Foreign Banks Lending To Canadian Borrowers

From time to time, we receive inquiries from foreign banks that do not have a presence in Canada on whether there are any Canadian banking regulatory restrictions on lending to Canadian borrowers. Under the Bank Act (Canada), a foreign bank can lend to Canadian borrowers by:

1. establishing a presence in Canada by creating a Canadian subsidiary or a foreign bank branch pursuant to the Bank Act (Canada); or
2. structuring its activities so that it is not considered to be engaged in or carrying on business in Canada.

The focus of this blog entry is option 2. A determination of whether a foreign bank is engaged in or carrying on business in Canada is a question of fact. Generally speaking, it is unlikely that a foreign bank that lends to a Canadian borrower would be found to be engaged in or carrying on business in Canada if: