The Office of the Superintendent of Financial Institutions (“OSFI”) issued Advisory 2017-01 (the “Advisory”) on June 30, 2017 in response to the apparent increased use of the words “bank,” “banker” and “banking” by non-bank financial institutions. OSFI provided the Advisory to clarify how it interprets specific provisions in the Bank Act (Canada) (the “Bank Act”) that restrict the use of this terminology by non-bank entities.
Section 983 of the Bank Act contains two separate restrictions on use of the words “bank,” “banker” and “banking” by non-bank entities:
- Name Restriction. The first restriction provides that every non-bank entity that acquires, adopts or retains a name that includes the word “bank,” “banker” or “banking,” either alone or in combination with other words, to indicate or describe a business in Canada or any part of a business in Canada, without being authorized to do so by the Bank Act or any other Act of Parliament, contravenes section 983 of the Bank Act.
- Business Description Restriction. The second restriction provides that every non-bank entity that uses “bank,” “banker” or “banking” to indicate or describe a business in Canada or any part of a business in Canada, without being authorized to do so by the Bank Act or any other Act of Parliament, contravenes section 983 of the Bank Act.
OSFI is of the view that any combination of these three terms will be considered to “indicate or describe” a non-bank’s business (or any part of its business) in contravention of section 983 where the terms are acquired, adopted, retained in a non-bank entity’s name or otherwise used in a manner that “could reasonably suggest to the public” the nature of the entity’s business (or any part of its business).
In particular, the Advisory sets out a broad list of examples of phrases and trade names that would be considered by OSFI to be a contravention of section 983 of the Bank Act.
Some examples of the “prohibited” term variations include:
- [Non-bank Entity’s name] Co-operative Banking
- [Non-bank Entity’s name] Banking Centre
- “Own your bank”
- “Welcome to Canada’s newest online bank”
- Commercial Banking Centre
- Better Banking/Convenient Banking
- Mobile Banking/Telephone Banking/Branch Banking
- Bank accounts/Bank services
- Automated Banking Machine
- “[Non-bank Entity’s name] offers business/personal banking…”
- “…for all your banking needs”
- “Come do your banking with us”
- “Bank at your convenience”
OSFI notes the Bank Act restrictions have been interpreted strictly in order to ensure that Canadians are not under the impression that they are doing business with a bank when that is not the case.
Who does this affect?
The restrictions apply to all non-bank financial institutions. This includes federally regulated trust and loan companies, provincially regulated institutions (including credit unions) and unregulated financial service providers.
What impact will this have on credit unions?
Credit unions will no longer be able to use the terms “bank,” “banker” or “banking” to describe their services. To comply with the Advisory, credit unions should review the following items to identify existing references to “bank,” “banker” or “banking” and determine whether they need to be removed:
- Advertising, marketing and promotional materials (in all forms)
- Business names
Response from Canadian Credit Union Association
In light of this and in response to the Advisory, the national association for Canada’s credit unions, Canadian Credit Union Association (“CCUA”), issued a press release on July 4, 2017, saying, “[T]he ban makes it difficult for credit unions to compete fairly with banks.” The CCUA is “calling on the federal government to reverse OSFI’s advisory.”
Although the Advisory is immediately in effect, OSFI provides a transitional period in order for non-bank financial institutions to comply with the restrictions.
|By December 31, 2017||For information contained on websites or other electronic media|
|By June 30, 2018||For information contained in print materials|
|By June 30, 2019||For information contained on physical signage|