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Can't Have A Padlet Without A Word Doc...

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Can't Have A Padlet Without A Word Doc...

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This image gives us some insight on how Canadian banks are changing their structure to not only compete with their fellow banks but also change according to the needs of the consumer. It gives an interesting look into what different services the banks are offering to consumers to attract more customers.

This is an important view on how banks change the way they do business to the needs of their customers, the overall "velocity of money" does not change but rather how the process gets started and how customers can access their money.

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Changing The Structure To Stay In The Game.

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Changing The Structure To Stay In The Game.

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This little image gives us a pretty basic layout on how the banks use your money to make money. The whole process is referred to the "Velocity of Money" and encompasses the process of how banks are able to make money.

This process is not fool proof however as I have learned in my research, as in when a large amount of clients withdrawn their money at the same time. In the end, the process has been successful for the banks and helped pave the way for the financial economy.

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This image gives us a little insight to how much Canadian banks take advantage of the mobile market. Mobile banking has exploded in recent years along with the increase of smartphone use, more and more people are taking advantage of the convenience of mobile banking.

I personally use mobile banking a lot in my life and it does not surprise me that the major banks are getting more invested in mobile banking. This is just another way for banks to bring in clients and grow their market.

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Canadian Banks Including Mobile Apps To Expand Their Structure.

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Canadian Banks Including Mobile Apps To Expand Their Structure.

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U.S. and Canadian banking systems are very different. Both systems have their advantages, and have contributed to the growth of each of their economies. Because of their differences, both Canada and the U.S. can learn from each other on how to improve banking.

I like this video, its pro Canadian lol. But all joking aside this video does lean into pro Canadian lectures, but it makes strong cases towards the differences between the two countries banking structure. I did learn the benefits the Canadian banking structure has over almost all other banking infrastructures.

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Canadian and U.S. banks are the same in some ways, but the different history, competitive frameworks, and economic environments each provide unique exposure for consumers and investors alike.

It doesn't get much easier than this. This site provides a beautiful infographic on the key differences between Canadian and US banking systems. From market share to investing stability, the website is a one stop for the Canadian vs. US banking stats.

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Regardless of which side of the 49th parallel you are on, banking sectors play a crucial role in both the financial system and the economy.

But while banks on each side of the border perform many similar functions, and have comparable economic impacts, the fact is that the U.S. and Canadian banking systems are very different.

Comparing Canadian and U.S. Banks

Today's infographic comes to us from RBC Global Asset Management and it compares Canadian and U.S. banks directly based on a variety of factors.

The histories of both banking sectors are contrasted, but subjects such as the regulatory environments, market forces, the number and size of banks, and post-crisis landscapes are also compared. An outlook for investors on both sectors is also provided.

The end result is an interesting depiction of two banking sectors that are related in many ways, but that also have distinct differences and ways of doing business.

General Differences:
Historically, the Canadian banking system favors a limited quantity of banks, and many branches. It also carries the British influence of valuing stability over experimentation. Meanwhile, U.S. banking is more decentralized and localized, and more open to experimentation. This has led to trial and error, but also the world's largest bank system.

Regulatory Focuses
Canada's banking system tends to promote safety and soundness, while the American system keys in on privacy, anti-money laundering, banking access, and consumer protection measures.

Market Environment
The Canadian market is worth C$142 billion (US$111 billion) per year, while the U.S. market is over 10x bigger at US$1.4 trillion. Interestingly, these market sizes explain why Canadian banks often seek growth opportunities in the U.S. market, while U.S. banks just focus on the massive domestic sector for growth.

Number of Banks
There are 85 banks in Canada, and 4,938 in the United States.

Market Share
Canada's five biggest banks hold a whopping 89% of market share, while America's five biggest banks only hold 35% of market share.

