What is the difference between a bank, a trust company and a credit union?
The differences are mainly regulatory. Canada’s banks are federally regulated and chartered pursuant to the Bank Act. The Bank Act recognizes and governs two distinct types of banks. Schedule I banks’ shares are widely held, with no shareholder permitted to own more than 10 per cent of the bank’s shares. Schedule II banks are not widely held. Unlike banks, trust companies can be incorporated and regulated at either the federal or the provincial level. By law, only trust companies are allowed to provide trustee functions. Banks can do that only through a separately created trust subsidiary. The other difference is that a bank has full commercial lending powers, whereas trust companies must have more than $25 million of regulatory capital to receive full lending powers with the approval of the Office of the Superintendent of Financial Institutions (OSFI). Credit unions are different from banks and trust companies in that they are fully provincially regulated. They are regulated by provin
