Continental Bank of Canada

Continental Bank of Canada refers to two Canadian banking ventures associated with the same name. The first developed from Industrial Acceptance Corporation, a financing company founded in 1925 and known as IAC after 1970. IAC expanded into banking and obtained a charter for Continental Bank of Canada in 1977. The bank began operations in June 1979, with its head office at 130 Adelaide Street West in Toronto. It expanded rapidly during the early 1980s and became one of Canada's larger banks. By 1981 it had 70 branches across the country and reported assets of approximately C$1.6 billion as of June 30 of that year. Continental Bank also absorbed its former parent, IAC, in 1981. The bank's expansion was followed by a period of instability affecting several smaller Canadian banks. In 1985, a loss of depositor confidence and a run on deposits placed Continental Bank under severe pressure. The Bank of Canada provided a line of credit, but the bank was not restored as an independent institution. Lloyds Bank plc of the United Kingdom acquired Continental Bank and its remaining 55 branches, and the Canadian business was renamed Lloyds Bank Canada in 1986. Lloyds later sold its Canadian operations to HongKong Bank of Canada in 1990; that institution subsequently became HSBC Bank Canada. Although the Continental banking business had been transferred and the name was no longer used operationally, the original chartered bank continued to exist formally until 1996 because of a dispute with Revenue Canada. A separate project later attempted to revive the name. In 2011, businessman and investor Eric Sprott, through Sprott Inc. and Sprott Continental Holdings Ltd. (SCHL), reached an agreement with Canadian Currency Exchange Canada Inc. and its owners, including Scott Penfound and members of his family, to establish a new Schedule I bank. The proposed institution was intended to be wholly owned by SCHL at formation and to use the foreign-exchange business and branch network of Canadian Currency Exchange as the foundation of its operations. The transaction contemplated Canadian Currency Exchange receiving shares representing 49% of the proposed bank's capital. The second Continental Bank of Canada was chartered in 2013, but it did not develop into an operating deposit-taking bank. On January 12, 2015, Sprott informed the proposed bank's board that he would no longer fund the transaction. The Office of the Superintendent of Financial Institutions then ordered on January 13, 2015 that the institution must not carry on banking business or accept deposits. The order remained in effect until the institution ceased to be a bank on December 16, 2019. Consequently, the name describes both a former operating Canadian bank and a later, unsuccessful attempt to create a new institution under the same name.

The history of Continental Bank of Canada has two distinct phases separated by the disappearance of the original bank's operating business. The first institution originated in the financing sector rather than as a new retail bank. Industrial Acceptance Corporation was established in 1925 and operated as a financing company. In 1970 it became known as IAC, and the company subsequently sought a broader banking mandate. A Canadian charter was granted in 1977 under the Continental Bank of Canada name, and the bank commenced business in June 1979. Continental Bank expanded its physical presence during the early 1980s. Its head office was located at 130 Adelaide Street West in Toronto, and by 1981 the institution had approximately 70 branches across Canada. It was then reported as the country's ninth-largest bank, with assets of about C$1.6 billion at June 30. That same year, Continental Bank absorbed IAC, bringing the financing company's operations into the bank. The move reflected the institution's transition from a finance-company heritage to a broader banking model. The bank encountered serious confidence problems in 1985. A run on deposits affected Continental and several other smaller Canadian banks, creating liquidity pressure and weakening the institution's position. The Bank of Canada extended a line of credit, but the support did not lead to a continuation of Continental as an independent bank. Lloyds Bank plc acquired the bank and its remaining 55 branches, and the Canadian operation was renamed Lloyds Bank Canada in 1986. Lloyds subsequently sold its Canadian business to HongKong Bank of Canada in 1990. HongKong Bank of Canada later became HSBC Bank Canada. The original Continental charter nevertheless remained in existence until 1996, reportedly because of an unresolved dispute with Revenue Canada. The name was later used for a second and separate banking proposal. In 2011, Eric Sprott and companies he controlled, including Sprott Inc. and Sprott Continental Holdings Ltd., entered into an arrangement with Canadian Currency Exchange Canada Inc. and its owners to create a new Continental Bank of Canada. The plan called for the new institution to be a wholly owned subsidiary of SCHL at establishment. Canadian Currency Exchange's business, including its Ontario foreign-exchange branch network, was intended to provide the operational base. The proposed structure also contemplated the issuance of shares equal to 49% of the new bank's capital to the currency-exchange business and its owners. The second institution received a charter in 2013. It did not, however, become a functioning deposit-taking bank. On January 12, 2015, Sprott told the board that he would not continue funding the transaction. The following day, the Office of the Superintendent of Financial Institutions issued an order prohibiting the institution from carrying on banking business or accepting deposits. That restriction remained until the institution ceased to be a bank on December 16, 2019. The second project therefore ended without recreating the nationwide banking operation associated with the original Continental Bank.

