The B.N.A. Act and the Near Banks: A Case Study in Federalism

The achievement of national economic goals through the management of our monetary system is a complex task. The regulation of banking is fundamental to that task and appropriately banking and the incorporation of banks have been placed within the exclusive legislative authority of the Parliament of Canada. However, the question of regulation does not end there as there exist numerous provincially incorporated entities whose functions correspond in varying degrees to those of chartered banks, but are neither called banks nor subject to federal legislative control. Professor McDonald attributes the escape of these institutions from federal influence, not to any confusion as to which level of government has authority to enact banking legislation but rather to the lack of "clear concept of the banking function". The author goes on to distinguish and examine the basic concepts of banking and assess the assistance which they may offer in clarifying the "banking function" for constitutional purposes. Through this analysis certain similarities or "common denominators" between the chartered banks and "near" banks are discovered. However, it is the lack of concrete distinctions between the two which leads Professor McDonald to call for the integration of "specialist" banks into national banking system. The present hybrid system of regulation of financial "intermediaries" is confusing, and in many cases inadequate. Further, the uncontrolled competition which it allows between chartered banks and the "near" banks may seriously hamper Canadian monetary policy.