A. Introduction

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 148-150

Page 148

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 activities for which there is express provision in the Bank Act.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 business has been prescribed both positively and negatively. Over time, the two lists have lengthened and become more complex but also less specific insofar as some activities originally listed, such as opening branches or lending money or dealing in foreign exchange, are no longer expressly listed because they are self-evidently banking business and have long been so recognized at common law. In the current Bank Act, considerable care is taken in the definitions of what banks may do to distinguish 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 and scope of banking business. Section 409(1) provides: "Subject

Page 149

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 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 permitted 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 incidental to banking²and 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...