Banking Business
| Author | M.H. Ogilvie |
| Profession | Professor of Law, Carleton University |
| Pages | 148-174 |
CHAP TER 5
BANKING BUSINESS
A. INTRODUCTION
Although banks are incor porated with the capacit y 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 restrict ions
on their activities, in particular, are per mitted 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 bank s may engage, as
well as the busines s in which they may not engage, that is, banking busi-
ness has been pre scribed 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 t hey are self-evidently ba nking business and have long
been so recognized at common law. In the current Bank Act, consider-
able care is taken in t he definitions of what banks may do to dist inguish
banks from other financial institutions, especially tru st companies and
insurance companie s, to ensure that the respective roles of inst itutions
providing fiduciar y and insurance services are protected in law.
However, at the same t ime as the Bank Act restrict s the capacity of
banks as natural persons to the activities expre ssly set out in the Act,
in setting out those activ ities, the Act introduces ambiguity into the na-
ture and scope of banking business. Sect ion 409(1) provides: “Subject
1 S.C. 1991, c. 46, s. 15; see Chapter 4, Section C.
148
Banking Business 149
to this Act a bank sha ll 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 i s 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 Act s and appears to suggest that
there may be scope for banks to engage in business not expres sly per-
mitted by the Act, provided it generally appertains to banking, even if
restricted to ban king as defined by the Act. Courts have consistently
interpreted the phrase i n this way, to mean activities reasonably inci-
dental to banking 2 and activities that the business community would
generally regard as being within the legitimate business of a banker.3
This construction mean s that banks can expand the scope of the Act
when they engage in activities reasonably close to those e xpressly per-
mitted by the Act and accepted wit hin the business community as ap-
propriate extensions of exi sting activities.
The Bank Act furt her disting uishes between “t he 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 a s
“banking” or, in some sense, as part of the core of banki ng. Selling
lottery tickets or urban tra nsit tickets6 would not be character ized as
banking in any common law s ense of that concept, although expres sly
listed as an act ivity.
Finally, in addition to difficulties i n 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, dea l-
ing in foreign currency and bul lion, and dealing in negotiable in stru-
ments as permitted bu siness 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..
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