Marginal note:Definitions

7. The following definitions apply in this Part.

“Chairperson of the Canada Deposit Insurance Corporation”

« président de la Société d’assurance-dépôts du Canada »

“Chairperson of the Canada Deposit Insurance Corporation” means the Chairperson of the Canada Deposit Insurance Corporation appointed under section 6 of the Canada Deposit Insurance Corporation Act.

“Commissioner of the Financial Consumer Agency of Canada”

« commissaire de l’Agence de la consommation en matière financière du Canada »

“Commissioner of the Financial Consumer Agency of Canada” means the Commissioner of the Financial Consumer Agency of Canada appointed under section 4 of the Financial Consumer Agency of Canada Act.

“Governor of the Bank of Canada”

« gouverneur de la Banque du Canada »

“Governor of the Bank of Canada” means the Governor of the Bank of Canada appointed under section 6 of the Bank of Canada Act.

“housing loan”

« prêt à l’habitation »

“housing loan” means a loan that

• (a) relates to a housing project;

• (b) is secured at least in part by security on or affecting a housing project or by an agreement relating to the use, occupancy or disposal of a housing project;

• (c) is made for the purpose of acquiring a financial interest in a person who, directly or indirectly, owns, leases or operates a housing project; or

• (d) is made for the purpose of refinancing a debt that the Corporation is of the opinion relates to a housing project or to a financial interest referred to in paragraph (c).

“Superintendent”

« surintendant »

“Superintendent” means the Superintendent of Financial Institutions appointed under section 5 of the Office of the Superintendent of Financial Institutions Act.

Marginal note:Objects

7.1 The Corporation has the following objects in carrying on any activities under this Part or Part I.1:

• (a) to promote the efficient functioning and competitiveness of the housing finance market;

• (b) to promote and contribute to the stability of the financial system, including the housing market; and

• (c) to have due regard to the Corporation’s exposure to loss.

Marginal note:Guarantee

• 14. (1) The Corporation may — with the Minister of Finance’s approval and on any terms or conditions that are specified by him or her — guarantee payment of any or all of the principal or interest, or both, in respect of securities issued on the basis of housing loans. The terms and conditions may, among others, relate to the amount and price of the guarantee, the characteristics of the securities to be guaranteed and the manner in which the securities are to be issued.

• Marginal note:Regulations — Governor in Council

  (2) The Governor in Council may, on the Minister of Finance’s recommendation, make regulations respecting the characteristics of those who may issue or sell the securities.

• Marginal note:Regulations — Minister of Finance

  (3) The Minister of Finance may make regulations respecting the characteristics of the housing loans.

• Marginal note:Compensation

  (4) The Minister of Finance may fix a fee to be paid by the Corporation to the Receiver General to compensate Her Majesty for Her exposure to the risks arising from a guarantee referred to in subsection (1). That Minister shall notify the Corporation in writing of the fee.

Marginal note:Prohibition

14.1 It is prohibited for the Corporation to guarantee payment of any or all of the principal or interest, or both, in respect of a covered bond as defined in section 21.5.

Marginal note:Maximum total

• 15. (1) Despite anything in this Act other than subsection (2), the total of the outstanding guaranteed amounts of principal for all issues of securities in respect of which guarantees that have been given under section 14 are in force may not exceed the total amount provided for in section 11.

• Marginal note:Maximum total — other Acts

  (2) The total of the outstanding guaranteed amounts of principal may not exceed the amount authorized by Parliament under an appropriation Act or other Act of Parliament.

Marginal note:Terms and conditions

19. Subject to any regulations made under this Part, the Corporation may

PART I.1COVERED BONDS

Definitions

Marginal note:Definitions

21.5 The following definitions apply in this Part.

“affiliate”

« groupe »

“affiliate” means an affiliate as defined in section 2 of the Bank Act.

“covered bond”

« obligation sécurisée »

“covered bond” means, except in paragraph 21.53(b), a debt obligation in relation to which the principal and interest owing are guaranteed to be paid from the loans or other assets held by a guarantor entity.

“covered bond collateral”

« garantie d’obligations sécurisées »

“covered bond collateral” means the loans or other assets that secure the payment of principal, interest and any other amounts owing in relation to the covered bonds that are issued under a registered program.

“derivatives agreement”

« contrat dérivé »

“derivatives agreement” means a financial agreement whose obligations are derived from, referenced to, or based on, one or more underlying reference items.

“guarantor entity”

« societé garante »

“guarantor entity” means an entity that is created and organized for the principal purpose of holding loans or other assets as the covered bond collateral for a registered program with the intention of legally isolating those loans or other assets from the registered issuer.