Biggest Banks
Canada's "Big Five" Banks:
RBC: C$142 billion
TD: C$130 billion
Scotia: C$93 billion
BMO: C$62 billion
CIBC: C$49 billion

The Biggest Four Banks in the U.S.:
JPMorgan Chase: US$377 billion
Bank of America: US$310 billion
Wells Fargo: US$260 billion
Citigroup: US$179 billion

In Canada, there are no other institutions worth over C$25 billion, but in the States there are eight that are worth between US$50-$100 billion.

Outlook for Investors

Not only are the two banking environments quite different in terms of character - but Canadian and U.S. banks are at different points in their market cycles, as well.

Post-2008 Reaction
Banks in Canada were minimally impacted by the Financial Crisis, and have been permitted to use lower risk weights than U.S. Banks. As a result, they've been able to hold less capital for each loan (i.e. higher leverage)

Banks in the U.S. have spent the past number of years building capital. Regulators required U.S. banks to be conservative in their approach post-crisis. As a result, U.S. banks have lower leverage than Canadian peers.

Leverage (Asset/Equity)
Canada's "Big Five":
18.3

Five Biggest U.S. Banks:
9.3

Dividend Yield
Canadian Banks: 3.9%
S&P/TSX Composite: 2.9%

Top 15 U.S. Banks: 2.5%
S&P 500: 2.1%

Which Sector Should Investors Choose?

There are compelling reasons to consider the financial institutions of either country:
Canada

1. Canadian banks have a proven track-record of delivering steady dividends that have grown over time.

2. Canadian banks have a strong global reputation for reliability and safety due to Canada's sound regulatory framework and their relatively risk-averse approach.

3. Canadian bank stocks can also be a good source of consistent income, with dividends that pay higher than the market. Canadians also doubly benefit, since to the Canadian dividend tax credit.

United States

1. U.S. banks have significantly improved their balance sheets and capital structure over the past decade to be better positioned for future market cycles.

2. Stronger U.S. economic growth combined with changing monetary policy creates a positive environment for U.S. banks to benefit from increased business and consumer demand and wider interest rate spreads.

3. Recent tax cuts and deregulation are likely to benefit U.S. banks, as savings stand to contribute to earnings per share, and potentially lead to higher dividend payouts along with share buybacks.

Canadian and U.S. banks are similar in many ways - but their differing histories, competitive frameworks, and economic environments each provide unique exposure for investors.

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A Tale of Two Banking Sectors: Comparing Canada and the U.S.

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Regardless of which side of the 49th parallel you are on, banking sectors play a crucial role in both the financial system and the economy. But while banks on each side of the border perform many similar functions, and have comparable economic impacts, the fact is that the U.S.

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The Difference Between Canadian And American.

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The Difference Between Canadian And American.

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The bank works because of our trust. We give the bank our money and then the bank turns around and loans it to someone else to make money for itself. Banks can legally extend more credit than they have funds. Most of us have total trust in the bank to give our money back when we need it.

This video is a little on the conspiracy side and it relies on viewers fear of world domination, however it showcases the banks hold on the economy quite well. There is some truth to the subject matter as it focuses on the structure of the banks and how the bank influences international markets as well as those that work within the bank system can influence the economy too.

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Stuff They Don't Want You To Know - HowStuffWorks

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Banks are important to the worlds economy. The motive of the bank is to put your money to good use. They do this by lending it out to others who then use it to purchase homes, businesses, etc.

I like how this website breaks down the structure of a banking institution and gives the reader some thought on what would the world be like if we had no banks. Giving notion that banks help the economy a lot more than harm.

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Commercial banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner. They provide specialized financial services, which reduce the cost of obtaining information about both savings and borrowing opportunities. These financial services help to make the overall economy more efficient.
Imagine a World Without Banks
One way to answer your question is to imagine, for a moment, a world without banking institutions, and then to ask yourself a few questions. This is not just an academic exercise; many former eastern-block nations began facing this question when they began to create financial markets and develop market-oriented banks and other financial institutions.

If there were no banks...

Where would you go to borrow money?

What would you do with your savings?

Would you be able to borrow (save) as much as you need, when you need it, in a form that would be convenient for you?

