Why U.S. Banks Face Tough Competition in Canada
Canada’s financial system isn’t exclusionary—it’s built for resilience, not risk, and in an era of economic uncertainty, that’s a feature, not a flaw, says Trent finance professor
Dr. Jie Zhang is a finance professor in the School of Business at Trent University and a professor in the Master of Management and Applied Modelling and Quantitative Methods graduate program. Professor Zhang’s research centres on analyzing the distinctions and risks of the Canadian banking sector.
Recent comments suggesting that U.S. banks are not allowed to do business in Canada are misleading. American financial institutions, including the four largest U.S. banks, JPMorgan Chase, Bank of America, Citibank and Wells Fargo, all operate in Canada.
“U.S. banks can operate in Canada, but if they want to be major players, it’s much more challenging,” said Dr. Jie Zhang, a professor of finance in the School of Business at Trent University. “The Canadian banking sector is designed for stability rather than competition.”
Canada’s banking system is highly concentrated, with the Big Six banks—RBC, TD, BMO, Scotiabank, CIBC, and National Bank—controlling over 90 percent of the country’s banking assets.
The resilience of the Canadian banking system is reinforced by stringent capital requirements set by the Office of the Superintendent of Financial Institutions (OSFI).
“As of last October, the Big Six banks in Canada must maintain a capital buffer of 13.3 percent of risk-weighted assets. In contrast, large U.S. banks are required to hold a minimum of seven percent, according to the Federal Reserve Board,” said Professor Zhang. “These regulations create a financial cushion that protects Canadian banks from collapse. That’s why, from 2001 through 2025, the U.S. has seen 569 bank failures, while Canada has had none.”
The 2023 failures of Silicon Valley Bank and First Republic Bank highlight the difference in risk between the two countries. “These banks collapsed because they were overexposed to high-risk investments,” Prof. Zhang said. “Canadian banks are required to be more diversified, making them more resilient.”
While Canada’s banking regulations limit competition, they also prevent financial crises. During the 2008 global financial crisis, many U.S. banks required bailouts, whereas Canadian banks remained stable with limited government support. During the COVID-19 pandemic, both countries implemented financial support measures, but Canadian banks again showed resilience.
Learn more about programs and research at the School of Business at Trent University.