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Bank Act (S.C. 1991, c. 46)

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Act current to 2019-08-15 and last amended on 2019-06-21. Previous Versions

PART XISelf-dealing (continued)

Prohibited Related Party Transactions

Marginal note:Prohibited transactions

  •  (1) Except as provided in this Part, a bank shall not, directly or indirectly, enter into any transaction with a related party of the bank.

  • Marginal note:Transaction of entity

    (2) Without limiting the generality of subsection (1), a bank is deemed to have indirectly entered into a transaction in respect of which this Part applies where the transaction is entered into by an entity that is controlled by the bank.

  • Marginal note:Exception

    (3) Subsection (2) does not apply where an entity that is controlled by a bank is a financial institution incorporated or formed under the laws of a province and is subject to regulation and supervision, satisfactory to the Minister, regarding transactions with related parties of the bank.

  • Marginal note:Idem

    (4) Subsection (2) does not apply in respect of transactions entered into by an entity that is controlled by a bank if the transaction is a prescribed transaction or is one of a class of prescribed transactions.

Permitted Related Party Transactions

Marginal note:Nominal value transactions

 Notwithstanding anything in this Part, a bank may enter into a transaction with a related party of the bank if the value of the transaction is nominal or immaterial to the bank when measured by criteria that have been established by the conduct review committee of the bank and approved in writing by the Superintendent.

Marginal note:Secured loans

 A bank may make a loan to or a guarantee on behalf of a related party of the bank or take an assignment of or otherwise acquire a loan to a related party of the bank if

  • (a) the loan or guarantee is fully secured by securities of or guaranteed by the Government of Canada or the government of a province; or

  • (b) the loan is a loan permitted by section 418 made to a related party who is a natural person on the security of a mortgage of the principal residence of that related party.

Marginal note:Deposits

 A bank may enter into a transaction with a related party of the bank if the transaction consists of a deposit by the bank with a financial institution that is a direct clearer or a member of a clearing group under the by-laws of the Canadian Payments Association and the deposit is made for clearing purposes.

Marginal note:Borrowing, etc., from related party

 A bank may borrow money from, take deposits from, or issue debt obligations to, a related party of the bank.

Marginal note:Acquisition of assets

  •  (1) A bank may purchase or otherwise acquire from a related party of the bank

    • (a) securities of, or securities guaranteed by, the Government of Canada or the government of a province;

    • (b) assets fully secured by securities of, or securities guaranteed by, the Government of Canada or the government of a province; or

    • (c) goods for use in the ordinary course of business.

  • Marginal note:Sale of assets

    (2) Subject to section 482, a bank may sell any assets of the bank to a related party of the bank if

    • (a) the consideration for the assets is fully paid in money; and

    • (b) there is an active market for those assets.

  • Marginal note:Asset transactions with financial institutions

    (3) Notwithstanding any of the provisions of subsections (1) and (2), a bank may, in the normal course of business and pursuant to arrangements that have been approved by the Superintendent in writing, acquire or dispose of any assets, other than real property, from or to a related party of the bank that is a financial institution.

  • Marginal note:Asset transactions in restructuring

    (4) Notwithstanding any of the provisions of subsections (1) and (2), a bank may acquire any assets from, or dispose of any assets to, a related party of the bank as part of, or in the course of, a restructuring, if the acquisition or disposition has been approved in writing by the Superintendent.

  • Marginal note:Goods or space for use in business

    (5) A bank may lease assets

    • (a) from a related party of the bank for use in the ordinary course of business of the bank, or

    • (b) to a related party of the bank

    if the lease payments are made in money.

  • Marginal note:Approval under section 236

    (6) A bank may acquire any assets from, or dispose of any assets to, a related party of the bank under a sale agreement that is approved by the Minister under section 236.