“registered issuer”

« émetteur inscrit »

“registered issuer” means an institution that is registered in the registry under section 21.53.

“registered program”

« programme inscrit »

“registered program” means a program that is registered in the registry under section 21.55.

“registry”

« registre »

“registry” means the registry established under section 21.51.

Establishment of Legal Framework

Marginal note:Registry

• 21.51 (1) The Corporation must establish and maintain a registry containing

  • (a) the names and business addresses of registered issuers;

  • (b) a list of registered programs and information relating to those programs, including the name of each essential service provider to the guarantor entity;

  • (c) a list of registered issuers whose right to issue covered bonds is suspended under subsection 21.62(1) and the reasons for the suspension;

  • (d) any other information that, in the Corporation’s opinion, is necessary; and

  • (e) any prescribed information.

• Marginal note:Accessible to public

  (2) The Corporation must make the registry accessible to the public through the Internet and by any other means that it considers appropriate.

Marginal note:Application for registration of issuers

• 21.52 (1) Any of the following institutions may apply for registration as a registered issuer:

  • (a) a federal financial institution as defined in section 2 of the Bank Act; and

  • (b) a cooperative credit society that is incorporated and regulated by or under an Act of the legislature of a province.

• Marginal note:Requirements

  (2) The applicant must provide the Corporation, in the time, manner and form required by the Corporation, with the required fees and any information that, in the Corporation’s opinion, is required for the purposes of the registration.

Marginal note:Registration of issuers

21.53 The Corporation may register an institution in the registry if

• (a) in the Corporation’s opinion, all of the requirements under this Part have been met; and

• (b) the institution gives an undertaking to not issue any debt obligation that is commonly known as a covered bond except under a registered program.

Marginal note:Application for registration of program

• 21.54 (1) A registered issuer may apply for registration of a program under which covered bonds are to be issued.

• Marginal note:Requirements

  (2) The registered issuer must provide the Corporation, in the time, manner and form required by the Corporation, with the required fees and the information referred to in subsection (3).

• Marginal note:Contents of program

  (3) An application must contain a complete description of the program, including the following information:

  • (a) the name of the entity that will act as the guarantor entity and the type of entity;

  • (b) a description of the loans or other assets to be held as the covered bond collateral and their value;

  • (c) the minimum and maximum ratio required under the program of the value of the covered bonds to be issued to the value of the loans or other assets to be held as covered bond collateral;

  • (d) a description of the contractual relationships between the registered issuer and the entity that will act as the guarantor entity;

  • (e) the names of all essential service providers to the entity that will act as the guarantor entity, a description of the services to be provided and, if a registered issuer or one of its affiliates is acting as a service provider, the circumstances in which it must be replaced;

  • (f) the names of any parties to a derivatives agreement with the entity that will act as the guarantor entity; and

  • (g) any other information that, in the Corporation’s opinion, is required.

Marginal note:Registration of programs

21.55 The Corporation may register the program in the registry if, in the Corporation’s opinion, all of the requirements under this Part have been met.

Marginal note:Application — issuer or program

• 21.56 (1) The Corporation must notify the applicant in writing of its decision with respect to the application to register the applicant or the program.

• Marginal note:Withdrawal of application

  (2) An applicant may withdraw the application for registration by so notifying the Corporation in writing at any time before the day on which the applicant receives notice of the Corporation’s decision.

Marginal note:Deregistration of program

• 21.57 (1) The Corporation may deregister a registered program on the request of the registered issuer only if there are no covered bonds outstanding under the program.

• Marginal note:Deregistration of issuer

  (2) The Corporation may deregister a registered issuer on the request of the issuer only if the issuer has no registered programs.

Marginal note:Conditions and restrictions

21.58 The Corporation may, at any time, establish conditions or restrictions applicable to registered issuers and registered programs.

Marginal note:Fees

• 21.59 (1) The Corporation may establish fees for registration applications under subsection 21.52(1) and subsection 21.54(1) as well as other fees to be paid by registered issuers.

• Marginal note:Limitation

  (2) The fees must be established, in accordance with any regulations, to be commensurate with the costs incurred by the Corporation in exercising its powers and performing its duties and functions under this Part.

Marginal note:Eligible assets

• 21.6 (1) Only the following assets may be held as covered bond collateral:

  • (a) loans made on the security of residential property that is located in Canada and consists of not more than four residential units; or

  • (b) any prescribed assets.

• Marginal note:Substitute assets

  (2) Despite subsection (1), covered bond collateral may include securities that are issued by the Government of Canada and any prescribed assets.

• Marginal note:Maximum ratio

  (3) Unless regulations have been made under paragraph 21.66(g), the value of the assets described in subsection (2) must not exceed 10 per cent of the total value of the loans or other assets held as covered bond collateral.

