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Financial services companies employ more than 55,000 people in Greater Vancouver. This workforce is highly educated and loyal, with relatively low turnover due to Vancouver’s quality of life. The industry generates one new job in other sectors for every new job in the financial services sector.
Financial services started as a critical business support for mining and forestry. Now, local financial services companies operate in global markets, leveraging and facilitating Vancouver’s position as a global commercial gateway. Shared language and customs with the United States are critical assets, as are strong cultural connections to emerging Asian economies.
Vancouver performs particularly well in four financial services sub-sectors: banking, credit unions, international financial transactions, and venture capital investment.
All five of Canada’s largest banks have significant operations in Vancouver. Several international banks also have offices in the city, including the Canadian headquarters of London’s HSBC - one of the world’s largest banks.
Cooperative banking institutions have carved out a strong niche in the community, doubling assets between 1996 and 2006 and accounting for 20 per cent of the local banking market. The credit union system in B.C. is the largest among the English-speaking Canadian provinces.
Through the Province’s International Financial Activities Act (IFAA), Vancouver is developing an important niche in international treasury and financial functions, including factoring, import/export financing, foreign exchange, and back-office support. The IFAA allows a corporation carrying out qualified international financial activities from a base in B.C. to get a refund of up to 100 per cent of provincial corporate income taxes.
Venture capital investment in B.C., which was more than $300 million in 2007, accounts for up to 20 per cent of venture capital investment in Canada. Vancouver’s venture capital investments focus on information technology, clean technology, life sciences and digital media.
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A robust, diversified economy and a very favourable tax environment make Vancouver’s financial services sector highly competitive. Activities in banking, credit unions, international financial transactions, and venture capital investment are exceptionally competitive.
The B.C. government has dramatically improved the climate for investment and financial services activities. The corporate capital tax is being phased out over three years, starting in April 2008. Business tax rates in B.C. are among the lowest in North America, thanks to a one per cent reduction in the provincial corporate tax rate to 11 per cent. The rate will drop to ten per cent by 2012.
Strong credit unions increase the competitiveness of the local financial services market and provide an important alternative source of financing for small businesses. Credit unions thrive by offering unique products and services that differentiate them from traditional banks and cater to local preferences. VanCity Credit Union, for example, has created a suite of investment products that appeal to environmentally-conscious Vancouverites.
For International Financial transactions that qualify under the International Business Activity Act (IBAA), B.C. offers an effective tax rate lower than in the provinces of Quebec, Alberta and Ontario, and lower than in most states in the U.S.
Venture capital deals in Vancouver rank among the largest in North America. Life sciences and clean technology spin offs from strong university labs have succeeded in Vancouver because of strong venture capital activity, as have industry spin offs in information technology and new media. Venture capital investors in Vancouver and B.C. are expanding syndication activities with the U.S. and other international partners. Day4 Energy, a solar technology developer, completed a $100 million IPO in 2007, one of the largest advanced-energy venture capital deals in North America that year.
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Research & Development
The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive designed to encourage research and development in Canada. Qualifying non-Canadian companies are eligible to receive tax credits of 20 per cent of qualified expenditures. Canadian companies receive enhanced credits. The B.C. government adds a ten per cent tax credit for qualifying Canadian and non-Canadian corporations that conduct R&D in British Columbia.
The National Research Council of Canada’s Industrial Research Assistance Program (NRC-IRAP) provides a range of technical and business-oriented advisory services to support growth-oriented Canadian small and medium-sized enterprises. This can include non-repayable contributions to Canadian firms interested in research to develop their services, products and processes. The program has contributed more than $570 million to more than 30,000 projects. In 2007-2008, approximately $13 million was available to firms in B.C.
International Financial Transactions
The International Business Activity Act (IBAA), allows corporations carrying out specified international business activities in B.C.. A company registered in the IBA program can receive up to a full refund of provincial tax on income earned on qualifying activities.
The B.C. government offers 4 different tax credit programs to B.C. residents and taxable corporations.
Non-profit society that promotes B.C. as a centre for international business activity and encourages corporations to take advantage of favorable tax treatment under International Business Activity Act (IBAA).
The oldest and largest angel group in Canada. It introduces emerging companies to private equity investors, with more than $26 million invested in companies since 1997.
Association for Corporate Growth
One of two Canadian chapters of the worldwide ACG organization that offers professional development opportunities for professionals involved in corporate growth, corporate development, and mergers and acquisitions.
British Columbia Business Council
Association of over 200 businesses in B.C., including firms in the financial services sector, working to enhance the province’s competitive position and business environment.
B.C. Ministry of Economic Development
Provincial government department that promotes commerce and investment in B.C. and administers B.C.’s venture capital programs.
British Columbia Technology Industry Association
Non-profit organization that supports the growth of B.C.’s technology industry through a variety of events and programs.
Canadian Financing Forum
Vancouver-based organization that hosts one of the largest venture capital gatherings in Western Canada, matching North American corporate and venture capital investors with technology entrepreneurs.
Credit Union Central
Central banking facility and trade association for B.C.’s 48 independent credit unions, managing a liquidity pool of $3.8 billion.
Mortgage Brokers Association
Industry association representing mortgage brokers, major financial institutions, mortgage insurers, title insurers, lawyers and notaries, credit reporting agencies, appraisers and other companies related to the mortgage industry.
New Ventures BC
Province-wide competition of technology business ideas, designed to help early-stage entrepreneurs develop the business skills needed to bring new technologies to market.
National Research Council of Canada
Canadian government agency that provides support to small and medium-sized businesses. It has an office in Vancouver.
Ready to Rocket
Company that profiles emerging technology companies with the greatest potential for future revenue growth, investment and market breakthroughs.
Simon Fraser University
Global Asset and Wealth Management Program
Master’s in Business Administration for financial services professionals, offering practical experience in managing a student-run investment portfolio of $10 million.
University Industry Liaison Office
University office that facilitates the creation of university-industry research, the development of partnerships, and the commercialization of research.
Comprehensive database of information and data on private equity transactions in Canada.
TSX Venture Exchange
Public stock exchange for emerging Canadian businesses, providing entrepreneurs with access to capital and offering investors a regulated venture investment market. Maintains an office in Vancouver.
University of British Columbia
Sauder School of Business
Business school offering specialization in finance at the undergraduate and graduate levels.
University Industry Liaison Office
University office responsible for commercializing university research, serving as a link between university researchers, entrepreneurs and businesses.
Vancouver Angel Network for Technology Enterprises
Networking organization that introduces early stage investors and mentors to promising technology ventures.
Photo Credit: Albert Normandin