Despite some gaps internationally, Canada banks have much to offer.
Canada continued its reign as a country with some of the world’s most solid banks, with six showing up in the top 25 of Global Finance magazine’s most recent “world’s safest” list (see related story here). Indeed, Canada added two more banks to the top 25 in the latest rankings. In order of placement the winners are – Royal Bank of Canada (RBC), Toronto Dominion Bank (TD Bank), Bank of Nova Scotia (Scotiabank), Caisse centrale Desjardins, Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CIBC).
The Canadian banks have weathered the financial and economic crisis unscathed and remain some of the strongest banks in the world. Canadian banks are profitable and well capitalized. And of the Schedule 1 (Canada-owned) domestic banks, only six hold most of the bank assets in Canada (about 95 percent), and dominate the local market.
So when operating businesses in Canada do corporate treasuries need only look to the strong domestic banks for banking services? Not necessarily, as large international banks registered to operate within Canadian borders (schedule II banks) offer a global reach that many of the Canadian banks cannot. At least, not in all countries and in all currencies that MNCS entities touch and for which they may need banking services. This is particularly true of exotic currencies and other less liquid currencies that are typically better handled by a larger, international provider.
Meeting Local cash needs. Domestic Canadian banks, however, corner the market when it comes to local cash management needs and it is necessary to hold domestic lockbox and bank accounts in order to take advantage of Canada’s efficient clearing systems and heavy use of electronic payments. Symcor, the single central lockbox processor, ensures same-day credit for all checks received regardless of where received in the country.
Some bank products such as purchasing cards are offered by both local Canadian banks and the global banks. Treasurers need to look closely at the services required and manage the relationships appropriately; noting the strengths and weaknesses of each bank and ensuring both local and global banking needs of their Canadian business are met.
As Canada’s solid economic performance attracts international attention and Canadian companies look beyond the border for investment opportunities, ways to be more efficient with managing foreign currency and risk exposure are necessary. Larger global banks operating within the borders are meeting this need today, as they have a broader reach internationally than do their Canadian counterparts. But Canadian banks remain the strongest in the world, and have the local reach treasury needs to create infrastructure and meet the cash pooling needs of the Canadian operations.