• Marginal note:Exceptions

  (4) Despite subsections (1) and (2), the following loans must not be held as covered bond collateral:

  • (a) a loan made on the security of residential property if the loan is insured by the Corporation;

  • (b) a loan made on the security of residential property if the loan is insured by the Canada Guaranty Mortgage Insurance Company, the Genworth Financial Mortgage Insurance Company Canada, the PMI Mortgage Insurance Company Canada or any successor to any of those companies; and

  • (c) a loan made on the security of residential property if the amount of the loan, together with the amount then outstanding of any mortgage or hypothecary loan having an equal or prior claim against the property, exceeds 80 per cent of the value of the property at the time of the loan.

Marginal note:Confidentiality

• 21.61 (1) Subject to any other provision of this Part or Part I, any information that is collected by the Corporation under this Part is confidential and must be treated accordingly.

• Marginal note:Use of information

  (2) Information that is collected by the Corporation under this Part must be used by the Corporation only for the purpose for which it is collected.

Marginal note:Suspension

• 21.62 (1) The Corporation may suspend the right of a registered issuer to issue further covered bonds under a registered program.

• Marginal note:Notice

  (2) In the case where the Corporation decides to suspend that right, it must provide the registered issuer with a written notice of and the reasons for the intended suspension, no later than 30 days before the day on which the suspension is to take effect.

• Marginal note:Copies to regulator

  (3) The Corporation must provide a copy of the notice and reasons to,

  • (a) in the case of a federal financial institution as defined in section 2 of the Bank Act, the Superintendent of Financial Institutions appointed under subsection 5(1) of the Office of the Superintendent of Financial Institutions Act; and

  • (b) in the case of a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province, the body that regulates that society.

• Marginal note:Revoking suspension

  (4) The Corporation may revoke a suspension and, in that case, must provide the registered issuer with written notice of the revocation of the suspension.

Bankruptcy and Insolvency Protection

Marginal note:Covered bonds

21.63 Nothing in any law of Canada or a province relating to bankruptcy or insolvency, or any order of a court made in relation to a reorganization, arrangement or receivership involving bankruptcy or insolvency, prevents or prohibits the following actions from being taken in accordance with the provisions of contracts relating to covered bonds that are issued under a registered program:

• (a) the making of any payments, including a payment to a registered issuer;

• (b) the netting or setting off or compensation of obligations;

• (c) any dealing with covered bond collateral, including

  • (i) the sale or foreclosure or, in Quebec, the surrender of covered bond collateral, and

  • (ii) the setting off or compensation of covered bond collateral or the application of the proceeds or value of covered bond collateral; and

• (d) the termination of those contracts.

Marginal note:Transfer not voidable and not subject to remedies

21.64 Despite anything in any law of Canada or a province relating to bankruptcy or insolvency, or any order of a court made in relation to a reorganization, arrangement or receivership involving bankruptcy or insolvency, the transfer of loans or other assets to a guarantor entity — to be held as covered bond collateral — by a registered issuer, any of its affiliates or any prescribed entity

• (a) is effective against every person;

• (b) is not voidable or, in Quebec, annullable;

• (c) is not subject to any other remedies available to creditors of the registered issuer; and

• (d) does not constitute a fraudulent conveyance, unjust preference or other reviewable transaction.

Marginal note:Non-application

21.65 Sections 21.63 and 21.64 do not apply to contracts relating to covered bonds that are issued under a registered program, nor to the transfer of loans or other assets to a guarantor entity to be held as covered bond collateral for those covered bonds, if those covered bonds are issued by a registered issuer during the period in which its right to issue covered bonds has been suspended under section 21.62.

Regulations

Marginal note:Regulations

21.66 The Minister of Finance may make regulations for carrying out the purposes and provisions of this Part, including regulations

• (a) excluding, from the definition “covered bond”, certain debt obligations;

• (b) excluding, from the definition “covered bond collateral”, certain payments from the guarantor entity to the registered issuer;

• (c) establishing requirements that an institution, or a program under which covered bonds are to be issued, must meet to be registered in the registry;

• (d) respecting applications made under section 21.52 or 21.54;

• (e) respecting cost recovery for the purposes of section 21.59;

• (f) establishing additional requirements with respect to the loans referred to in paragraph 21.6(1)(a);

• (g) respecting the circumstances in which guarantor entities may hold the assets described in subsection 21.6(2) and, according to each circumstance, the maximum ratio of the value of those assets relative to the total value of the loans or other assets being held as covered bond collateral; and

• (h) prescribing anything that is to be prescribed under this Part.