The Bank Act establishes an offence if a non-bank entity acquires, adopts or retains a name that contains the words “bank”, “banker” and “banking”, or uses those words, to indicate or describe a business, or any part of a business, in Canada in any language (the “Bank Word Restrictions”). However, a business that is not engaged in financial activities is permitted to use the words “bank”, “banker” or “banking”.

The Office of the Superintendent of Financial Institutions (“OSFI”) has observed increased use of the words “bank”, “banker” and “banking” by financial service firms which include both federally and provincially regulated entities such as trust companies and credit unions as well as unregulated firms such as mortgage lenders, money services businesses and Fintech companies. In response, OSFI published on June 30, 2017 its first advisory of 2017, Restrictions on the use of the words “bank”, “banker” and “banking” (the “Advisory”). The Advisory buttresses the federal government’s constitutional jurisdiction over banks and banking in an environment that has seen a proliferation of financial service firms that are either provincially regulated or, more often than not, not regulated.

The Advisory sets out how OSFI interprets and administers the Bank Word Restrictions and the exception that applies where the use of the words is not in relation to financial activities. According to OSFI, a financial service firm commits an offence if it uses, directly or indirectly, the words “bank”, “banker” and “banking” to suggest to the public the nature of the firm’s business, or a part of its business. The Advisory includes certain examples of trade names or phrases that are contrary to the Bank Word Restrictions and clarifies that the meaning of “business” is the carrying on of a serious occupation whether or not for profit.

Financial services firms should carefully review their marketing and advertising material to determine if their current use would be contrary to the legislation, as interpreted under the Advisory. “Banking”, or “bancaire” in French, is an adjective and may be employed in the description of firms’ investment, savings, automated teller/bank machine or even mortgage lending businesses. Casinos are also an interesting case due to the financial nature of their operations and the vocabulary used in that industry.

The Bank Word Restrictions are subject to exceptions such as the use by certain businesses of “food bank”, “blood bank” or other such words when their services are not financial in nature.

OSFI will regulate how firms use certain expressions and phrases in their advertising and electronic mediums such as social media. OSFI has provided for a transition period and timelines within which the necessary adjustments must be made – the soonest being December 31, 2017 for information contained on websites or other electronic mediums, June 30, 2018 for print materials and June 30, 2019 for physical signage.

The Advisory is likely to result in heightened enforcement of the use of bank words by financial services firms. Since many of these firms interface directly with the banking system in providing their services, and may even bundle their own services with services they source from banks, we anticipate the courts will play a significant role in setting boundaries on the enforcement of the Bank Word Restrictions.