B. Jurisdiction over Banking

AuthorM.H. Ogilvie
ProfessionLSM, 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
Pages6-9

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In Canada, banking has been a highly regulated activity since Confederation. The definition of "banking" as a legal activity itself has been entangled by constitutional considerations unknown to the common law which relied on judicial definitions. The most famous of these was a definition by Lord Denning M.R. in United Dominions Trust Ltd. v. Kirkwood:

There are, therefore, two characteristics usually found in bankers today: (i) They accept money from, and collect cheques for, their customers and place them to their credit; (ii) They honour cheques or orders drawn on them by their customers when presented for payment and debit their customers accordingly. These two characteristics carry with them also a third, namely: (iii) They keep current accounts, or something of that nature, in their books in which the credits and debits are entered.6

Even before the decline in the use of cheques on which this definition hinges, this definition was far from comprehensive, as demonstrated by comparison with that of Isaacs J. in Commissioners of the State Savings Bank of Victoria v. Permewan, Wright & Co. Ltd.:

The essential characteristics of the business of banking are ... the collection of money by receiving deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilization of the money so collected by lending it again in such sums as are required. These are the essential functions of a bank as an instrument of society. It is, in effect, a financial reservoir receiving streams of currency in every direction, and from which there issue outflowing streams where and as required to sustain and fructify or assist commercial, industrial or other enterprises or adventures ... The methods by which the functions of a bank are effected - as by current account, deposit account at call, fixed deposit account, orders, cheques, secured loans, discounting bills, note issue, letters of credit, telegraphic transfers, and any other modes that may be developed by the necessities of

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business - are merely accidental and auxiliary circumstances, any of which may or may not exist in any particular case.7

Definitions of "banking" as a legal activity are contextual. The content of any given definition depends largely on the circumstances in which it is proposed. The older common law definitions came from case law dealing with traditional services such as deposit taking and account operation and may not reflect current banking practices. In most Western countries, the recent trend toward statutory definitions of banking means that for legal purposes, banking is defined by legislation, and the common law supplements ambiguities and gaps in that legislation. Statutory approaches differ. At one end of the spectrum is legislation defining a "bank" as any institution recognized as such by the state and "banking" as the activities carried on by those institutions. At the other end of the spectrum is legislation that expressly lists certain activities only as banking, so...

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