B. Application to the "Chartered" Banks

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 25-26

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The earliest banks in nineteenth-century Canada were incorporated under individual charters granted by the colonial legislatures.³

Over the course of the second half of that century, federal banking legislation moved incrementally toward comprehensive legislation of general application to all banks, and in 1923⁴the Bank Act became the charter for all banks operating in Canada. The use of one comprehensive statute as the common charter for all banks doing business in Canada has been a distinctive feature of Canadian banking regulation since 1923.

Sections 13 and 14 of the Bank Act state that the Act is the charter of, and applies to, every bank in Canada, including domestic Canadian banks ("Schedule I banks"), foreign bank subsidiaries ("Schedule II banks"), and authorized foreign banks ("Schedule III banks").⁵

Once incorporated, a bank will be listed in a schedule and chartered to do business in Canada for a period of five years from the coming into force of the Act, with two exceptions: (i) Parliament dissolves within a three-

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month period prior to the day on which the Bank Act expires, so that banks may continue in business for 180 days after the first day of the first session of the next Parliament; and (ii) the Governor in Council may extend once by six months the period of time during which banks may carry on business.⁶

The concept of permitting banks to operate for fixed periods of time and then being subject to review is a peculiar feature of Canadian banking law. The reason is historical. After 1867, the chartered banks were unwilling to give up their powers to issue paper notes to the federal government, which responded from the 1871 Bank Act⁷onward by permitting banks to operate for ten-year periods subject to review of their operations generally. From 1881,⁸the decennial review concept became customary, so that Bank Acts were typically revised every ten years until 1991,⁹when the period was shortened to five years. Associated with the concept of periodic review and renewal of the charter was the practice of amending successive Bank Acts only at the review, so that typically¹⁰no amendments to the Act would be made between reviews. Since 1991, the Bank Act, like other legislation, has been subject to such frequent amendment as Parliament deems necessary. Amendment between reviews is anticipated to be the future practice.

[3] For the legislative history of banking in Canada, see successive editions of the classic...