WHAT IS A Schedule II Bank

A Schedule II bank is a a financial institution regulated by Canada's Federal Bank Act and can be owned either domestically or by a foreign entity. A Schedule II bank is subsidiary of a foreign bank and authorized to accept deposits within Canada. A foreign Schedule II bank can be owned by non-residents, and a Canadian Schedule II bank is owned by a Schedule I bank. Although Schedule II banks are smaller, they are still regulated by the Federal Bank Act and have to adhere to the same strict policies put into place for consumer protection.


Schedule II banks are the most common type of bank in Canada, as many of the smaller credit unions, trusts and banks fit into this category.

Under Canada’s Bill C-8, implemented on October 24, 2001, the Schedule I and II bank structures were replaced with a new size-based ownership system based upon the institution's equity. Under this legislation,institutions with more than $5 billion in equity are required to have no person owning more than 20 percent of the voting shares or 30 percent of the non-voting shares. Institutions with equities of $1 billion to $5 billion have fewer restrictions on ownership, as they are only subject to having a public float of 35 percent of voting shares. Institutions with less than $1 billion in equity have no ownership restrictions.

Although the Schedule I and II bank structures have been replaced, these terms are still widely used to describe the two structures of banks in Canada.

Canada’s Banking System

Canada's federal government has sole jurisdiction over banks, while credit unions, securities dealers, and mutual funds are mostly regulated by provincial governments. Canada’s Bank Act outlines Schedules I, II and III, which list all banks permitted to operate in Canada.

Schedule I banks are allowed to accept deposits which are not subsidiaries of a foreign bank. Because Schedule I banks are not subsidiaries of any foreign bank, they are the true domestic banks and are the only banks allowed to receive, hold and enforce security interest as described in the Bank Act. Schedule II banks are allowed to accept deposits that are subsidiaries of a foreign bank, and Schedule III banks are foreign banks permitted to conduct business in Canada.

The Office of the Superintendent of Financial Institutions (OSFI) is the regulator of Canadian banks. Financial groups are also governed by regulatory bodies such as bank regulators, securities regulators and insurance regulators.