What’s in a Name?

(OSFI’s Restrictions on the Use of the Words “bank”, “banker” and “banking”)

Let me start by saying that the views expresses in this article are my opinion based on my understanding of OSFI’s decision to restrict the use of certain words by non-banking financial institutions like credit unions.

I have asked OSFI for an explanation on their decision. OSFI’s reply indicated the restrictions have been in force for many years. Here is the reply in full:

The Office of the Superintendent of Financial Institutions (OSFI) is responsible for administering the federal financial institutions statutes, including the Bank Act, and publishes advisories to provide clarity regarding its interpretation of provisions of those statutes that are being applied inconsistently.

While the Bank Act restrictions on the use of the words Bank, Banker and Banking have been in place for many years, OSFI has observed increased use of these words by non-bank financial service providers. OSFI issued the Advisory to provide clarity regarding its interpretation of these restrictions.

While consumers of non-banks (emphasis added) may use the terms Bank, Banker and Banking on a day-to-day basis, the restrictions apply to all non-bank financial service providers, including federally regulated trust and loan companies, provincially regulated financial institutions and unregulated financial service providers.

While the regulations have been “in place for many years”, they appear not to have been enforced.

If the use of the terms was so offensive to OSFI, why did they wait such a long time to act?

Does not the long period of non-enforcement constitute an implied acceptance of the use of the terms by non-banking institutions?

Credit unions are well-established financial institutions where people or companies can set up chequing and savings accounts, invest their savings and generally carry out the same financial transactions as they would do at a bank – with the primary exception being that account holders are also “owners” of the financial institution.

Perhaps credit unions, which are member-owned financial co-operatives, should embrace the challenge that OSFI’s decision has presented and focus on how different they are from banks. Credit unions have a rich history of innovation and have made a positive contribution to Canadian communities – and you can that to the bank, or not.

What’s your opinion on this issue?