Thank you very much.
I want to talk to you today a little about what we could pull together quickly for the committee on the financial services sector. I'm open to responding to questions and getting you more information, depending on the questions you might have.
I'll give you a little bit of a profile of the sector overall and talk a little bit about the financial performance we've seen recently of the banks and life insurers, which we tend to track pretty closely, and then just talk a little bit about the global activities of Canadian banks and life insurers.
The financial sector is one of the key pillars of the economy. It's one of those infrastructure sectors that's there for both manufacturing and the other services industries. It's made up of a variety of different entities, including banks, trust and loan companies, credit unions and caisses populaires, life insurance, property and casualty insurance, securities dealers, leasing advisers--a full range of entities. These entities vary from having federal regulation, joint federal-provincial regulation, or some just provincial regulation.
The sector accounts for about 700,000 jobs in Canada. That constitutes about 4% of national employment. It also has been growing in terms of its contribution to GDP as a sector. Two decades ago it was running about 4.5% and now is up to 6.2%. It's a source of high value-added jobs. If you look at Mr. Wright's presentation, the wage level in that sector, finance and insurance, is quite high. As I said, it plays a critical role in the economy in terms of the allocation of capital and the distribution of risk across the economy.
I'll take you through some of the big sectors, or big sub-sectors, in the financial services areas starting with banks and deposit-taking institutions in general. We have about 21 domestic banks in Canada, 24 foreign subsidiaries operating here, 22 full service branches--these are entities that lever off of the capital in the home markets, as they don't need to have as much capital in Canada--and we have six lending branches.
It is, however, a sector that is fairly concentrated in Canada. The big six banks, which would be Royal, TD, Scotia, CIBC, Bank of Montreal, and Banque Nationale, account for about three-quarters of the assets in the deposit-taking sector in Canada. The provincial entities, such as the caisses populaires and the credit unions, would account then for about 12%, and foreign banks about 8.5%. So the other Canadian institutions are relatively small and account for only about 2% of our deposit-taking sector.
Our banks are very prominent in our capital markets in Canada. If we just take the year to date, the equity raised in Canada, the five large banks accounted for about 65% of that underwriting. So not only are they big on the deposit-taking side, they're also big in our capital markets. The capital markets activity has grown for our Canadian banks. It's about 27% of their assets right now and it used to be about 19% maybe a decade ago, so it's an area they're doing more in.
On life insurance, we have about 100 life insurance companies in Canada. These companies employ about 51,000 people full time, but the sector overall accounts for about 120,000 people once you include the advisers and the assessors and adjusters. We've got some concentration here as well. The big three, which would be Manulife, Sun Life, and Great-West Life, account for about 60% of domestic net premiums. The foreign players then are the next biggest. There are about 53 of those, accounting for 22% of the premiums, and then the other domestic smaller companies, about 18%.
On property and casualty insurance, we have about 214 players in the market and that sector accounts for about 110,000 people in Canada, 40% directly working for the property and casualty insurers and 60% being the brokers and adjusters. This industry is not as concentrated. The largest entity, which I think is probably ING, would account for about 11% of net premiums. It's not as concentrated as life insurance and banking and it's more heavily foreign-dominated. So foreign players in Canada earn about 58% of the net premiums earned.
There are other elements of this sector. If the committee wants more information on those, I would be happy to get that for you. For example, there are 476 credit unions in Canada. Those are provincially regulated. Also, there's Desjardins in Quebec. Then the securities industry, for example, employs about 41,000 people in Canada, so that's a significant industry segment as well.
We had done a presentation looking at what the recent performance of banks and life insurance companies has been in Canada. Both sides of this industry have been very profitable and doing very well. Even through the August market turmoil, they seemed to be weathering those developments quite well.
We've seen over the last decade or so the banks averaging between 15% to 20% return on equity. There was a dip in 2002 when a lot of companies pulled out of the United States commercial loan market. Scotiabank had a big writeoff in Argentina, so there was a little dip there. Then in 2005, when CIBC did their Enron writeoff, there was a little bit of a dip. But they've certainly been trending now up over 20% in terms of returns, so they're doing well.
Also, since 1990 we've been looking at impaired loans as a percentage of all the loans that the banks are carrying. It looks like the intermediation function is getting even better in Canada. That could be a function of the strong economic times that we have been enjoying, but it does look like credit underwriting decisions are getting stronger. Both the banks and insurers have very strong capital positions vis-à-vis the requirements that OSFI, the Office of the Superintendent of Financial Institutions, requires of them.
In terms of the size of the Canadian banks, they are mid-sized players when you look at all global banks. You have the Royal sitting at about 40th. That would be our largest bank in terms of assets, compared with global banks. Going all the way down, the CIBC would be about 58th. So we rank in the mid-tier group of banks in the world.
On the insurance side, again, we see very good capital ratios. We have three very strong companies there in Manulife, Sun Life, and Great-West Life. It's a sector where there's been a lot of consolidation in the last few years. In 2002 Sun Life acquired Clarica. In 2003 Great-West Life acquired Canada Life, and in 2004 Manulife bought John Hancock in the United States. These transactions have really improved the performance of Canadian life insurance companies, or those three in particular. Unlike the banks, the insurance companies globally are within striking distance of the top players. Manulife ranks about third or fourth in the world in terms of global insurance companies, and Great-West and Sun Life would also be in about the top 12.
One thing we watch with these institutions, particularly the large Canadian banks and life insurances, is their global activity, because it's interesting to see what they're doing abroad. With Canadian banks, in terms of their assets, about 65% are domestic, but 34% would be coming from their foreign operations. It's weighted a little more heavily on the life insurance side, where they're getting about 54% of premium income from their operations outside of Canada.
Each of these institutions has its own strategies in terms of its global aspirations. We've seen BMO, TD, and Royal really focusing on the U.S. retail market in recent years. Scotiabank is the most global of the Canadian banks. They have a global retail strategy and they have significant presence in Mexico and many Caribbean and Latin American countries. They're also focused on Asia, as are most of the other institutions. CIBC's building on the Caribbean, and all banks are pursuing global wholesale banking, as well, outside of Canada and pursuing wealth management opportunities abroad.
There's been a lot of consolidation of the large life insurance companies domestically, as I mentioned, and also the big Hancock deal with Manulife. Manulife's now a major global player and has significant operations in North America and Asia. Sun Life is looking at operations in Europe, in the U.S., and also in parts of Asia, and Great-West Life is looking for acquisitions and growth in the U.S. and Europe.
That is what I've prepared. I'd be happy to take any questions.