Canada: Federal Financial Institutions Legislative And Regulatory Reporter — November And December 2018

Last Updated: January 16 2019
Article by Jeffrey S. Graham

Most Read Contributor in Canada, July 2019

The Reporter provides a monthly summary of Canadian federal legislative and regulatory developments of relevance to federally regulated financial institutions. It does not address Canadian provincial financial services legislative and regulatory developments, although this information is tracked by BLG and can be provided on request. In addition, purely technical and administrative changes (such as changes to reporting forms) are not covered.

The November 2018 edition follows below.

December 2018

Institution

Published

Title and Brief Summary

Status

OSFI
[Banks, Bank Holding Companies, Federally Regulated Trust and Loan Companies, Cooperative Retail Associations]

December 19, 2018

Proposed changes to the Liquidity Adequacy Requirements (LAR) Guideline: Chapter 3 — Net Stable Funding Ratio

OSFI is issuing for consultation Chapter 3 Net Stable Funding Ratio (NSFR) and proposed revisions to Chapter 1 Overview of the Liquidity Adequacy Requirements (LAR) Guideline. Chapter 3 incorporates the Basel Committee on Banking Supervision's (BCBS) NSFR rules issued in October 2014 into the LAR Guideline. OSFI is targeting implementation of the NSFR for January 1, 2020 for Domestic Systemically Important Banks. 

Comments should be provided by February 1, 2019.

Finance Canada

December 13, 2018

Budget Implementation Act, 2018, No. 2, S.C. 2018, c. 27

Bill C-86, Budget Implementation Act, 2018, No. 2 received Royal Assent.

 

 

 

Subdivision A of Division 3 of Part 4 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to, among other things,

(a) establish thresholds below which the acquisition of control of certain entities, or the acquisition or increase of a substantial investment in them, does not require the approval of the Superintendent of Financial Institutions;

(b) allow financial institutions to invest in the Canadian business growth fund; and

(c) ensure that customers can provide consent electronically to receive electronic documents.

It also corrects a reference to the Insurance Companies Act in the Budget Implementation Act, 2018, No. 1.

Effective on December 13, 2018.

 

 

Subdivision B of Division 3 of Part 4 amends the Canada Deposit Insurance Corporation Act to, among other things,

(a) make technical amendments to clarify the method of calculating insured deposits, to remove outdated references, to repeal certain provisions not yet in force and to clarify that withdrawals made following the amalgamation of two or more member institutions or the continuance as a federal credit union will be considered to be made from pre-existing deposits and that the separation of accounts following the amalgamation is limited to a period of two years;

(b) exclude amounts borrowed by the Canada Deposit Insurance Corporation under paragraph 60.2(2)(c) of the Financial Administration Act from the calculation of the Corporation's total principal indebtedness; and

(c) clarify that the liquidator of a member institution of the Canada Deposit Insurance Corporation must not apply the law of set-off or compensation to a claim related to insured deposits.

It also repeals two sections of the Financial System Review Act.

Effective on December 13, 2018.

 

 

Subdivision C of Division 3 of Part 4 amends the Office of the Superintendent of Financial Institutions Act, the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to, among other things, clarify that providing legally privileged information to the Superintendent of Financial Institutions does not constitute a waiver of the privilege.

Effective on December 13, 2018.

 

 

Division 4 of Part 4 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to remove the right of persons to decide not to proceed further with importing or exporting currency or monetary instruments that are required to be reported.

Effective on December 13, 2018.

 

 

Division 6 of Part 4 amends the Canada Business Corporations Act to set out criteria for identifying individuals with significant control over a corporation. The Division also sets out a requirement for a corporation that meets certain criteria to keep a register of individuals with significant control and requirements respecting the information to be recorded in it. Finally, the Division includes applicable offences and punishments.

Effective on June 13, 2019.

 

 

Division 10 of Part 4 amends the Bank Act to strengthen provisions that apply to a bank or an authorized foreign bank in relation to the protection of customers and the public. It implements enhancements in the areas of corporate governance, responsible business conduct, disclosure and transparency, and redress. It also amends the Financial Consumer Agency of Canada Act to strengthen the mandate of the Financial Consumer Agency of Canada and grant additional powers to that agency.

Effective on December 13, 2018.

