Guide to wholesale banking in Canada

Business owners in Canada have a variety of banks to choose from, and it’s important to be aware of what each financial institution can offer. Wholesale banks, or wholesale banking divisions, account for a significant portion of the Canadian banking landscape, offering services tailored to large enterprises and institutions.¹ But is wholesale banking right for your business?

Keep reading to learn more about wholesale banking in Canada and the services these institutions offer. We’ll also explore how the Airwallex Business Account can help SMEs and growing businesses manage their global financial operations.

What is wholesale banking?

In Canada, wholesale banking is a specialized branch of banking that caters exclusively to multinational corporations (MNCs), government agencies, pension funds, and other financial institutions. It focuses on handling large-scale transactions, managing risks, and providing access to significant capital.

Unlike banks serving individuals and businesses, wholesale banking divisions typically work exclusively with institutional clients. Examples of wholesale banking divisions in Canada include those operated by RBC Capital Markets, BMO Capital Markets, and TD Securities.²

Wholesale bank vs. full bank

A full-service bank in Canada, regulated by the Office of the Superintendent of Financial Institutions (OSFI), offers services to both individuals and businesses. For individuals, they provide personal banking services like savings accounts, mortgages, and credit cards. For businesses, they offer accounts, lending solutions, and treasury services.

Wholesale banks, on the other hand, serve large institutional clients. These wholesale banking services are often delivered through divisions within Canada’s Big Five banks – RBC, TD, BMO, CIBC, and Scotiabank – which offer integrated support for institutional clients.

The difference between wholesale and full-service banks lies in their customers. 

What's the difference between wholesale, retail, and commercial banking?

Wholesale banking, retail banking, and commercial banking serve different clients and financial needs. Here’s a quick breakdown of how they differ:

• Wholesale banking: serves large corporations, pension funds, and institutional clients with services like structured financing and M&A advisory. It’s built for businesses with complex needs and high-value transactions.

• Retail banking: provides personal financial services to individuals, such as credit cards, checking accounts, and personal loans.

• Commercial banking: Also known as SME banking or business banking, commercial banking provides individual businesses with solutions like business accounts, loans, and payroll services.  

While wholesale banking services are designed for large institutions with complex needs, fintech platforms like Airwallex offer financial tools that help SMEs manage global operations more efficiently.

Wholesale banking services

Wholesale banks excel at these specialized services:

• Trade financing: Helps businesses manage and fund international trade transactions, mitigating risks like currency fluctuations and geopolitical instability. For instance, Scotiabank offers letters of credit and documentary collections tailored to large import/export clients.³

• Structured financing: These are large-scale, custom loans often delivered through syndicated lending agreements. For example, BMO Capital Markets may facilitate a syndicated loan for infrastructure or renewable energy development.⁴

• Treasury and cash management: Services include liquidity management, cash flow forecasting, and FX hedging. RBC says its global treasury solutions help corporations optimize working capital across multiple currencies.⁵

• Capital raising: Wholesale banks assist with raising funds through bond underwriting, syndicated loans, and IPOs. For example, TD Securities helps corporate clients raise capital via public and private markets.⁶

• Risk management: Banks like CIBC Capital Markets use sophisticated financial instruments to help clients manage exposure from FX and interest rate hedging to commodity price protection.⁷

Advantages and disadvantages of wholesale banking

Like any financial service, wholesale banking comes with advantages and challenges. Understanding its advantages and disadvantages can help businesses decide if wholesale banking is right.

Pros of wholesale banking

• Access to large-scale financing: Wholesale banks have the capital and expertise to structure multi-million-dollar deals. They also coordinate with multiple lenders in syndicates.

• Tailored financial solutions: Solutions are highly customized to the clients’ industry, business model, and project scope.

• Global connectivity: Canadian wholesale banks operate globally and collaborate with international development banks and export credit agencies.

• Expert risk management: Advanced analytics, stress testing, and hedging instruments are used to mitigate financial risk.

• Strong compliance safeguards: Canadian wholesale banks are subject to OSFI oversight and follow Basel III capital standards, ensuring robust due diligence.

Cons of wholesale banking

• Limited accessibility: Designed for large, sophisticated clients. SMEs may not meet eligibility thresholds.

• Complexity of services: Financial structuring and risk models often require specialized financial knowledge.

• Reliance on legacy systems: Some large banks still face challenges modernizing legacy systems and providing real-time integrations.

