268 PA R T I I I Financial Institutions financial deregulation and fundamental economic forces in other countries have improved the availability of information in securities markets, making it easier and less costly for firms to finance their activities by issuing securities rather than going to banks Further, even in countries where securities markets have not grown, banks have still lost loan business because their best corporate customers have had increasing access to foreign and offshore capital markets, such as the Eurobond market In smaller economies, like Australia, which still not have well-developed corporate bond or commercial paper markets, banks have lost loan business to international securities markets In addition, the same forces that drove the securitization process in Canada and the U.S have been at work in other countries and have undercut the profitability of traditional banking in these countries as well Canada and the U.S have not been unique in seeing their banks face a more difficult competitive environment Thus, although the decline of traditional banking occurred earlier in North America than elsewhere, the same forces have caused a decline in traditional banking in other countries STRU CT UR E O F TH E CAN ADI AN CHARTE RED BAN KIN G I N DU ST RY As of January 2009, there were seventy-three banks in Canada with over 8000 branches and over 257 000 employees As Table 11-1 indicates, however, the six largest chartered banks, the Royal Bank of Canada, Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal, Scotiabank, TD Canada Trust, and the National Bank of Canada, together hold over 90% of the assets in the industry Schedule I, Schedule II, and Schedule III Banks The Big Six, together with the Laurentian Bank of Canada, the Canadian Western Bank, and another twelve domestic banks, are Canada s Schedule I banks The remaining fifty-three banks are Schedule II banks (foreign bank subsidiaries, controlled by eligible foreign institutions) and Schedule III banks (foreign bank branches of foreign institutions) Until 1981, foreign banks were not allowed to operate in Canada and there was no distinction between Schedule I and Schedule II banks The 1981 revisions to the Bank Act focused on introducing more competition into the Canadian financial services industry Domestic Canadian banks became Schedule I banks and subsidiaries of foreign banks became Schedule II banks Schedule I and Schedule II banks have identical powers; the only difference between them is the ownership structure permitted In particular, according to current ownership policy, all Schedule I banks must be widely held: no individual can own more than 10% of any class of shares Schedule II banks, however, are exceptions to this rule, if small In fact, there are three categories of exception The first exception is that widely held foreign banks can own 100% of a Canadian bank subsidiary The second exception is that a Schedule II bank may have a significant shareholder (more than 10%) for up to ten years after chartering, as a transition measure to becoming a Schedule I bank The third exception, introduced in the 1992 revision of the Bank Act, is that any widely held and regulated Canadian financial institution, other than a bank, may own 100% of a bank In the case of large Schedule II banks (those with over $5 billion in equity capital), the same widely held ownership rule that applies to Schedule I banks applies With the 2001 Bank Act Reform (to be discussed in detail later in this chaper), a foreign bank may enter the Canadian banking industry as either a Schedule II or