Banking Business

AuthorM.H. Ogilvie
ProfessionChancellor's Professor and Professor of Law, Carleton University
Cha pter 5
a. Int roduC tIon
Although banks are incor porated with the capacity of a natural person in
law, they are not theoretically permitted to engage in any activ ities they
wish; rather, like natural p ersons, banks are subject to restrictions on
their activities, in particular, are permitted to engage only in t he activi-
ties for which there is expres s provision in the Bank Act.1 Hi s tori ca l ly,
Bank Acts have prescr ibed 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 def‌i nitions of what banks may do to di stinguish
banks from other f‌inancial institutions, especially trust compan ies and
insurance companies, to ensure that the respective roles of institutions
providing f‌iduciary and insurance serv ices are protected in law.
However, at the same time as the Bank Act restricts the capacity of
banks as nat ural persons to the activities expressly set out in the Act, in
setting out those activitie s, the Act introduces ambiguity into the nature
1 S.C. 1991, c. 46, s. 15; see also Chapter 4, Section C.
and scope of banking busi ness. Section 409(1) provides: “Subject to this
Act a bank shall not engage in or carr y on any business other than the
business of banking and such business generally as apper tains thereto.”
This ambiguity is further ref‌lected in section 409(2), which states what
“the business of bank ing includes.” The phrase “and such business gen-
erally as apperta ins thereto” has appeared in this or in similar formu-
lations in earlier Ban k Acts and appears to suggest that there may be
scope for banks to engage in business not ex pressly permitted by the
Act, provided it generally appertain s to banking, even if restr icted 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 th at the business community would generally regard as
being within t he legitimate business of a ban ker.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 th at the latter category should not be characterized
as “banking” or, in some sense, as par t of the core of banking. Selling
lottery tickets or urban tr ansit tickets6 would not be characterized as
banking in any common law sense of that concept, although expressly
listed as an activ ity.
Finally, in addition to diff‌iculties in def‌in ing precisely what bank-
ing is as a legal activit y resulting from the express provisions i n the Act,
there are also dif f‌iculties resulting from what ha s been omitted from
the Act. Previous acts li sted such activities as opening branches, deal-
ing in foreign currency and bullion, and dealing in negotiable instr u-
ments as permitted business for banks, but the current Bank Act doe s
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..

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