For over a century, American banks have successfully operated within Canada's financial landscape, contrary to recent claims suggesting otherwise. US banks account for approximately half of all foreign bank assets in Canada, cementing their significant presence in the Canadian market. The Canadian Bankers Association confirms that major US financial institutions, including Bank of America, Wells Fargo, Citigroup, US Bank, JPMorgan, and Northern Trust, maintain active operations north of the border. This engagement underscores the importance of Canada as a strategic market for US banking giants.
Canada's financial sector offers two main avenues for US banks seeking to establish operations: launching a subsidiary or opening a branch. A subsidiary, classified as a "Schedule II" entity, is a separate legal entity from its parent company, necessitating its own capital and liquidity structures. Conversely, a branch, classified as a "Schedule III" entity, operates without such requirements but faces restrictions on deposit acceptance, specifically a minimum threshold of $150,000 CAD.
“Bottom line: there are trade-offs to each option, but foreign banks certainly can operate in Canada. A case could probably be made that the restrictions on both options prevent full competition with Canadian banks, but not that ‘Canada doesn’t even allow U.S. Banks to open or do business there’ as Trump stated.” – Kronick
Despite these regulatory nuances, US banks have effectively navigated the Canadian financial system. The Canadian government imposes stringent regulations on the banking industry, requiring comprehensive approvals before foreign-owned banks can commence operations. This meticulous approach ensures that financial services remain a core asset to Canada's economy.
“We take a very careful look at people who want to come into our banking sector because we consider financial services to be a core asset to Canada and to the Canadian economy.” – Meredith
The decision-making process for US banks involves weighing the benefits and limitations of each operational model. Many US banks opt for the branch model to circumvent the capital and liquidity requirements imposed on subsidiaries. This choice reflects the desire to streamline operations while maintaining compliance with Canadian regulations.
“A separate legal entity from their parent, thus requiring their own local capital and liquidity structures. From the foreign bank’s perspective, this is obviously inefficient.” – Jeremy Kronick
In addition to financial services, Canada holds significant importance for US agricultural exports. It ranks as one of the largest buyers of US agricultural products globally. In the 2023 fiscal year alone, Canada purchased $27.9 billion worth of US agricultural exports. The dairy sector, in particular, highlights this relationship, with Canada being the second-largest market for US dairy products after Mexico.
“Canada is an important market for U.S. dairy products, second only to Mexico. From 2010 to 2021, total dairy exports from the United States to Canada, adjusted for inflation, rose 48 percent from $466.4 million in 2010 to $691.5 million in 2021.” – US Department of Agriculture (USDA)
Despite these robust trade relations, recent statements have sparked debates about Canada's receptiveness to US agricultural products and banking operations.
“We can’t let them take advantage of the US. They don’t take our agricultural product for the most part.” – Trump
“They don’t take our agricultural product for the most part, our milk and dairy, etc. A little bit they do, but not much.” – Trump
These assertions stand in contrast to data from the US Department of Agriculture (USDA), which acknowledges Canada's consistent ranking among top markets for American agricultural exports.
“Canada consistently ranks among our top markets for agricultural product exports, representing one of our most significant and reliable trading partners.” – US Department of Agriculture (USDA)
Moreover, experts emphasize that there are no prohibitions preventing American banks from operating in Canada.
“There’s nothing prohibiting American banks from operating here, including having retail branches.” – Cristie Ford
The Canadian financial sector hosts numerous international banking institutions beyond those from the United States. Banks from China, Japan, Europe, and other regions have also established operations within Canada’s regulated banking environment.
“But there are existing American institutions, Chinese institutions, Japanese institutions, and European institutions” that have permission to operate in Canada.” – Meredith
