Payment Clearing and Settlement Act (S.C. 1996, c. 6, Sch.)

Act current to 2016-09-18 and last amended on 2016-06-22. Previous Versions

Payment Clearing and Settlement Act

S.C. 1996, c. 6, Sch.

Assented to 1996-07-31

An Act respecting the regulation of systems for the clearing and settlement of payment obligations

[Enacted as the Schedule to 1996, c. 6, in force July 31, 1996, see SI/96-58.]
Preamble

Whereas Parliament recognizes that the stability of the financial system in Canada and the maintenance of efficient financial markets are important to the health and strength of the national economy;

Whereas systems established for the clearing and settlement of payment obligations among financial institutions are an essential element of the financial system in Canada and must be properly designed and operated in order to control risk to the financial system in Canada and contribute to its stability;

Whereas the Bank of Canada, in promoting the economic and financial welfare of Canada, takes actions to promote the efficiency and stability of the Canadian financial system, including providing the means of settlement of Canadian dollar payments, acting as lender of last resort and, in consultation with other central banks, developing and implementing standards and practices to recognize and manage risk associated with systems for clearing and settling payment obligations;

And whereas Parliament recognizes that it is desirable and in the national interest to provide for the supervision and regulation of such clearing and settlement systems in order to control risk to the financial system in Canada and promote its efficiency and stability;

NOW, THEREFORE, Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

Short Title

Marginal note:Short title

 This Act may be cited as the Payment Clearing and Settlement Act.

Interpretation

Marginal note:Definitions

 The following definitions apply in this Act.

Bank

banque

Bank means the Bank of Canada; (banque)

Canadian participant

participant canadien

Canadian participant means a participant that is incorporated or formed under an enactment of Canada or a province. (participant canadien)

central counter-party

intermédiaire

central counter-party means a corporation, association, partnership, agency or other entity in a clearing and settlement system with whom all participant’s payment rights and obligations are netted to produce a single amount owing as between each participant and the central counter-party; (intermédiaire)

clearing and settlement system

système de compensation et de règlement

clearing and settlement system means a system or arrangement for the clearing or settlement of payment obligations or payment messages in which

  • (a) there are at least three participants, at least one of which is a Canadian participant and at least one of which has its head office in a jurisdiction other than the jurisdiction where the head office of the clearing house is located;

  • (b) clearing or settlement is all or partly in Canadian dollars; and

  • (c) except in the case of a system or arrangement for the clearing or settlement of derivatives contracts, the payment obligations that arise from clearing within the system or arrangement are ultimately settled through adjustments to the account or accounts of one or more of the participants at the Bank.

For greater certainty, it includes a system or arrangement for the clearing or settlement of securities transactions, derivatives contracts, foreign exchange transactions or other transactions if the system or arrangement also clears or settles payment obligations arising from those transactions. (système de compensation et de règlement)

clearing house

chambre de compensation

clearing house means a corporation, association, partnership, agency or other entity that provides clearing or settlement services for a clearing and settlement system. It includes a securities and derivatives clearing house, as defined in subsection 13.1(3), but does not include a stock exchange or the Bank. (chambre de compensation)

eligible financial contract

contrat financier admissible

eligible financial contract has the same meaning as in subsection 22.1(2) of the Winding-up and Restructuring Act; (contrat financier admissible)

Minister

ministre

Minister means the Minister of Finance; (ministre)

participant

établissement participant

participant means a member of a clearing house or a party to an arrangement that establishes a clearing and settlement system; (établissement participant)

payments system risk

risque pour le système de paiement

payments system risk means the risk that a disruption to or a failure of a clearing and settlement system could cause a significant adverse effect on economic activity in Canada by

  • (a) impairing the ability of individuals, businesses or government entities to make payments, or

  • (b) producing a general loss of confidence in the overall Canadian payments system, which includes payment instruments, infrastructure, organizations, market arrangements and legal frameworks that allow for the transfer of monetary value. (risque pour le système de paiement)

systemic risk

risque systémique

systemic risk means the risk that the inability of a participant to meet its obligations in a clearing and settlement system as they become due, or a disruption to or a failure of a clearing and settlement system, could, by transmitting financial problems through the system, cause

  • (a) other participants in the clearing and settlement system to be unable to meet their obligations as they become due,

  • (b) financial institutions in other parts of the Canadian financial system to be unable to meet their obligations as they become due,

  • (c) the clearing and settlement system’s clearing house or the clearing house of another clearing and settlement system within the Canadian financial system to be unable to meet its obligations as they become due, or

  • (d) an adverse effect on the stability or integrity of the Canadian financial system. (risque systémique)

  • 1996, c. 6, s. 162 (Sch., s. 2);
  • 2007, c. 29, s. 110;
  • 2012, c. 5, s. 213, c. 31, s. 168;
  • 2014, c. 39, s. 360.