What risks might you face as a saver (borrower)?

How Banks Work
Banks operate by borrowing funds-usually by accepting deposits or by borrowing in the money markets. Banks borrow from individuals, businesses, financial institutions, and governments with surplus funds (savings). They then use those deposits and borrowed funds (liabilities of the bank) to make loans or to purchase securities (assets of the bank). Banks make these loans to businesses, other financial institutions, individuals, and governments (that need the funds for investments or other purposes). Interest rates provide the price signals for borrowers, lenders, and banks.

Through the process of taking deposits, making loans, and responding to interest rate signals, the banking system helps channel funds from savers to borrowers in an efficient manner. Savers range from an individual with a $1,000 certificate of deposit to a corporation with millions of dollars in temporary savings. Banks also service a wide array of borrowers, from an individual who takes a loan of $100 on a credit card to a major corporation financing a billion-dollar corporate merger.

The table below provides a June 2001 snapshot of the balance sheet for the entire U.S. commercial banking industry. It shows that the bulk of banks' sources of funds comes from deposits - checking, savings, money market deposit accounts, and time certificates. The most common uses of these funds are to make real estate and commercial and industrial loans. Individual banks' asset and liability composition may vary widely from the industry figures, because some institutions provide specialized or limited banking services.

Banks Are Only One Type of Financial Intermediary

Finally, the U.S. financial services industry and financial markets are highly developed. In recent decades, many new products and services have been created, as well as new financial instruments and institutions. Today, in addition to banks, there are several other important types of financial intermediaries. These include savings institutions, credit unions, insurance companies, mutual funds, pension funds, finance companies, and real estate investment trusts (REITS).

Banks' assets have grown in recent decades in absolute terms; however, banks have tended to lose market share to even faster growing intermediaries such as pension funds and mutual funds. Still, banks continue to account for a significant share-over 23 percent-of the assets of all financial intermediaries at the end of year 2000, as the chart below shows.

Let me also suggest some more advanced reading materials:

What's Different about Banks--Still? Milton Marquis.
Federal Reserve Bank of San Francisco. FRBSF Economic Letter. No. 2001-09. Apr. 6, 2001. (8-22-01)
/publications/economics/letter/2001/el2001-09.html

Are Banks Special? A Revisitation. E. Gerald Corrigan.
Federal Reserve Bank of Minneapolis. The Region. No. v. 14, no 1. Mar, 2000 , p. 14-17. (8-22-01)
http://www.minneapolisfed.org/pubs/region/00-03/corrigan.cfm

Personal Financial Education, FederalReserveEducation.org, 2003

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What is the economic function of a bank?

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Commercial banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner. They provide specialized financial services, which reduce the cost of obtaining information about both savings and borrowing opportunities.

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Banks make money by lending money at rates higher than the cost of the money they receive. Loans are the principal way in which the banks earn income.

I like this site because its a great breakdown of what is involved in banking as a consumer. It tells you all about whats involved, what should you expect as far as fees are concerned, whether a checking or savings account is better for you, etc.

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The Basics of Banking

Recently, I received a lengthy email from a reader who had a ton of basic personal finance questions contained within. I thought it might be interesting to start an irregular "personal finance 101" series to answer and explain some of her questions.

Many people see banks as being a place where you save your money or where you get a checking account or where you can get loans, but they often don't understand the big picture of how a bank functions. Let's walk through it in baby steps so that you can understand why a bank exists.

Remember a bank is a business like any other business: it strives to make as much money as possible. They make money by simply moving money around; keep that in mind as we move through the services that a bank provides.

Saving Account

The first service that most people become familiar with in terms of a bank is a savings account. At first glance, a savings account is a situation in which you give a bank your money for a period of time, withdraw it whenever you like, and it earns a small amount of money for the time you leave it there. What actually happens, though, is that a savings account is actually a loan, except this time you're the lender. It's no different than any other loan, except it's really flexible: you can lend as much as you want to the bank and get that loan paid back whenever you'd like. Because of this flexibility, though, the interest you make on this loan is pretty low.

