Discussions of the post-war development of the Euro-dollar market have drawn attention to the foreign currency business of Canadian chartered banks. In these discussions interest in Canadian banks' foreign currency operations has centred on their international implications, and particularly on their impact on the balance of payments of the United States. With the exception of parts of a paper by O. Altman and a short section in the Report of the Porter Commission there has been little analysis of the development and significance of this business as an adjunct of the Canadian financial system. This paper is an attempt partially to fill this gap. It draws together available information on the foreign currency business of the banks, including some data on interest rates which are not otherwise readily available, and presents an analysis of the growth, changing character, and domestic implications of these operations since the mid-1950's. The analysis is intended to complement and extend the work previously reported by Altman and the Porter Commission.
The chartered banks conduct a variety of transactions in currencies other than Canadian dollars. For convenience these can be classified into five categories. It should be noted, however, that even if these categories were sharply distinct conceptually (which they are not), published data would not permit precise quantification of each.