earned interest will be lost.
NOTE ONLY / Term Deposits
Term deposits are a safe investment offering a higher than average interest rate. The interest rate is guaranteed for the duration of the term. The term, or the length of time the funds are deposited, can range from 30 to 365 days, or from one to five years. In some cases, the term can be up to seven years.
The length of the term deposit, as well as the prevailing market conditions at the time of the deposit, determines the rate of interest payable.
A term deposit is different from a savings account. The client has restricted access to the funds once they are deposited. The client may withdraw all or any part of the funds deposited, if necessary, but all earned interest will be lost.
NOTE ONLY / TERM DEPOSITS
Target Clientele
A client interested in a term deposit typically wants a fixed or known interest rate on an investment for the duration of the term. In addition, the client wants access to the money, if it becomes necessary to withdraw the funds before the maturity date.
NOTE ONLY / TERM DEPOSITS
Target Clientele
A client interested in a term deposit typically wants a fixed or known interest rate on an investment for the duration of the term. In addition, the client wants access to the money, if it becomes necessary to withdraw the funds before the maturity date.
NOTE ONLY / TERM DEPOSITS / Characteristics
The term deposit is classified somewhere between products that give immediate access to funds, but low interest rates (such as a savings account) and those that give a relatively good return.
This product highlights the trade-off between risk, time and return, and incorporates the following major features:
The rate of interest is determined when the deposit is made, and can either be fixed for the duration of the deposit or it can fluctuate during the term of the deposit.
Some financial institutions offer a variable rate term deposit that will accommodate the changing needs of the client, regarding rate of return and access to funds.
Interest is paid at fixed intervals of once, twice or 12 times a year, depending on the type of deposit made.
It is possible to redeem the term deposit before its maturity date, but this results in an interest rate penalty, thereby earning a lower rate than as specified at the time of purchase.
Any prior to redemption rate is stipulated at the onset of the term deposit.
Insurance coverage of up to $100,000 by the Canada Deposit Insurance Corporation is standard for term deposits (except term deposits in foreign currency).
NOTE ONLY / TERM DEPOSITS / Characteristics
The term deposit is classified somewhere between products that give immediate access to funds, but low interest rates (such as a savings account) and those that give a relatively good return.
This product highlights the trade-off between risk, time and return, and incorporates the following major features:
The rate of interest is determined when the deposit is made, and can either be fixed for the duration of the deposit or it can fluctuate during the term of the deposit.
Some financial institutions offer a variable rate term deposit that will accommodate the changing needs of the client, regarding rate of return and access to funds.
Interest is paid at fixed intervals of once, twice or 12 times a year, depending on the type of deposit made.
It is possible to redeem the term deposit before its maturity date, but this results in an interest rate penalty, thereby earning a lower rate than as specified at the time of purchase.
Any prior to redemption rate is stipulated at the onset of the term deposit.
Insurance coverage of up to $100,000 by the Canada Deposit Insurance Corporation is standard for term deposits (except term deposits in foreign currency).
NOTE ONLY
Guaranteed Investment Certificates
Guaranteed Investment Certificates
Of all products directly issued by financial institutions, a Guaranteed Investment Certificate (GIC) is the least liquid. It has the most restrictions in terms of accessing the funds once they have been deposited. As a result, GICs offer higher rates of return than term deposits.
The client invests a fixed sum of money with a financial institution for a pre-determined period, in order to gain a higher fixed interest rate.
The GIC is an investment instrument that offers a guaranteed rate of interest for the term of the certificate. The holder does not have the privilege of making withdrawals during this time.
NOTE ONLY
Guaranteed Investment Certificates
Guaranteed Investment Certificates
Of all products directly issued by financial institutions, a Guaranteed Investment Certificate (GIC) is the least liquid. It has the most restrictions in terms of accessing the funds once they have been deposited. As a result, GICs offer higher rates of return than term deposits.
The client invests a fixed sum of money with a financial institution for a pre-determined period, in order to gain a higher fixed interest rate.
The GIC is an investment instrument that offers a guaranteed rate of interest for the term of the certificate. The holder does not have the privilege of making withdrawals during this time.