OSFI [Domestic Systemically Important Banks (D-SIBs)]

December 13, 2018

Proposed Changes to Guideline B-2: Large Exposure Limits

OSFI's draft guideline incorporates the Basel Committee on Banking Supervision (BCBS) guidance to reflect current risk management sound practices and provides additional guidance on methods OSFI expects D-SIBs to use for identifying, measuring, managing and monitoring large exposures.

The draft guideline specifies a number of revisions to the large exposure limit calculation, including:

  • Moving the eligible capital base from Total capital to Tier 1 capital;
  • Introducing tighter limits for exposures to systemically important banks; and
  • Providing for the recognition of eligible credit risk mitigation techniques — that is, exposures are measured on a net basis rather than a gross basis.

The guideline also provides additional guidance for determining groups of connected counterparties.

Comments should be provided by February 1, 2019.

BIS

December 13, 2018

Revisions to leverage ratio disclosure requirements

This consultative document seeks comments on revisions to leverage ratio Pillar 3 disclosure requirements to include, in addition to current requirements, mandatory disclosure of the leverage ratio exposure measure amounts of securities financing transactions, derivatives replacement cost and central bank reserves as calculated using daily averages over the reporting quarter.

Comments should be provided by March 13, 2019.

BIS

December 12, 2018

Pillar 3 disclosure requirements - updated framework

The revised Pillar 3 framework reflects the Committee's December 2017 Basel III post-crisis regulatory reforms and pertains to the following areas:

  • credit risk, operational risk, the leverage ratio and credit valuation adjustment (CVA) risk;
  • risk-weighted assets (RWAs) as calculated by the bank's internal models and according to the standardized approaches; and
  • an overview of risk management, RWAs and key prudential metrics.

In addition, the updated framework sets out new disclosure requirements on asset encumbrance and, when required by national supervisors at the jurisdictional level, on capital distribution constraints.

Effective

November 2018

Institution

Published

Title and Brief Summary

Status

OSFI
[All Federally Regulated Property and Casualty Insurance Companies]

November 30, 2018

Minimum Capital Test For Federally Regulated Property and Casualty Insurance Companies

The Minimum Capital Test (MCT) 2019 guideline incorporates changes to reflect OSFI's review of the framework for reinsurance, International Financial Reporting Standard (IFRS) 16, and the amendments to Guideline B-5 — Asset Securitization.

Key changes to the MCT guideline, compared to the June 2018 draft version, include:

  • The introduction of a transition period for the increase in the margin required for reinsurance ceded to unregistered reinsurers from 15 per cent to 20 per cent.
  • Amendments to allow the return of excess funds withheld or collateral associated with reinsurance ceded to unregistered reinsurers.
  • The addition of three credit rating agencies to the list of recognized rating agencies.

Effective on January 1, 2019.

OSFI
[Federally regulated insurers]

November 26, 2018

Guideline B-5: Asset Securitization

In this updated final version, key amendments reflect events that have affected securitizations since the Guideline was first published in November 2004, including the financial crisis and changes to the Basel Framework. The Guideline also incorporates relevant content from the Advisory Securitization – Expected Practices.

Effective on January 1, 2019.

OSFI
[Banks, Bank Holding Companies, Federally Regulated Trust and Loan Companies, Cooperative Retail Associations]

November 20, 2018

Revisions to the Leverage Ratio Disclosure Requirements Guideline

The revisions, which reflect the recent changes to the Leverage Requirements guideline and the Capital Adequacy Requirements (CAR) guideline, incorporate a new line to capture the treatment of securitized assets that meet the operational requirements for recognition of significant risk transfer.

Effective January 2019 for domestic and non-domestic systemically important banks.

IAIS
[Applicable to insurance companies]

November 15, 2018

IAIS Publishes Public Consultation Document on a Holistic Framework for Systemic Risk in the Insurance Sector

The holistic framework includes the following key elements:

  • An enhanced set of supervisory policy measures for macroprudential purposes providing the preemptive part of the framework;
  • A global monitoring exercise by the IAIS designed to detect the possible build-up of systemic risk in the global insurance sector at an individual insurer level and at sector-wide level;
  • Where a potential systemic risk is detected, supervisory powers of intervention that enable a prompt and appropriate response;
  • Mechanisms that help ensure the global consistent application of the framework, by having a collective assessment of potential global systemic risk and a coordinated supervisory response when needed; and
  • An assessment by the IAIS of the consistent implementation of enhanced on-going supervisory policy measures and powers of intervention.

Comments should be provided by January 25, 2019.

  To view the Reporter for previous months, please visit our Banking and Financial Services publications page.

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