THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 302

PA R T I I I 270 Financial Institutions Moreover, the 2001 changes to bank ownership laws encouraged the establishment of new banks For example, Canadian Tire established a banking subsidiary (Canadian Tire Bank), as has Loblaws (President s Choice Bank) Western Financial Group, a holding company for a network of insurance agencies, created Bank West, and the Wheaton Group, a chain of car dealerships, launched a new bank called General Bank of Canada In addition, a large number of private-sector competitors (for example, General Motors Acceptance Corporation, Ford Credit, GE Capital Group, CIT Group, and Dell Financial Services) participate in Canada s financial services market and offer similar products and services as Canada s banks, including credit cards, residential and commercial mortgages, equipment leasing, and motor vehicle financing COM PA RISO N W IT H TH E U NI T ED STAT ES The structure of the commercial banking industry in Canada, although similar to that in many other industrialized countries, is radically different from that in the United States There are approximately 7100 commercial banks in the United States, far more than in any other country in the world Japan, for example, has fewer than 100 commercial banks a mere fraction of the number of banks in the United States, even though its economy and population are half the size of the United States and, as already noted, Canada has seventy-three banks Moreover, as Table 11-2 indicates, the United States has an extraordinary number of small banks; 40% of its commercial banks have less than US$100 million in assets, and the 10 largest U.S banks (listed in Table 11-3) together hold just over 50% of the assets in the industry The presence of so many commercial banks in the United States reflects past regulations that restricted the ability of these financial institutions to open branches The result was that many small banks stayed in existence because a large bank capable of driving them out of business was often restricted from opening a branch nearby Indeed, it was often easier for a U.S bank to open a branch in a foreign country than to open one in another state in the United States! In fact, most industries in the United States have far fewer firms than the commercial banking industry For example, Microsoft dominates the computer software industry and General Motors, Ford, Chrysler, Toyota, and Honda dominate the automobile industry TA B L E 11- Size Distribution of Insured Commercial Banks in the U.S., September 30, 2008 Assets Number of Banks Share of Banks (%) Share of Assets Held (%) Less than US$100 million 2882 40.3 1.9 US$100 million US$1 billion 3755 52.5 11.4 425 6.0 12.8 84 1.2 73.9 7146 100.0 100.0 US$1 billion US$10 billion More than US$10 billion Total Source: Federal Deposit Insurance Corporation, FDIC Quarterly Banking Profile, www2.fdic.gov/qbp/2008sep/cb4.html