Banking Business

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

153

Cha pter 5

BANKING BUSINESS

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.

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 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..