A:

In recent decades, banking reforms and exposure to new business practices has served to increase the similarities between financial services in the United States and Canada. This has also been bolstered by an increasing globalization of financial markets and influence from multinational corporations. Both financial services sectors are guided, in part, by the monetary policies of central banks that emphasize full employment. The U.S. has a larger financial services sector than Canada, but the fastest-growing area of financial services is in Toronto, Canada.

Similar Financial Services Providers

There are a number of banks, asset management firms and insurance companies that have operations in both the U.S. and Canada. Most of these firms are headquartered in the U.S., including Merrill Lynch, Goldman Sachs and Morgan Stanley. The NYSE group Euronext opened a liquidity center in Ontario in 2012 to help bridge access to markets and trading infrastructure. J.P. Morgan Chase & Co. established an investment banking presence in Alberta in 2010 and has since become a major corporate, institutional and government financial services provider.

International providers such as HSBC and Credit Suisse are active in both the U.S. and Canada but are not headquartered in either country. The impacts of financial homogenization are not complete; there are still differences between rules and regulations in different countries, but the types of service offerings between trading countries are becoming more similar.

United States and Canadian Financial Sectors

The economies of Canada and the U.S. are heavily influenced by each other. Canada is the largest trading partner of the U.S., which also happens to be the largest trading partner for Canada.

The financial services sector in Canada accounts for somewhere between 6-8% of national output. Figures in the U.S. have ranged between 2.5% and 7.5% of GDP over the past 50 years, although at one point the financial services sector in the U.S. accounted for nearly half of all business profits in 2010.

Canadian banking laws have historically been more favorable to large national banks than in the U.S. Many of these differences went away in 1990 with the removal of interstate banking restrictions in the U.S. As a result, there are less than two dozen domestic banks in Canada, while there are more than 1,000 in the U.S.

There are other restrictions U.S. banks face relative to Canadian banks. Investments between industrial firms and banks are highly restricted in the U.S. This has been one of the reasons mutual funds and other financial intermediaries are growing at faster rates than banks in the U.S.

Most of the financial services sector in the U.S. is clumped near major financial hubs in cities such as Chicago, New York and San Francisco. Canadian service providers are clumped in Vancouver, Ontario and Quebec.

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