• Sensitivity to macroeconomic shifts: Higher interest rates and economic downturns can reduce corporate borrowing and M&A activity.

Wholesale banking licence in Canada

Canada does not have a separate wholesale banking licence. Banks offering wholesale services must obtain a Schedule I or Schedule II bank licence under the Bank Act, regulated by OSFI. Foreign banks must also register with OSFI and may operate under a foreign bank branch licence.

All banks must adhere to capital adequacy, liquidity, and anti-money laundering (AML) requirements outlined by OSFI and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).⁸

Consider Airwallex for your business’s global financial operations 

We’ve just explored wholesale banks in Canada and their financial products. While wholesale banks cater effectively to large corporations, their services may be inappropriate for businesses that don’t have large-scale needs.

However, alternative institutions like Airwallex have similar services designed for businesses of all sizes. The Airwallex Business Account is an all-in-one platform for SMEs and enterprises seeking to grow their global footprint, with products that mirror some services offered by wholesale banks:

• Multi-currency accounts with local bank details: With Airwallex, there’s no need to open bank accounts in markets where you operate. You can instantly open a local currency account in more than 60 countries and start receiving funds in 23+ currencies.

• Foreign exchange risk management: Airwallex’s FX solutions minimize currency risk by locking in FX rates and tailoring settlement dates to suit your business requirements. This lets you manage short-term risks from cross-border payments and long-term risks from extended contracts and other financial commitments.

• Multi-entity management: Airwallex gives you a central platform to manage finances for your global entities. Instead of viewing each market’s local bank dashboard, you get a unified view of your global finances. You can also create global spend controls across your organization and review and approve global expenses in one place.

On top of these, Airwallex has solutions to support your business’s day-to-day operations through:

• Fast, cost-effective international transfers: When using local payment rails, you pay zero or near-zero fees for international transfers to 120+ countries. 95% of transfers arrive on the same day.

• Unlimited virtual and physical debit cards: The Airwallex Corporate Card offers zero foreign transaction fees. You can earn up to 1% cashback on eligible local and international purchases (terms and conditions apply).

• Expense management: instantly view, monitor, and approve employee expenses through our built-in Expense Management platform.

• Bill payments: Bill Pay automates your local and international bill payments. Upload, approve, pay, and reconcile your invoices all within your Airwallex Business Account.

• Accounting software integrations: If you use Xero, Netsuite, or QuickBooks, you can integrate these with Airwallex and automate your monthly reconciliation.

We help over 150,000 businesses worldwide simplify their global financial operations. Open a free Airwallex Business Account today or contact our team to discover how Airwallex can support your 2025 growth targets.

Frequently asked questions (FAQ)

1. What’s the difference between a Schedule I and a Schedule II bank licence in Canada?

Schedule I banks are domestic banks authorized to accept deposits. Schedule II banks are foreign-owned subsidiaries operating in Canada. Both can provide wholesale banking services.

2. Do Canadian wholesale banks serve SMEs?

Wholesale banks primarily serve large organizations, but some offer mid-market and commercial banking services tailored to SMEs, primarily through their commercial banking divisions.

3. Why is treasury management important in wholesale banking?

Treasury management is important in wholesale banking because it helps businesses efficiently manage their liquidity. Optimizing the use of funds and ensuring sufficient reserves enables enterprises to meet their operational and strategic needs. This is particularly critical in wholesale banking, where clients often deal with large-scale, complex transactions that require precise financial planning.

4. How are wholesale banks regulated in Canada

They are overseen by OSFI and must comply with the Bank Act. They must also meet international capital standards and AML regulations enforced by FINTRAC.

5. Can fintechs offer wholesale-like services?

Fintechs can provide wholesale-like services such as global payments, FX, and treasury tools. However, they cannot offer services like deposit-taking, capital raising, or syndicated lending unless they partner with licensed financial institutions.

Sources:

1. https://www.osfi-bsif.gc.ca/en

2. https://www.td.com/ca/en/about-td/corporate-profile/industry-profile#:~:text=Wholesale%20Banking%20serves%20over%2012%2C000,Europe%2C%20and%20Asia%2DPacific.

3. https://www.scotiabank.com/ca/en/commercial-banking/banking-solutions/trade-finance.html

4. https://capitalmarkets.bmo.com/en/

5. https://www.rbc.com/newsroom/news/article.html

6. https://www.tdsecurities.com/ca/en

7. https://us.cibc.com/en/commercial/capital-markets.html

8. https://www.fintrac-canafe.gc.ca/