Banking

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Banking in Canada

The Bank of Canada is the national central bank formed in 1934 during the Great Depression to regulate credit and currency.

Canada has numerous chartered commercial banks. In 1980 Canadian banks were reorganized into two bands: “Schedule I”, with shareholdings by any individual limited to 10 per cent; and “Schedule II”, either foreign-owned or in private hands. Further legislation in 1992 freed banks, trust companies, and insurance companies to diversify into each other’s areas of interest, and opened ownership of Schedule II banks to non-banking institutions. Trust and mortgage loan companies, provincial savings banks, and credit unions are also important components of the banking system.

Private banking is dominated by Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, National Bank of Canada and Royal Bank of Canada (RBC). The latter is by far the best-known Canadian player in the international banking scene.

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Banking in Australia

The Commonwealth Bank of Australia was established in 1911, offering a savings and general bank business and supported by federal guarantee. However, in 1959, with concerns that it was unethical to be both a central bank and a general bank, it was split into the Commonwealth Banking Corporation (which includes the Commonwealth Trading Bank and the Commonwealth Savings Bank) and the Reserve Bank of Australia.

The Reserve Bank of Australia has been tasked by legislation to contribute to: the stability of the currency of Australia; the maintenance of full employment in the country; and the economic prosperity and welfare of the people of Australia.

The Commonwealth Banking Corporation was privatized in the 1990s and is currently the second-largest bank in Australia after the National Australia Bank (NAB), and followed by the Westpac Banking Corporation and the Australia and New Zealand Banking Group (ANZ Bank). The Australian banks are considered conservative by nature although highly profitable by global standards, with returns on average capital of more than 28 per cent in 2003. With the exception of ANZ Bank, they have few interests in neighbouring Asia Pacific countries.

Building societies are also common. Banking reform in the 1980s similar to that enacted in Britain freed many building societies to become banks or offer banking services, and also opened the domestic market to more foreign competition.

XII

Banking in New Zealand

The Reserve Bank of New Zealand is the national central bank. The Reserve Bank is owned and operated by the government. Commercial banks are called trading banks, as in Australia: the Australia and New Zealand Banking Group and the Westpac Banking Corporation are both also represented in Australia. A long tradition of close government regulation and protection of commercial banks ended in 1987 with banking deregulation moves that opened the commercial market and introduced many new and foreign banks. Trustee savings banks are also prevalent, with former savings banks such as ASB Bank and Trust Bank having become important commercial banks following banking deregulation. New Zealand’s small population allows highly sophisticated banking systems, with Electronic Funds Transfer at Point of Sale integrated nationwide. The government lends money at low interest to farmers, home builders, and small-business owners through the State Advances Corporation.

XIII

Banking in Singapore

As one of the world’s major financial centres and a regional economic giant, Singapore has an internationally significant banking regime. Central banking functions are exercised by the Monetary Authority of Singapore, though issuing of currency is conducted by a separate government body. The domestic commercial banking industry in Singapore consists of some 13 local banks and is dominated by the leading houses. The Post Office Savings Bank serves as the national savings bank. There are also numerous merchant banks. Singapore is also host to many foreign banks, divided according to the type of licence they are granted: full, restricted, or “offshore”. The Singaporean government operates a compulsory savings scheme for employees, the Central Provident Fund. Singapore’s banking industry continues to grow and mature with the development of the nation’s economy. The reversion of Hong Kong to Chinese sovereignty in July 1997 has also spurred Singapore’s growth as an international financial centre in Asia.

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Banking in Hong Kong S. A. R.

As a British colony until 1997, Hong Kong S. A. R. benefited from British banking and contractual law and attracted international businesses, boosting a multinational banking presence. Now known as the Hong Kong Special Administrative Region (S. A. R.), it is under Chinese sovereignty but benefits from a large measure of self-rule and a continuing laissez-faire economy.

It is regarded as the most important banking and securities trading centre in Asia Pacific after Japan and has over 200 authorized banks. One of the world's largest banks based on Tier 1 capitalization, HSBC—previously known as the Hongkong and Shanghai Banking Corporation—was founded here but reincorporated to the United Kingdom in the 1990s. (Tier 1 capitalization is a measure of a bank’s financial strength as used and defined by the Bank for International Settlements. It is used as a measure of a bank’s ability to handle unexpected losses by regulators and financial analysts worldwide. It is based on various types of available capital, primarily equity.)

The Office of the Commissioner of Banking supervises banking in Hong Kong S. A. R. in conjunction with the Hong Kong Monetary Authority (established 1993). Generally, regulatory control is not onerous. The primary aims of the regulatory bodies are to maintain capital adequacy ratios, stop improper lending, and monitor that international banking rules are being followed.

Banking rules were further relaxed in 2001 with the removal of restrictions on foreign banks as to the number of branches they could operate, which benefited Citibank in particular.

There are three banks of issue: HSBC, the Standard Chartered Bank, and the Bank of China. Numerous locally incorporated commercial banks operate alongside branches of foreign banks; there are also many banks operating under restricted licences and numerous deposit-taking companies.