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Bank Act (S.C. 1991, c. 46)

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Act current to 2021-04-20 and last amended on 2021-03-06. Previous Versions

PART VIIIBusiness and Powers (continued)

General Business (continued)

Marginal note:Restriction on guarantees

  •  (1) A bank shall not guarantee on behalf of any person the payment or repayment of any sum of money unless

    • (a) the sum of money is a fixed sum of money with or without interest thereon; and

    • (b) the person on whose behalf the bank has undertaken to guarantee the payment or repayment has an unqualified obligation to reimburse the bank for the full amount of the payment or repayment to be guaranteed.

  • Marginal note:Exception

    (2) Paragraph (1)(a) does not apply where the person on whose behalf the bank has undertaken to guarantee the payment or repayment is a subsidiary of the bank.

  • Marginal note:Regulations

    (3) The Governor in Council may make regulations imposing terms and conditions in respect of guarantees permitted by this section.

  • 1991, c. 46, s. 414
  • 1997, c. 15, s. 44
  • 2001, c. 9, s. 105

Marginal note:Restriction on securities activities

 A bank shall not deal in Canada in securities to the extent prohibited or restricted by such regulations as the Governor in Council may make for the purposes of this section.

Marginal note:Prohibition

  •  (1) It is prohibited for a bank to issue a debt obligation in relation to which the amounts of principal and interest owing are guaranteed to be paid from loans or other assets held by an entity that is created and organized for the principal purpose of holding those loans or other assets and with the intention of legally isolating those loans or other assets from the bank, unless

    • (a) the debt obligation is a covered bond as defined in section 21.5 of the National Housing Act;

    • (b) the bank is a registered issuer as defined in section 21.5 of that Act other than one whose right to issue covered bonds has been suspended; and

    • (c) the debt obligation is issued under a registered program as defined in section 21.5 of that Act.

  • Marginal note:Exception

    (2) The Governor in Council may make regulations exempting any type of debt obligation from the application of subsection (1).

  • 2012, c. 19, s. 362

Marginal note:Derivatives and eligible financial contracts — regulations

  •  (1) The Governor in Council may make regulations respecting a bank’s activities in relation to derivatives and eligible financial contracts.

  • Definition of derivative

    (2) In this section, derivative means an option, swap, futures contract, forward contract or other financial or commodity contract or instrument whose market price, value, delivery obligations, payment obligations or settlement obligations are derived from, referenced to or based on an underlying interest, including a price, rate, index, value, variable, event, probability or thing.

  • Definition of eligible financial contract

    (3) In this section, eligible financial contract has the same meaning as in subsection 39.15(9) of the Canada Deposit Insurance Corporation Act.

  • 2014, c. 20, s. 210
  • 2016, c. 7, s. 157

Marginal note:Benchmarks  — regulations

  •  (1) The Governor in Council may make regulations respecting a bank’s activities in relation to benchmarks.

  • Definition of benchmark

    (2) In this section, benchmark means a price, estimate, rate, index or value that is

    • (a) determined from time to time by reference to an assessment of one or more underlying interests;

    • (b) made available to the public, either free of charge or on payment; and

    • (c) used for reference for any purpose, including

      • (i) determining the interest payable, or other sums that are due, under loan agreements or other financial contracts or instruments,

      • (ii) determining the value of financial instruments or the price at which they may be bought or sold, and

      • (iii) measuring the performance of financial instruments.

  • 2014, c. 20, s. 210

Marginal note:Restriction on insurance business

  •  (1) A bank shall not undertake the business of insurance except to the extent permitted by this Act or the regulations.

  • Marginal note:Restriction on acting as agent

    (2) A bank shall not act in Canada as agent for any person in the placing of insurance and shall not lease or provide space in any branch in Canada of the bank to any person engaged in the placing of insurance.

  • Marginal note:Regulations

    (3) The Governor in Council may make regulations respecting the matters referred to in subsection (1) and regulations respecting relations between banks and

    • (a) entities that undertake the business of insurance; or

    • (b) insurance agents or insurance brokers.

  • Marginal note:Saving

    (4) Nothing in this section precludes a bank from

    • (a) requiring insurance to be placed by a borrower for the security of the bank; or

    • (b) obtaining group insurance for its employees or the employees of any bodies corporate in which it has a substantial investment pursuant to section 468.

  • (5) [Repealed, 1997, c. 15, s. 45]

  • Definition of business of insurance

    (6) In this section, business of insurance includes

    • (a) the issuance of any annuity if the liability in respect of the annuity is contingent on the death of a person; and

    • (b) the issuance of any debt obligation, any of whose terms and conditions are established on the basis of mortality considerations, under which the issuer is obliged to make periodic payments.

  • 1991, c. 46, s. 416
  • 1997, c. 15, s. 45
  • 2012, c. 19, s. 206

Marginal note:Restriction on leasing

 A bank shall not engage in Canada in any personal property leasing activity in which a financial leasing entity, as defined in subsection 464(1), is not permitted to engage.

  • 1991, c. 46, s. 417
  • 2001, c. 9, s. 106

Marginal note:Restriction on residential mortgages

  •  (1) A bank shall not make a loan in Canada on the security of residential property in Canada for the purpose of purchasing, renovating or improving that property, or refinance such a loan, if the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, would exceed 80 per cent of the value of the property at the time of the loan.

  • Marginal note:Exception

    (2) Subsection (1) does not apply in respect of

    • (a) a loan made or guaranteed under the National Housing Act or any other Act of Parliament by or pursuant to which a different limit on the value of property on the security of which the bank may make a loan is established;

    • (b) a loan if repayment of the amount of the loan that exceeds the maximum amount set out in subsection (1) is guaranteed or insured by a government agency or a private insurer approved by the Superintendent;

    • (c) the acquisition by the bank from an entity of securities issued or guaranteed by the entity that are secured on any residential property, whether in favour of a trustee or otherwise, or the making of a loan by the bank to the entity against the issue of such securities; or

    • (d) a loan secured by a mortgage where

      • (i) the mortgage is taken back by the bank on a property disposed of by the bank, including where the disposition is by way of a realization of a security interest, and

      • (ii) the mortgage secures payment of an amount payable to the bank for the property.

  • 1991, c. 46, s. 418
  • 1997, c. 15, s. 46
  • 2007, c. 6, s. 27
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