Promotion of insurance not part of the core of banking: Supreme Court of Canada

The Supreme Court of Canada has ruled that promoting insurance is not a core function of banking. Consequently, Alberta legislation that regulates insurance agents also applies to federally regulated banks when it comes to the practice of promoting creditors insurance.
In Canada Western Bank v. Alberta, eight major banks asked the Supreme Court of Canada to reverse rulings made in the lower Alberta courts. The lower courts ruled that the federally regulated banks did not have inter-jurisdictional immunity from Alberta legislation that regulates the promotion of insurance products.
Lawyers for the banks argued that if promoting in this case, creditor insurance is essential to what banks do, then this banking activity should be regulated by the federal government (which regulates banks) and not the province (which regulates insurance).
Clearly, the promotion of authorized insurance is not part of the core of banking because it is not essential to the function of banking, Supreme Court of Canada Justice Michel Bastarache wrote for the court majority.
The structure and language of the federal statutory provisions [that] permit banks to engage in the promotion of insurance suggests that Parliament clearly intended to allow only a limited participation in the insurance industry, recognizing that such participation would in fact constitute an encroachment of banks into an area not traditionally associated with the core of banking, Bastarache wrote. Parliament appears to have drawn a clear distinction between the business of banking and the business of insurance.
Bastarache went on to say that: To hold the banks immune from provincial market conduct regulation would give them a privileged position in the marketplace. Every indication is that Parliament wished to avoid this result.
Commenting on the case, IBAC CEO Dan Danyluk said: This judgment clearly clarifies the intent of the framers of our Constit ution when it comes to the financial services sector. The intent of the term [banking] found in S.91 (15) of the Constitution Act 1867, does not include the business of insurance, and respectively, the Supreme Court has cleared the air on this debate once and for all.