OSFI FCAC account closure rules: what banks must do

What to take away

Who can close an account, and under which statute

A chartered bank in Canada operates under the Bank Act. Part XII (Consumer Provisions), including the 627 series, sets out the disclosure and complaint-handling duties that apply to your account. The Act and your account agreement give the bank the right to end a deposit or business relationship, provided it follows those rules. Your consent is not required for closure.

The Office of the Superintendent of Financial Institutions (OSFI) supervises the bank's safety and soundness under the Office of the Superintendent of Financial Institutions Act. The Financial Consumer Agency of Canada (FCAC) supervises how the bank treats you under the Financial Consumer Agency of Canada Act. Two regulators, two different jobs.

Provincial credit unions and caisses populaires sit outside this federal framework. They answer to regulators such as the Financial Services Regulatory Authority of Ontario or the Autorité des marchés financiers in Quebec. Their closure rules can differ.

A business account closed by a bank is usually a commercial decision, not a consumer protection failure. Banks can exit a relationship because of risk appetite, credit losses, or a compliance concern.

If you are opening a replacement account elsewhere, the account verification standards set the baseline for what a bank must verify about your business before it accepts you.

Notice and disclosure obligations before a business account is closed

Notice is the core obligation. There is no single federal notice period for every business account. The rule for determining it is the account agreement plus the common-law duty to give reasonable notice. The bank must tell you it intends to close the account and give you time to move your affairs.

Disclosure means the bank must explain the closure in writing. A usable closure notice should identify the account, the closure date, the reason at the level the bank will give, what will happen to the balance, and how to complain. For a business account, the bank may keep internal details confidential, but it must not misstate the reason.

The FCAC enforces the Bank Act's consumer provisions, including the disclosure rules for account terms and charges. Its Banking - Canada.ca pages explain what you can expect from a federally regulated bank.

Read the account agreement you signed. Closure clauses, notice periods and set-off rights live there. A bank can also freeze or set off funds against an outstanding loan before returning the balance.

Cheque holds, debit holds and pending transactions can delay your access to funds even after closure notice. Plan for a gap between the notice date and the date you can move money.

Pre-closure compliance checklist for a business account

FCAC complaint-handling steps when closure is disputed

You can dispute a closure, but the FCAC cannot order a bank to keep your account open. What the FCAC can do is make sure the bank followed its own complaint-handling process and its disclosure obligations.

Start with the bank's internal complaint process. The Bank Act complaint-handling rules require every federally regulated bank to have a designated complaints officer and to give a final response within 56 days after the complaint is filed.

If the internal process does not resolve it, escalate to OBSI, the Ombudsman for Banking Services and Investments. Since November 1, 2024, OBSI is the sole external complaints body for banks. The service is free to you.

After the bank's final response, or after 56 days, you can bring the matter to the FCAC. The FCAC reviews whether the bank complied with federal consumer provisions. It does not adjudicate the commercial decision.

FCAC complaint handling works best when you frame the issue as a process failure, not as unfairness. Did the bank give notice? Did it disclose the reason? Did it follow its own agreement?

Fee disclosure is part of the same Bank Act consumer provisions; for a common business payment, the Interac e-transfer business fee rules sit in that same disclosure framework.

OSFI guidance that shapes how banks document the decision

OSFI does not approve individual account closures and has no single account-closure rule. Its expectations sit in the Corporate Governance Guideline, Guideline E-13: Regulatory Compliance Management, and Guideline E-21: Operational Risk Management.

Those instruments require a bank to document decisions, assign clear accountability, follow applicable consumer provisions and manage operational and conduct risk. OSFI's Guidance library hosts the current versions.

In practice, that means a closure file should show who decided, why, and what evidence supported the decision. A compliance-driven closure, such as a suspected money laundering concern, will have a thicker file than a routine credit exit.

FINTRAC obligations can trigger a closure without much explanation. If a bank files a suspicious transaction report, it is legally barred from telling you. You may never learn the real reason.

OSFI also expects banks to treat customers fairly as part of sound conduct. That expectation does not create a right to keep an account, but it does push banks to avoid abrupt, undocumented exits.

For a business, the practical takeaway is simple: ask for the decision in writing and keep your own record of every interaction. The bank's file matters if you later complain.

Moving balances, pre-authorized debits and payroll after closure

Moving accounts is a project, not a phone call. The FCAC has a page on Transferring your products or services to another financial institution - Canada.ca that walks through the switch.

Start with a replacement account. A new bank will run its own verification, including business registration, beneficial ownership information and identification for signing officers.

Pre-authorized debits are the biggest risk. Each one must be cancelled with the originator and re-established on the new account. Miss one and a supplier payment bounces.

Payroll is next. Update your payroll provider, your CRA business number records and any source deductions. A missed payroll deposit damages trust with staff faster than almost anything else.

Interac e-transfers, merchant deposits and payment processor settlements all need new banking details. Payments Canada operates the underlying systems, but your contracts with processors are what you must amend.

If you have a CDIC deposit insurance coverage question, check it before you move. Deposit insurance limits and eligibility can differ between institutions and between account types.

Keep the old account open until every item clears. A zero balance is not the same as a closed account, and a dormant account can still generate fees.

Where unclaimed balances go if the business cannot be reached

If a bank cannot reach you and a credit balance sits untouched for a long period, the money can be transferred to the Bank of Canada under the unclaimed balances regime. The Unclaimed bank balances - Canada.ca page explains how that process works and how to search for lost balances.

For a business, this is a real risk after a closure. Mail goes to an old address, email goes to a former employee, and the balance drifts into the unclaimed pool.

Unclaimed bank balances are held by the Bank of Canada, not by the bank that closed your account. You can search the registry and claim what is yours, but the process takes time and proof.

The fix is administrative. Keep your address and contact information current with every institution, even for accounts you plan to close. Update signing officer records when people leave.

If a closure is sudden, ask the bank in writing where the residual balance will be sent and by when. Get a name and a reference number for the person handling the file.

Businesses that change banks often should compare business account structures before committing to a replacement.

Common questions