SECURITY UNDER SECTIONS 177 AND 178 OF THE BANK ACT

Abstract

Sections 177 and 178 of the Bank Act provide Canadian chartered banks with special mechanisms for taking security interests in the assets of business borrowers. Section 178, the more familiar of the two provisions, allows a bank to extend inventory financing to a broad range of manufacturers of goods, producers of primary products, and dealers in those goods and products. Section 177, of somewhat more recent origin, provides for the financing of those engaged in extracting hydrocarbons and minerals. Both sections were expanded significantly in the 1980 revisions to the Bank Act. In this article, the author examines the provisions of sections 177 and 178 and discusses in turn the creation, enforcement and priorities of the special security arrangements that are available to a bank under those sections.