Alternate Banks

Alternate banks are Financial Pillar #2 of the Canadian financial system. They operate alongside chartered banks and include trust companies and credit unions/caisses populaires.

How It Appears Per Course

ADMN 201

Trust Companies

A trust company safeguards funds and estates entrusted to it. It may also serve as:

• Trustee — protects bondholder interests when a corporation issues bonds
• Transfer agent — records changes in ownership of a corporation’s shares
• Registrar — certifies that stock issues are correctly stated and comply with the corporate charter

Other services include preparing dividend cheques for shareholders and serving as trustee for employee profit-sharing funds. Trust companies also accept deposits and pay interest. Note: Trust companies have declined in importance; many have been bought by banks or insurance companies.

Credit Unions / Caisses Populaires

Credit unions (called caisses populaires in French Canada) are cooperative savings and lending associations formed by a group with common interests. Key features:

• Member-owned — members are the owners and can add to savings accounts via payroll deductions or direct deposits
• Lending — members can borrow short-term, long-term, or mortgage funds from the credit union
• Investment — credit unions invest substantial amounts in corporate and government securities and sell certificates of deposits to the general public
• Growing popularity — offer many of the same services as chartered banks while paying dividends to members when profitable

Top Credit Unions in Canada (by members)

Rank	Organization	Members
1	Mouvement Desjardins*	7,500,000
2	Coast Capital Savings	594,483
3	Vancity	520,448
4	Meridian Credit Union	387,815
5	Servus Credit Union	380,500

Caisses Desjardins is the largest federation of credit unions in North America.

Cross-Course Connections

CharteredBanks — Financial Pillar #1; alternate banks operate alongside and compete with chartered banks
SpecializedLendingIntermediaries — Financial Pillar #3; a third category of financial institution
LegalFormsOfBusiness — credit unions operate as cooperatives — distinct from corporations

Key Points for Exam/Study

• Alternate banks = Financial Pillar #2
• Trust companies: three specific roles — trustee, transfer agent, registrar
• Credit unions: cooperative (member-owned), pay dividends to members, growing in popularity
• Mouvement Desjardins = largest credit union federation in North America (7.5M members)
• Trust companies have declined in importance; many absorbed by banks or insurers

Open Questions

• How do credit union deposit rates compare to chartered bank rates today?

graph TD
    P2[Financial Pillar 2\nAlternate Banks]
    P2 --> TC[Trust Companies]
    P2 --> CU[Credit Unions /\nCaisses Populaires]
    TC --> TC1[Trustee]
    TC --> TC2[Transfer Agent]
    TC --> TC3[Registrar]
    TC --> TC4[Accepts Deposits]
    CU --> CU1[Member-Owned\nCooperative]
    CU --> CU2[Savings & Lending]
    CU --> CU3[Invest in\nSecurities]
    CU --> CU4[Pay Dividends\nto Members]