Bank branches may not sell comprehensive credit insurance

par Andrew Rickard | September 30 2016 01:30PM

Photo: Freepik

The Office of the Superintendent of Financial Institutions (OSFI) has ruled that banks may not sell comprehensive credit insurance (CCI) in their Canadian branches.

CCI policies insure sellers against losses resulting from non-payment for goods or services; those who buy such coverage are often but not always exporters. In a ruling released yesterday, OSFI notes that the Bank Act does permit banks to sell export credit insurance (ECI), but points out that the legislation specifically defines ECI as insurance for exporters.

“Driedger approach”

The ruling relies on the Supreme Court of Canada's “Driedger approach”, which specifies that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”.

Applying this method, OSFI has determined that ECI is strictly confined to the coverage of losses incurred by exporters due to a non-payment for exported goods or services. "Given that CCI would not be confined to such losses, OSFI is of the view that CCI does not constitute ECI," reads the ruling. "OSFI concludes that a bank may not promote a CCI policy within its Canadian branches."