Banking lawyers’ practice area encompasses representing domestic and international providers and consumers of debt financing including, on the lending side, domestic and foreign banks, bank holding companies, leasing companies, finance companies and other financial institutions and, on the borrowing side, corporate, government, institutional, individual and financial intermediary borrowers.
A banking lawyer’s work includes incorporation of banks; all manner of corporate and private lending, financing and refinancing; cross-border and international banking transactions; financial leasing; loan syndications and participations; preparation of all manner of real and personal property security documentation; trade finance; negotiable instruments; sovereign risk lending; gold loans; project loans; interbank transaction arrangements, credit card facilities, electronic banking, payment and clearing systems; and all matters of a regulatory and corporate governance nature including capital adequacy and financial market integrity.
Please note that the Lexpert Directory has separate sections for the following related law practice areas:
Banking lawyers in Canada refer to the Canadian Bank Act as the main law regulating banks. Commonly called the Bank Act, it is the federal law respecting banks and banking. Passed in 1871, it has undergone several amendments in lieu of its “Sunset provision” (Section 21). As a result of the said provision, the Bank Act and the bank charters under it will expire unless the Act will undergo a statutory review in order to keep up with fast-evolving economy of Canada.
The Bank Act has three important objectives: first, is to protect the funds of account holders and depositors; second, is to ensure the maintenance of cash reserves vis-a-vis the Monetary Policy, which aims to protect the value of Canadian money by keeping inflation low and stable; and third, is to promote the efficiency of the financial system through competition in the banking industry.
Accordingly, the Act provides that a bank has the capacity, rights, powers and privileges similarly accorded to a natural person, although, these are subject to the restrictions provided in the same Act. Along with these rights and privileges, banks are prohibited from doing restricted business, or doing business in a manner contrary to law.
Banking lawyers in Canada are experts in this Act including its restrictions, along with the other federal banking laws and regulations and administrative procedures of the banking law, in order to help clients – banks and clients alike – in transactions with the government regulators for the former, and the bank for the latter.
Banking lawyers and clients are guided with the different Schedules of banks below:
Schedule I are the Canadian-incorporated domestic banks. Banks under this Schedule has the same requirements as with Canadian-incorporated foreign bank subsidiaries (Schedule II).
Schedule II are the Canadian-incorporated foreign bank subsidiaries.
Schedule III lists the authorized Canadian branches of foreign banks, including the name it uses under which it is permitted to conduct business in Canada. While foreign banks can establish its branch or a lending branch in Canada as chartered banks, they are not allowed to accept retail deposits.
A bank or a bank branch are only allowed to operate in Canada when they are approved by the Finance Minister and the Office of the Superintendent of Financial Institutions (OSFI). This applies to banks under Schedules I and II, while or a foreign bank under Schedule III, the approval of the Finance Minister is still sought out but has different requirements compared to those of banks under Schedules I and II.
Matters detailed in Section 27 of the Bank Act are those which will be considered by the Finance Minister in its application for incorporation, while for foreign banks, it is found in Section 526.
One of the major restrictions against banks is that it is restricted from performing any business that is either not related to banking or to the business of banking. As provided in Section 409 of the Bank Act, the acts under the term “business of banking” are the following:
In addition to this restriction, Section 410(2) states that banks are also prohibited from dealing in goods, wares or merchandise, or engaging in any trade or other business, except when permitted by the Act. Furthermore, Section 412 also provides restrictions on banks with regards to its “fiduciary activities”, such as acting as an executor, administrator or official guardian or a guardian, tutor, curator, judicial adviser or committee of a mentally incompetent person, or acting as a trustee for a trust.
While this seems simple at its face value, banking lawyers may guide both banks and clients alike with the complexities under these prohibitions.
Banking law is important to protect clients against unfair banking practises. Furthermore, banking laws are put in place to regulate one of the important drivers of the Canadian economy, which are banks. The laws are there to guide the relationship between stakeholders, and to also provide guidance to our banking lawyers.
Canadian banking laws and regulations are under the responsibility of the Office of the Superintendent of Financial Institutions (OSFI) and the Minister of Finance.
In dealing with banking institutions, federal laws and regulations provides for the general rights of the customers, such as opening a personal account at any bank; encashing cheques from Government of Canada for free at any bank; receiving clear and simple information that are not misleading about the bank’s products and services; availing himself/herself of products and services subject to express consent; and, resolved issues with the bank through a complaint-handling process.
However, on June 30, 2022, these rights are enhanced by the new Canadian Financial Consumer Protection Framework.
Banks are now required to send additional and timely information to guide customers with their decisions on their banking transactions. This includes sending electronic alerts with regards to customers’ account balance on their accounts and the credit available on their credit card or line of credit. However, these electronic alerts are not applicable to accounts opened for business purposes. Banks should also send advance notices as to the renewal of products and services a customer may have availed from them, except for mortgages secured on real property and products or services used for business purposes. A separate agreement will have to be provided for optional products and services customers might agree to buy, in order to provide necessary information on these products, its cost, and the procedures when cancelling these products.
As banks are impressed with public interest, banking transactions are held up to a higher standard. Banks should be able to assess the specific needs of its customers for them to be able to provide appropriate products and services. In all transactions, there should be express consent from the customers, and they should be provided with a written statement entailing the products or services that they have agreed to or availed of. Broader protections are also provided for customers against false and misleading information about the bank’s products and services, or banks employing means to take advantage or to apply undue pressure to customers to coerce them to avail of the bank’s products and services. Banking lawyers can help in ensuring that banks follow these standards.
Whenever customers would want to address grievances or issues, they should be able to do so through the systems in place by the banks, and these must be resolved promptly and fairly. In addition, banks are required to provide refunds and credits to customers who have been charged erroneously or whose consent was not sought as previously mentioned.
Banking lawyers in Canada ensure that these standards imposed by the Bank Act and other regulations are strictly followed by the banks and these protections are known to their clients.
Given the complexities of Canadian banking law, and the severe consequences of running afoul of any of these laws, the hiring of the best banking lawyer your budget can afford is an essential step in the lifespan of any company involved with finances.
Need help with regards to your banking transactions? Scroll down to see some of the best banking lawyers ranked by Lexpert below.