TARA PERKINS
FINANCIAL SERVICES REPORTER
June 20, 2007

Past the tables of croissants and coffee, inside a meeting room in Toronto's Hyatt hotel, dozens of people clad in suits are sitting at desks in a semi-circle, many scribbling notes, as Peter O'Neill shares the secrets to his success.

Mr. O'Neill is the chief operating officer of one of the new entrants on the Canadian banking scene. And his company, Bridgewater Bank, is already profitable, selling mortgages, GICs and term deposits in Alberta.

About thirty companies have signed up to attend this conference, which is geared to non-traditional companies that want to open banks, says its organizer Mark Sibthorpe, the publisher of startabank.ca.
"If you have all the right elements in place, including legal, a great business plan, people and capital, the fact is ... to start a bank is easy," he says.

And it's clear that the success of new banks such as President's Choice Bank, Canadian Tire Financial Services Ltd., Dundee Bank of Canada, First Nations Bank of Canada, Bank West and Bridgewater Bank is spurring a host of Canadian companies to consider entering the market.
There are 22 domestic banks, 24 foreign bank subsidiaries and 26 foreign bank branches in Canada, according to the Office of the Superintendent of Financial Institutions' website.

The formation of even just a handful of new domestic, or so-called Schedule I banks, could have a major impact on the industry.
Jason LaMontagne, a spokesperson for OSFI, said the regulator currently has about 20 applications for new financial institutions. It will not disclose names or details. A number of those applications could be for institutions other than banks, such as trust companies or retail associations, Mr. LaMontagne said.

Some potential up-and-comers, such as CI Financial Income Fund, have been open about their plans. "It is possible that we will have a bank or banking services at some point in the relatively near future," CI chief executive officer Bill Holland said after the company's annual meeting last month. The company is considering offering credit cards, mortgages, small consumer loans and chequing accounts.
And an entire industry has popped up to help new banks open up. KPMG distributed posters at the conference outlining how to become a bank in 12 steps. The process takes about eight to 14 months, the posters say.

Mary Filippelli, a partner-in-charge at KPMG's regulatory compliance practice, said there is some erosion happening in customers' relationships with the traditional banks, and the opportunity is there for niche players and new products.
"Don't be scared of the regulation attached to it," she told the audience of banking wannabes.

Telus Corp. had representatives pitching products and asking the obvious question: "What the heck does a telco ... have to do with starting a bank?"

The answer: Telus offers a variety of services and products that can help a company get into retail banking, from back-office software to printing statements and delivering them to customers. The result, company reps say, is a "bank in a box" offering.
Telus and its partner Fincentric Corp. do work for Bridgewater Bank, among others.

Bridgewater is an offshoot of the Alberta Motor Association, which bought a mortgage-lending company in 1997 and renamed it Bridgewater Financial Services Ltd. It decided to push further into banking products, and just last year, received its order to start business as a bank.
Mr. O'Neill, who worked at Royal Bank of Canada for more than two decades and eventually came to manage the main branch in Calgary, says his former colleagues look at his new business venture and think "I'm cute."

According to data on OSFI's website, Bridgewater Bank earned $1.2-million last year. That's peanuts compared to the big banks. Bridgewater has 105 employees for its customer base in Alberta which numbers "in the thousands, but it's not in the tens of thousands," according to Mr. O'Neill.

What does it take to become a bank?
1. Conduct initial meeting with regulator.
2. Prepare draft application, which includes a comprehensive financial plan and other informational requirements, draft bylaws and other incorporating documents.
3. Prepare policies and procedures to satisfy supervisory framework requirements.
4. Publish Notice of Intention to apply for Bank Licence in Canada Gazette and one newspaper.
5. Allow public 30 days for objections.
6. Submit formal application to OSFI.
7. Minister of Finance approves issuance of Letters Patent of Incorporation.
8. Conduct first meeting of board of directors.
9. Conduct OSFI on-site visit.
10. Deposit initial capital to approved financial institution.
11. Apply for order to commence.
12. OSFI issues order to commence.
Source: OSFI guide for incorporating banks