PART IClearing and Settlement System Regulation

Designated Clearing and Settlement Systems

Marginal note:Application

 This Part applies in respect of clearing and settlement systems designated under subsection 4(1).

  • 1996, c. 6, s. 162 (Sch., s. 3);
  • 2014, c. 39, s. 361.
Marginal note:Designation by Governor
  •  (1) If the Governor of the Bank is of the opinion that a clearing and settlement system could be operated in a manner that poses a systemic risk or payments system risk and the Minister is of the opinion that it is in the public interest to do so, the Governor may designate the clearing and settlement system as a clearing and settlement system that is subject to this Part.

  • Marginal note:Revocation

    (2) If the Governor of the Bank is of the opinion that the designated clearing and settlement system could no longer be operated in a manner that poses a systemic risk or payments system risk and the Minister is of the opinion that it is in the public interest to do so, the Governor may revoke the designation.

  • Marginal note:Notice

    (3) If a designation is made or revoked, the Governor of the Bank shall, in writing, so inform in advance the clearing and settlement system’s clearing house and shall cause a copy of the designation or revocation, as the case may be, to be published in the Canada Gazette.

  • 1996, c. 6, s. 162 (Sch., s. 4);
  • 2007, c. 6, s. 441;
  • 2014, c. 39, s. 362.

Information

Marginal note:Information to be provided to Bank

 A clearing house shall, in respect of the designated clearing and settlement system, provide the Bank with any information that the Bank may request in writing, at any time and in any form and manner that is specified by the Bank.

  • 1996, c. 6, s. 162 (Sch., s. 5);
  • 2014, c. 39, s. 363.

Directives

Marginal note:Directive to clearing house
  •  (1) The Governor of the Bank may issue a directive in writing to a clearing house of a designated clearing and settlement system that requires the clearing house, within any period that may be specified in the directive, to take — and to have the participants take — any corrective measures that the Governor considers necessary, if the Governor is of the opinion that systemic risk or payments system risk is being or is likely to be inadequately controlled because of

    • (a) the operation of the clearing and settlement system; or

    • (b) any actual or anticipated acts or omissions of the clearing house or of a participant.

  • Marginal note:Directive to participants

    (2) The Governor of the Bank may issue a directive in writing to a participant that requires the participant, within any period that may be specified in the directive, to take any corrective measures that the Governor considers necessary if the Governor has formed an opinion referred to in subsection (1) that systemic risk or payments system risk is being inadequately controlled and

    • (a) the clearing house fails to comply with a directive that has been issued to it under subsection (1);

    • (b) the designated clearing and settlement system does not have a clearing house located in Canada; or

    • (c) in the opinion of the Governor,

      • (i) the risk is being inadequately controlled because of an act or omission by a participant, and

      • (ii) the act or omission is not subject to the by-laws, agreements, rules, procedures, guides or other documentation governing the designated clearing and settlement system.

  • Marginal note:Clarification

    (3) For greater certainty, a directive issued under this section must not be made in respect of

    • (a) the capital adequacy of a participant;

    • (b) the management of a participant’s investments;

    • (c) a participant’s corporate governance;

    • (d) a participant’s relations with customers who are not themselves participants in the designated clearing and settlement system;

    • (e) a participant’s ownership structure; or

    • (f) any other matter that is not directly related to a participant’s participation in the designated clearing and settlement system.

  • Marginal note:Directive may apply to statutory system

    (4) Subject to the approval of the Minister, a directive, if it so provides, applies to a designated clearing and settlement system that is established under a statute.

  • 1996, c. 6, s. 162 (Sch., s. 6);
  • 2014, c. 39, s. 364.
 
Date modified: