The differences are mainly regulatory.
Canada's banks are federally incorporated and regulated pursuant to the Bank Act. The Bank Act governs three distinct types of banks. Schedule I banks are domestically owned. Schedule II banks are subsidiaries of foreign banks. And Schedule III banks are foreign banks with branches in Canada.
Unlike banks, trust companies can be incorporated and regulated at either the federal or the provincial level. By law, only trust companies are allowed to provide trustee functions. Banks can do that only through a separately created trust subsidiary. The other difference is that a bank has full commercial lending powers, whereas trust companies must have more than $25 million of regulatory capital to receive full lending powers with the approval of the Office of the Superintendent of Financial Institutions (OSFI).
Credit unions are different from banks and trust companies in that they are fully provincially regulated. They are regulated by provincial ministries of finance, the Credit Union Central and the provincial deposit insurance corporations. Credit unions are owned by their members and are typically established to serve a particular group of people based on a geographic area, ethnic background or employer.
