Business Unit 2 - Finance

Front 1

Payee:

Back 1

The party that receives the check

Front 2

Payor:

Back 2

The party that writes the check (to the payee).

Front 3

Service Charge:

Back 3

An amount the bank charges (fees) for use of the checking account.

Front 4

Check Register:

Back 4

A booklet that is used to keep a record of all your checking related transactions, including checks written and deposits.

Front 5

Check Stub:

Back 5

A strip on the side of some checks that is torn off. Used to keep record of the amount of the check

Front 6

Endorse a Check - Check Endorsement:

Back 6

When the payee signs their name on the back of a check to cash or deposit the check

Front 7

Balance:

Back 7

The amount of money currently in your checking account.

Front 8

Non-sufficient Funds:

Back 8

When you write a check for more money than you have in your account.

Front 9

Minimum Balance:

Back 9

The minimum amount of money required in your account. Having an amount less than the minimum balance may result in extra service charges or reduced privileges.

Front 10

Three ways banks earn profits.

Back 10

- Sell Services and earn profits on these services
- They earn most of their revenue by charging interest on money they loan to consumers, businesses, and government.
- The banks earn interest on investments, which contributes to their profits

Front 11

the Bank Act

Back 11

The Bank Act is legislation outlining the rules and regulations that banks have to follow.

Front 12

3 classes of Canadian banks

Back 12

Schedule I, II, III banks

Front 13

Schedule I Banks

Back 13

---Schedule I banks are owned by Canadian shareholders
---Shares are traded on the major Canadian stock exchanges
---Investors buy shares in these banks in order to receive a share of profits
---19 Schedule I banks including the “Big Five”
---These banks accept deposits and offer investment and financial services
- EXAMPLES: BMO Bank of Montreal and TD Bank Financial Group

Front 14

Schedule II Banks

Back 14

- Mostly foreign-owned banks that are controlled by a small number of shareholders
- These banks generally don’t offer shares to the public
- Have the same powers as Schedule I banks however the government sets limits on the total number of branches they can have and the total amount of assets they can hold
- Most Schedule II banks concentrate on investment banking and corporate customers
- EXAMPLES: Amex Bank of Canada, the HSBC Bank of Canada, and the ING Bank of Canada

Front 15

Schedule III Banks

Back 15

- Foreign bank branches with permission to operate in Canada
- Bank Act sets restrictions on these banks
- Most schedule III banks concentrate on investment banking and corporate customers
- EXAMPLES: Capital One Bank, Deutsche Bank A.G., Citibank

Front 16

3 advantages of branch banking

Back 16

- Branch banking offers residents of both small communities and large cities the same services at the same cost.
- Branches link small communities to major financial centers.
- Each branch, no matter how small, is fully supported by the expertise and services of the bank’s head office.

Front 17

2 ways branch banking is changing

Back 17

- Bank branches are expensive to maintain, and banks are finding that it saves money to close some branches and encourage customers to use automated banking machines (ABMs) and telephone or online banking instead.

- In low-income areas, where there is not enough business to support bank branches, retailers such as RBC’s Cash and Save and Money Mart are offering cheque-cashing services. (These are retailers, not banks. They do not accept deposits or lend money, and they charge substantial service fees.)

Front 18

the function of the Bank of Canada

Back 18

- Not a chartered bank
Helps keep the Canadian economy as stable as possible. Its most important roles are to regulate money supply and to raise or lower the bank rate to control the rate.

Front 19

A chartered Bank

Back 19

-Customers can open accounts or borrow money
- Operate under the bank act
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Front 20

Transaction Accounts

Back 20

- Allow people to pay for good and services with cash, cheques, or debit.
- Usually do not pay interest and are used to pay personal and household bills

Front 21

Combination Account

Back 21

- Provides ways to save money and to pay expenses
- Financial institutions levy service charges on combination and transaction accounts

Front 22

Current Accounts

Back 22

- For businesses that are registered with the provincial or federal government.
- These accounts must be recorded in the business' name

Front 23

Trust Companies

Back 23

A financial institution that manages estates, acts as a trustee in business transactions, and provides a number of financial, services similar, to those provided by banks.

Front 24

Caisses Populaires and Credit Unions

Back 24

- A type of credit union located mainly in Quebec.
- Organized and owned by groups of people who agree to pool and share their resources

Front 25

Insurance Companies

Back 25

Financial institution that insures risk.
- focus on life and health