1. 2019Second institution ceases to be a bank

   The proposed successor's banking status ends on December 16.

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2. 2015Funding ends and OSFI restricts activity

   Sprott withdraws further funding, and OSFI orders the institution not to conduct banking business or accept deposits.

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3. 2013Second institution receives a charter

   The proposed successor bank is chartered as a new Schedule I institution.

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4. 2011Second bank project is announced

   Eric Sprott, Sprott-related companies, and Canadian Currency Exchange agree to pursue a new bank under the Continental name.

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5. 1996Original chartered bank ceases to exist

   The original Continental Bank continues formally until 1996 despite the earlier transfer of its operating business.

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6. 1990Lloyds sells Canadian operations

   Lloyds sells its Canadian operations to HongKong Bank of Canada, which later becomes HSBC Bank Canada.

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7. 1986Business becomes Lloyds Bank Canada

   Lloyds Bank plc acquires Continental and renames the Canadian operation Lloyds Bank Canada.

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8. 1985Depositor run leads to central-bank support

   The Bank of Canada provides Continental with a line of credit after depositor confidence deteriorates.

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9. 1981Bank reaches national scale and absorbs IAC

   Continental is reported as Canada's ninth-largest bank, with 70 branches and approximately C$1.6 billion in assets at June 30; it also absorbs its parent, IAC.

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10. 1979Bank begins operations

    Continental Bank begins business in June, operating from Toronto and building a Canadian branch network.

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11. 1977Continental Bank of Canada is chartered

    IAC's planned expansion into banking results in the chartering of Continental Bank of Canada.

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12. 1970IAC becomes the predecessor's operating name

    Industrial Acceptance Corporation becomes known as IAC before expanding toward a banking charter.

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13. 1925Industrial Acceptance Corporation is founded

    The financing-company predecessor that later developed into Continental Bank of Canada is established.

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The original institution positioned itself as a nationwide Canadian chartered bank serving depositors and borrowers through a branch network. The later project was conceived as a Schedule I bank built around an established foreign-exchange business and its Ontario branch network.

• Branch bankingRetail and commercial banking1979

  The original Continental Bank operated as a full-service Canadian chartered bank, using a nationwide branch network to serve depositors and borrowers. By 1981 its network had reached about 70 branches, although it had contracted to 55 remaining branches by the time Lloyds acquired the business in 1986.

• Foreign-exchange servicesForeign exchange

  The proposed second bank was designed to grow from Canadian Currency Exchange Canada's foreign-exchange operations. Its Ontario branch network was intended to form the operating foundation of the new institution, but the project never became an operating deposit-taking bank.

• 2015Withdrawal of funding for the second bank projectStrategy

  The proposed successor bank had not developed into an operating institution after receiving its charter.

  What changed. Eric Sprott notified the board that he would not continue funding the transaction. OSFI then prohibited the institution from conducting banking business or accepting deposits.

  Aftermath. The restriction remained until the institution ceased to be a bank in December 2019.

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• 2011Plan to establish a successor bankStrategy

  Sprott-related companies sought to combine with Canadian Currency Exchange Canada to create a new Schedule I bank under the Continental name.

  What changed. The proposed structure placed the new bank under Sprott Continental Holdings and contemplated issuing Canadian Currency Exchange's owners shares equal to 49% of the capital.

  Aftermath. The bank was chartered in 2013 but did not begin banking operations.

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• 1986Sale to Lloyds BankM&A

  Continental Bank faced depositor-confidence problems and liquidity pressure after a run on deposits in 1985.

  What changed. Lloyds Bank plc acquired Continental Bank and its remaining Canadian branches, converting the operation into Lloyds Bank Canada.

  Aftermath. The Continental operating identity disappeared. Lloyds later sold its Canadian operations to HongKong Bank of Canada in 1990.

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• 2019Second Continental Bank of Canada ceases to be a bank

  The OSFI prohibition remained in place until the proposed institution ceased to be a bank on December 16, 2019.

  RegulationBankruptcy
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• 2015OSFI prohibits proposed bank from conducting banking business

  After Eric Sprott withdrew from further funding of the proposed transaction, the Office of the Superintendent of Financial Institutions ordered the new Continental Bank not to conduct banking business or accept deposits.

  RegulationLeadership change
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• 2013New Continental Bank of Canada is chartered

  A separate group associated with Eric Sprott, Sprott Continental Holdings, and Canadian Currency Exchange obtained a charter for a proposed new bank using the Continental name.

  Other
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• 1986Lloyds Bank acquires Continental Bank of Canada

  Lloyds Bank plc acquired Continental Bank and its remaining branch network, converting the business into Lloyds Bank Canada.

  M&A
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• 1985Continental Bank receives Bank of Canada credit support during depositor run

  A loss of depositor confidence and a run on deposits affecting several small Canadian banks led the Bank of Canada to provide Continental Bank with a line of credit.

  RegulationOther
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1. Continental Bank of Canada