Banking Business

• Author: M.H. Ogilvie
• Profession: Professor of Law, Carleton University
• Pages: 148-174

CHAPTER 5

BANKING BUSINESS

A. INTRODUCTION

Although banks are incorporated 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 ac-

tivities for which there i s express provision in the Bank Act.1 Historically,

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

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

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

two lists have lengt hened and become more complex but also less speci f-

ic insofar as some activities originally listed, such as opening branches

or lending money or dealing in foreign exchange, are no longer expre ssly

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

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

able care is taken in t he def‌initions of what banks may do to dist inguish

banks from other f‌inancial institutions, especially trust companies and

insurance companies, to ensure that the respective roles of institutions

providing f‌iduciar y 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 activ ities, the Act introduces ambiguity into the na-

ture and scope of banking business. Section 409(1) provides: “Subject

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

148

Banking Business149

to this Act a bank shall not engage in or carry on any business other

than the busi ness of banking and such business general ly 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 generally as appertains thereto” has appeared in this or in

similar formulations in earlier Bank Acts and appears to suggest that

there may be scope for banks to engage in business not expressly per-

mitted by the Act, provided it generally appertains to banking, even if

restricted to banking as def‌ined by the Act. Courts have consistently

interpreted the phrase in this way, to mean activities reasonably inci-

dental 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 banks can expand the scope of the Act

when they engage in activities reasonably close to those expressly per-

mitted by the Act and accepted within the business community as ap-

propriate extensions of existing activities.

The Bank Act further distinguishes between “the business of bank-

ing”4 and “additional activities”5 in which a bank may engage, there-

by 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 activ ity resulting from the expre ss provisions in 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

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

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

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

ces Ltd. v. T.D. Bank (1980), 107 D.L.R. (3d) 88 (Man . C.A.) (c omputerization of

banking s ervices); Canada Deposit Ins urance Corp. v. Canadian Commercial Bank

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

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

5Ibid., s. 410.

6Ibid., s. 410(1)(e). Especially si nce these would include tickets of fered by prov-

incial and mun icipal governments and prop erly construed under s. 92(13) of

the Constitution 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..