  • 1991, c. 46, s. 494
  • 2007, c. 6, s. 45

Marginal note:Services

  •  (1) A bank may enter into a transaction with a related party of the bank if the transaction

    • (a) subject to subsection (2), consists of a written contract for the purchase by the bank of services used in the ordinary course of business;

    • (b) subject to subsection (4), involves the provision of services normally offered to the public by the bank in the ordinary course of business;

    • (c) consists of a written contract with a financial institution or an entity in which the bank is permitted to have a substantial investment pursuant to section 468 that is a related party of the bank

      • (i) for the networking of any services provided by the bank or the financial institution or entity, or

      • (ii) for the referral of any person by the bank to the financial institution or entity, or for the referral of any person by the financial institution or entity to the bank;

    • (d) consists of a written contract for such pension or benefit plans or their management or administration as are incidental to directorships or to the employment of officers or employees of the bank or its subsidiaries; or

    • (e) involves the provision by the bank of management, advisory, accounting, information processing or other services in relation to any business of the related party.

  • Marginal note:Order concerning management by employees

    (2) Where a bank has entered into a contract pursuant to paragraph (1)(a) and the contract, when taken together with all other such contracts entered into by the bank, results in all or substantially all of the management functions of the bank being exercised by persons who are not employees of the bank, the Superintendent may, by order, if the Superintendent considers that result to be inappropriate, require the bank, within such time as may be specified in the order, to take all steps necessary to ensure that management functions that are integral to the carrying on of business by the bank are exercised by employees of the bank to the extent specified in the order.

  • Marginal note:Exception

    (3) Despite subsection 489(2), a bank is deemed not to have indirectly entered into a transaction in respect of which this Part applies if the transaction is entered into by an entity that is controlled by the bank and the business of which is limited to the activity referred to in paragraph 468(2)(c) and the transaction is on terms and conditions at least as favourable to the bank as market terms and conditions, as defined in subsection 501(2).

  • Marginal note:Services

    (4) The provision of services, for the purposes of paragraph (1)(b), does not include the making of loans or guarantees.

  • 1991, c. 46, s. 495
  • 1997, c. 15, s. 70
  • 2007, c. 6, s. 46

Marginal note:Transactions with holding companies

  •  (1) Subject to subsection (2) and sections 495.2 and 495.3, if a widely held bank holding company or a widely held insurance holding company has a significant interest in any class of shares of a bank, the bank may enter into any transaction with the holding company or with any other related party of the bank that is an entity in which the holding company has a substantial investment.

  • Marginal note:Policies and procedures

    (2) The bank shall adhere to policies and procedures established under subsection 195(3) when entering into the transaction.

  • 2001, c. 9, s. 129

Marginal note:Restriction

  •  (1) If a bank enters into a transaction with a related party of the bank with whom the bank may enter into transactions under subsection 495.1(1) and that is not a federal financial institution, the bank shall not directly or indirectly make, take an assignment of or otherwise acquire a loan to the related party, make an acceptance, endorsement or other guarantee on behalf of the related party or make an investment in the securities of the related party if, immediately following the transaction, the aggregate financial exposure, as that expression is defined by the regulations, of the bank would exceed

    • (a) in respect of all transactions of the bank with the related party, the prescribed percentage of the bank’s regulatory capital or, if no percentage is prescribed, five per cent of the bank’s regulatory capital; or

    • (b) in respect of all transactions of the bank with such related parties of the bank, the prescribed percentage of the bank’s regulatory capital or, if no percentage is prescribed, ten per cent of the bank’s regulatory capital.

  • Marginal note:Order

    (2) If the Superintendent is of the opinion that it is necessary for the protection of the interests of the depositors and creditors of a bank, the Superintendent may, by order,

    • (a) reduce the limit in paragraph (1)(a) or (b) that would otherwise apply to the bank; and

    • (b) impose limits on transactions by the bank with related parties with whom the bank may enter into transactions under subsection 495.1(1) that are federal financial institutions.

  • Marginal note:Order

    (3) The Superintendent may, by order, increase the limit in paragraph (1)(a) or (b) that would otherwise apply to a bank on transactions by the bank with related parties that are financial institutions that are regulated in a manner acceptable to the Superintendent.

  • 2001, c. 9, s. 129
 
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