Checking Account

A checking account, at most banks, is no different than a savings account: you're lending the bank your money, but with a checking account, they pay your interest with services (dealing with the checks you write, etc.) instead of interest.

The other major aspect that people think of when they consider a bank is loans: they lend money to people for automobiles, cars, and other things.

How do banks make money?

For starters, they take the money you loan them and earn a pretty strong return with it, then give you a part of that return in the form of interest. So, each dollar you put into your account with the bank makes them a little bit of money.

Let's say, for example, that the bank has a savings account with a 1.5% rate of return, which is likely better than the bank in your neighborhood. They take the money from your account (and a lot of other savings accounts) and use all of that money to buy (for example) a treasury note, which is guaranteed by the federal government and returns about 5%.

Even better, let's say that someone else comes into the bank and wants to borrow some money for a car. The bank offers to lend them the money for the car at 7% return, so they take that money from the accounts at the bank and give it to the borrower. Then, the borrower pays back that money plus the interest, of which they pass on 1.5% to you, keeping 5.5% for themselves.

So, hypothetically, let's say a bank opens for business and two people open savings accounts at 1.5% with $10,000 each. Then, Judy comes in and wants to borrow $20,000 for a car loan for one year, so the bank uses the $20,000 the people have deposited. At the end of the year, Judy will pay back the $20,000 plus 7% ($1,400). Then, each of the savings account holders come in and clean out their accounts. Each one takes out $10,000 plus 1.5% ($150) for a total of $20,300. The bank thus keeps the remaining $1,100. If that happens, say, 100 times in a year (200 savings accounts, 100 car borrowers), the bank makes $110,000 a year. When you start figuring in long term things like home loans, and also when people buy things like certificates of deposit, it becomes clear that a bank can bring in a lot of money each year.

On top of that, banks today make a lot of money from fees. You get pinged when you use the wrong ATM, when you overdraft a check, and so on. Each of these activities only costs the bank a few cents to handle, but it costs you a few dollars (at least).

To summarize, a bank works by paying people small amounts to lend them money, then lending that money onto others for larger amounts. They manage that whole process, and then keep the difference between the large amount (interest on loans) and small amount (interest from a savings account).

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Personal Finance 101: How Does A Bank Work? - The Simple Dollar

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Recently, I received a lengthy email from a reader who had a ton of basic personal finance questions contained within. I thought it might be interesting to start an irregular "personal finance 101" series to answer and explain some of her questions.

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How Does The Bank Make Money Off Of You?

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How Does The Bank Make Money Off Of You?

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How Do Banks Make Their Money And How Does It Effect You?

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How Do Banks Make Their Money And How Does It Effect You?

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What Is The Economic Function Of A Bank?

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What Is The Economic Function Of A Bank?

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Here we are going to learn about how a bank works. Meaning how it is able to operate, how it makes money for itself,  how it handles your money and how the bank impacts the economy.

Topics I will cover include:

- Economy Impact
-  How Do Banks Make Money?
- Canadian vs. U.S. Banking Structure
- The Costs Of Banking
- Checking/Savings Accounts

Thanks and enjoy!

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                                                          HOW BANKS WORK  by Jesse Tanner

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                                                          HOW BANKS WORK  by Jesse Tanner

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Most of the money in our economy is created by banks. Banks create new money whenever they make loans. 90% of the money in the economy is created by banks, while just 10% is created by the government.

This video gives us a good glimpse of how banks make money from consumers and how the money made from banks represent most of the economy's worth. Its a pretty sweet deal from the banks perspective.

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Where does money come from? Waar komt geld vandaan? Var kommer pengarna ifrån?

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Michael Kumhof, IMF Economist and Dirk Bezemer, Associate Professor, University of Groningen explain where money comes from... Money creation in the modern economy http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf Waar komt geld vandaan? Var kommer pengarna ifrån?