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Free-wheeling banks -- that's Canada

Should Americans ever wonder what nationwide, relatively unregulated banking is like, they should visit Canada. Bankers here are paying around 14.75 percent on nonchecking savings accounts and 14.5 percent on "daily interest" accounts, a type of savings account on which checks can be written. There is no Regulation Q, as in the United States, to impose a ceiling on interest rates for deposits. As a results, money-market funds are no problem to the banks. They don't exist.

With mortgage rates now running at 17.5 to 18 percent and the prime rate at 19.5 percent, the banks still have a "spread" sufficient to make a profit.

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Moreover, federally chartered banks can branch and do business freely anywhere in Canada, from coast to coast if they wish. One result has been the large size, considering Canada's population, of most Canadian banks. The Royal Bank of Canada -- the largest Canadian bank --

Referring to the effect on American banks of tighter banking controls in the United States, Victor Dobb, executive vice-president of the Bank of British Columbia, shook his head and said: "It is a strong, strong argument against government regulation."

Mr. Dobb's bank is much smaller than the Royal Bank, with deposits of $2.6 billion.

Canada has in the past been slow in chartering new banks. But the passage of a new Bank Act last year promises to step up competition. Some 50 foreign banks are expected to apply for Canadian charters. Many have already been active in Canada through nonbank financial institutions. Further, the new bank legislation makes it easier for the chartering of domestic banks through a less difficult procedure known as "letters patent." Previously, to be granted a charter each new bank had to have a private members's bill passed by the federal Parliament in Ottawa.

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