CANADA

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Although Canada is considered as one of the most stable and resilient economies, it was not spared by the COVID-19 outbreak. GDP fell by 5.3% in 2020, not only because of lockdowns that depressed activity in services, but also as a consequence of the fall in oil prices (Canada ranks fifth worldwide among oil exporter countries). The shock was nevertheless short-lived, and Canada was among the first to benefit from the recent recovery in world trade and commodity markets. In 2021, the economy would have rebounded by 6.1% (OECD estimates).

To address the pandemic, the Bank of Canada has swiftly eased its monetary policy. The main key rate was lowered to 0.25 from 1.75 in January 2020. In the COVID-19 crisis turmoil, the Canadian dollar depreciated against the USD. The need for deleveraging could be a brake for economic expansion after the recovery process. Indeed, loose monetary and financial conditions have caused household debt to surge, fuelling rapid increases in house prices.

Summary

BNP Paribas has had a continuous presence in Canada since 1961 with a growing number of employees (currently over 500) and business centres in Montreal and Toronto. It is only one of only a small number of non-Canadian banks that is a direct clearer in the large value transfer system (LVTS). BNP Paribas has become a leading provider of global cash management and trade finance solutions, supporting the needs of domestic corporations, particularly those with international operations, and foreign corporations doing business in Canada.

Currency

  • Canadian dollar (CAD)

Bank accounts

  • A company is considered resident in Canada if it has been incorporated in the country since 26 April 1965 or its place of effective management is located in Canada.

BNP Paribas Cash Management Capabilities

Cash collections
Cheque collections
Direct debit collections
Domestic incoming transfers
Virtual IBAN
Virtual accounts
International incoming transfers
Card acquiring

Payments & collections

Cash payments declined 9% in 2019, accounting for less than 19% of the total payments volume. Payments Canada's annual Canadian Payments: Methods and Trends 2020 found that electronic payments increased significantly in 2019 accounting for approximately 16.9 billion transactions, representing around 77% of total payments volume and 62% of total payments value. Card payments are the most widely used method of payment: debit and credit cards make up the largest portion of total transaction volume, representing 28% and 31% of total payments volumes respectively in 2019.

The Covid-19 outbreak has resulted in a significant shift in payments preference towards the use of contactless payment methods. According to a survey conducted by Payments Canada in November 2020, approximately 47% of Canadians surveyed used contactless debit and credit cards more often than before the pandemic.

Payments Canada is developing two new payment systems as part of its multi-year modernisation programme.

  • Lynx, a high-value system, will replace the existing real-time settlement system LVTS. Phase I of Lynx is expected to go live by end-2021. Phase II, which includes the adoption of the international payment messaging standard ISO 20022, will be launched in 2022.
  • Real-Time Rail (RTR), a real-time payment system, will process payments in real-time 24 hours a day, seven days a week. It will serve as a platform for future innovation. The RTR is expected to go live in 2022.

Electronic banking services are available from all banks. There is no national electronic banking system in Canada, so companies use banks’ proprietary services.

Online and mobile banking services are provided by all of the country’s leading banks. The outbreak of Covid 19 has seen a significant increase in the use of digital services across all age groups. Approximately 83% and 44% of account holders use online and mobile banking services respectively.

Interac’s e-Transfer platform supports real-time payments, including P2P payments, across more than 250 financial institutions. Payments are processed 24 hours a day, seven days a week.

Short term investments

Interest payable on credit balances

  • Interest-bearing accounts are permitted in Canada.

Demand deposits

  • Demand deposits denominated in CAD or major foreign currency are available for various terms.

Time deposits

  • Time deposits are available in CAD or major foreign currency, usually for terms of less than one year. Short-term deposits (with a maturity of less than five years) are guaranteed up to CAD 100,000, as long as the deposit holder is a member of the Canada Deposit Insurance Corporation (CDIC).
  • Effective 30 April 2020, CDIC coverage will include eligible deposits held in foreign currency and deposits with terms longer than five years.

Certificates of deposit

  • Domestic banks issue certificates of deposit with terms ranging from three months to five years. These can be denominated in CAD or foreign currency.
  • The minimum investment amount is CAD 5,000.

Treasury (government) bills

  • The Canadian federal government, and provincial governments, issue Treasury bills, typically for three-month terms, although a range of maturities are available.

Commercial paper

  • Domestic commercial paper is issued with terms ranging from overnight to one year. The minimum investment amount is CAD 100,000.
  • Canadian companies can invest in US commercial paper (USCP). Issuers usually have a published credit rating and issue USCP for maturities under 270 days in USD.

Money market funds

  • Money market funds are available in Canada.

Repurchase agreements

  • Repurchase agreements are available in Canada.

Bankers' acceptances

  • Bankers' acceptances are available in Canada, with terms ranging from overnight to one year.

BNP Paribas Trade Finance Capabilities

Documentary credits
Documentary collections

International trade

  • As a member of the United States-Mexico-Canada Agreement (USMCA),
  • Canada has free trade agreements (FTAs) with Mexico and the USA.