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Canadian brokers turn the tables on branching out by bankers

Last year Canadian banks moved into the brokerage business; this year Canadian brokers are getting into the banking business. Midland Doherty of Toronto is the first Canadian brokerage to offer checking services. Other brokers are almost certain to follow.

''It is really an attempt to duplicate something which is in existence in the United States,'' says Roger Keane, a director of the firm. The Midland Doherty service is aimed at wealthy clients. To open a checking account, a person has to have minimum balance of $25,000. There is a hundred-dollar annual fee, which includes a hundred free checks as well as detailed accounts of all brokerage transactions for tax purposes. The real advantage appears to be that a person can quickly tap money tied up in a brokerage account.

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Checks written by Midland Doherty customers are cleared by the Toronto-Dominion Bank. This is the bank that fought to enter the discount brokerage business last year. Midland Doherty was one of the few brokers welcoming the bank as a competitor; other members of the broker's lobby, the Investment Dealers Association, spent more than half a million dollars fighting the bank's entry. (Toronto-Dominion is still losing money on its discount brokerage operation.)

The ''Access'' brokerage account at Midland Doherty also pays better interest than the banks do, at 1 percent below the Canadian Treasury-bill rate. That means 11 percent at the brokers, compared with 7/2 percent with a similar daily interest account at banks.

The higher interest rates mean that it isn't only the rich who are attracted, Mr. Keane says. ''We just don't need the gigantic spreads that the banks have been charging this last year or so to make a profit. We also don't have to generate excess profits on domestic business to apply against international loans that have gone bad,'' a reference to the exposure of the Canadian banks in Latin America, estimated at $16 billion.

The Canadian Bankers Association, representing the 11 domestic chartered banks, is not happy about the brokers entering the checking business. The brokers have no cash reserve requirements and operate without a lot of constraints banks have.

''They are not a member of the Canadian Payments Association, and they will not, as far as I can see, get deposit insurance,'' says Robert MacIntosh, president of the Canadian Bankers Association. His association was strongly in favor of the Toronto Dominion and other banks being allowed into the brokerage business.

Midland Doherty has 47 offices across Canada; that is not much, compared with 7,200 bank branches across the country. But bankers feel that the Midland Doherty plan, and others that are certain to follow soon, are not harming the banks because the banks generally are not after rich customers.

''It's a fight between brokers,'' says Mr. MacIntosh; ''the banks don't have many people who hold $25,000.''

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''It doesn't say you can't do this in the Bank Act,'' says Mr. Keane of Midland Doherty. ''The point is that no one has ever done it.''

The Canadian financial world is being intensely scrutinized as a result. Quebec's Finance Ministry is conducting an investigation, Ottawa has an advisory committee on the issue, and the Ontario Securities Commission has just announced a committee on the securities industry. The Ontario government has yet another panel looking at pretty much the same thing.

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