Banking Business

• Author: M.H. Ogilvie
• Profession: Chancellor's Professor and Professor of Law, Carleton University
• Pages: 153-182

153

Chapter 5

BANKING BUSINESS

a. IntroduCtIon

Although banks are incor porated with the capacity of a natural person in

law, they are not theoretically permitted to engage in any activities they

wish; rather, like natural persons, banks are subject to restrictions on

their activities, in particular, are permitted to engage only in the activi-

ties for which there is express provision in the BankAct.1 Historically,

Bank Acts have prescribed the business in which banks may engage, as

well as the business in which they may not engage, that is, banking busi-

ness has been prescribed both positively and negatively. Over time, the

two lists have lengthened and become more complex but also less spe-

cif‌ic insofar as some activ ities originally listed, s uch as opening branches

or lending money or dealing in foreign exchange, are no longer expres sly

listed because they are self-evidently banking business and have long

been so recognized at common law. In the current Bank Act, consider-

able care is taken in the def‌initions of what banks may do to di stinguish

banks from other f‌inancial institutions, especially trust companies and

insurance companies, to ensure that the respective roles of institutions

providing f‌iduciary and insurance services are protected in law.

However, at the same time as the Bank Act restricts the capacity of

banks as natural persons to the activities expressly set out in the Act, in

setting out those activities, the Act introduces ambiguity into the nature

1 S.C. 1991, c. 46, s. 15; see also Chapter 4, Section C.

BANK AND C USTOMER LAW IN CA NADA154

and scope of banking busi ness. Section 409(1) provides: “Subject to this

Act a bank shall not engage in or carry on any business other than the

business of banking and such business generally as appertains thereto.”

This ambiguity is further ref‌lected in section 409(2), which states what

“the business of banking includes.” The phrase “and such business gen-

erally as appertains thereto” has appeared in this or in similar formu-

lations in earlier Bank Acts and appears to suggest that there may be

scope for banks to engage in business not expressly permitted by the

Act, provided it generally appertains to banking, even if restricted to

banking as def‌i ned by the Act. Courts have consistently interpreted the

phrase in thi s way, to mean activities rea sonably incidental to banking2

and activities that the business community would generally regard as

being within the legitimate business of a banker.3 This construction

means that ban ks can expand the scope of the Act when they engage in

activities reasonably close to those expressly permitted by the Act and

accepted within the business community as appropriate extensions of

existing activities.

The Bank Act further distinguishes between “the business of

banking”4 and “additional activities”5 in which a bank may engage,

thereby suggesting that the latter category should not be characterized

as “banking” or, in some sense, as part of the core of banking. Selling

lottery tickets or urban transit tickets6 would not be characterized as

banking in any common law sense of that concept, although expressly

listed as an activity.

Finally, in addition to diff‌iculties in def‌ining precisely what bank-

ing is as a legal activit y resulting from the express provisions i n the Act,

there are also diff‌iculties resulting from what has been omitted from

the Act. Previous acts listed such activities as opening branches, deal-

ing in foreign currency and bullion, and dealing in negotiable instru-

ments as permitted business for banks, but the current Bank Act does

2 Jones v. Imperial Bank (1876), 23 Gr. 262; Provincial Treasurer of Alber ta v. Long

(1973), 49 D.L.R. (3d) 695 (Alta. S.C.).

3 Tennant v. Union Bank of Canada, [1894] A.C. 31 (P.C.); Central Computer Ser-

vices Ltd. v. Toronto Dominion Bank (1980), 107 D.L.R. (3d) 88 (Man. C.A.) (com-

puterizat ion of banking service s); Canada Depos it Insurance Corp. v. Canadian

Commercial Bank (1986), 27 D.L.R. (4th) 229 (Alta. Q.B.).

4 Bank Act,above note 1, s. 409.

5 Ibid., s. 410.

6 Ibid., s. 410(1)(e). Especially since t hese would include tickets offered b y prov-

incial and mun icipal governments and properly c onstrued under s. 92(13) of

the Constitut ion Act, 1867 (U.K.), 30 & 31 Vict., c. 3, reprinted in R.S.C. 1985,

App. II, No. 5: Quirt v. Canada (1891), 19 S.C.R. 510; Canadian Western Bank v.

Alberta, [2005] 6 W.W.R. 226 at 252 (Alta. C.A.), Hunt J.A..