CanadaBank Act: investment and lending policies, standards and procedures
Bank Act, S.C. 1991, c. 46, s. 465
In force.
An AI sector rules rule binding private bodies.
- Instrument type
- an act of a legislature
- Obligation class
- Governance
- Audit expectation
- none
As of .
What it requires
- It reaches you if you operate as a bank under the Bank Act; section 581 of the Act states the same kind of duty for an authorized foreign bank.
- Have the directors of the bank establish investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans, to avoid undue risk of loss and obtain a reasonable return.
- Adhere to those investment and lending policies, standards and procedures.
If you get it wrong
Criminal exposureYes
Criminal exposure note
A person guilty of an offence under any of sections 980 to 984 of the Bank Act is liable under section 985. An entity faces a fine of not more than $500,000 on summary conviction or not more than $5,000,000 on conviction on indictment. A natural person faces a fine of not more than $100,000 or imprisonment for not more than twelve months, or both, on summary conviction, or a fine of not more than $1,000,000 or imprisonment for not more than five years, or both, on conviction on indictment.
Penalty structure
Applies to an entity guilty of an offence under the Bank Act, on conviction on indictment; on summary conviction the cap for an entity is $500,000. A natural person faces fines of up to $100,000 on summary conviction and $1,000,000 on conviction on indictment, with imprisonment of up to twelve months or five years respectively. A court may also order an additional fine of three times the monetary benefits the convicted person acquired.
- Rule
- Fixed only
- As of
- Currency
- CAD
- Fixed cap
- 5,000,000
Who enforces it
Enforcement body
Office of the Superintendent of Financial Institutions, which supervises banks' compliance with the Bank Act.
What this law does
Section 465 of the Bank Act provides that the directors of a bank shall establish, and the bank shall adhere to, investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans to avoid undue risk of loss and obtain a reasonable return.
Subsection 157(2) of the Act lists, among the specific duties of the directors of a bank, establishing investment and lending policies, standards and procedures in accordance with section 465. Section 581 of the Act provides that an authorized foreign bank shall establish and adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans.
The Bank Act received royal assent on . The Library of Parliament records that on the federal government proclaimed its new legislative framework for federally regulated financial institutions, including banks. Section 980 of the Act makes it an offence for a person, without reasonable cause, to contravene any provision of the Act or the regulations.
Under section 985 of the Act, an entity guilty of an offence under any of sections 980 to 984 is liable to a fine of not more than $500,000 on summary conviction, or of not more than $5,000,000 on conviction on indictment.
A natural person guilty of such an offence is liable on summary conviction to a fine of not more than $100,000 or to imprisonment for a term of not more than twelve months, or to both, and on conviction on indictment to a fine of not more than $1,000,000 or to imprisonment for a term of not more than five years, or to both.
The Office of the Superintendent of Financial Institutions supervises financial institutions to determine whether they are in sound financial condition and are complying with their governing statute law and supervisory requirements under that law.
Guidance on this law
How the bodies that enforce this law read it. Guidance binds nobody by itself, so LexLint never raises a finding from it; the duty is this law's.
- OSFI Guideline E-23, Enterprise-Wide Model Risk Management for Deposit-Taking Institutions (2017), the Office of the Superintendent of Financial Institutions
- OSFI Guideline E-23, Model Risk Management (2027), the Office of the Superintendent of Financial Institutions
When LexLint raises it
When your app profile says your app provides financial services.