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

Settlement Provisions

Marginal note:Validity, etc.

• 8 (1) Despite anything in any statute or other law of Canada or a province, but subject to paragraph 11.07(1)(a) and subject to an order made under section 11.11,

  • (a) the settlement rules of a designated clearing and settlement system are valid and are binding on the clearing house, the participants, a central counter-party and the Bank and any action may be taken or payment made in accordance with the settlement rules;

  • (b) the obligation of a participant, a clearing house or a central counter-party to make payment to a participant and the right of a participant, a clearing house or a central counter-party to receive payment from a participant, a clearing house or a central counter-party shall be netted and a net settlement or close-out amount shall be determined in accordance with the settlement rules, if they so provide; and

  • (c) if a payment is made, property is delivered or an interest in, or in Quebec a right to, property is transferred in accordance with the settlement rules of a designated clearing and settlement system, the payment, delivery or transfer shall not be required to be reversed, repaid or set aside.

• Marginal note:Payments not subject to set aside provisions

  (2) An entry to or a payment out of the account of a participant, a clearing house or a central counter-party at the Bank to settle a payment obligation in a designated clearing and settlement system shall not be the subject of any provision or order that operates as a stay of that activity.

• Marginal note:Rights, etc., not subject to stay

  (3) The rights and remedies of a participant, a clearing house, a central counter-party or the Bank in respect of collateral granted to it as security for a payment or the performance of an obligation incurred in a designated clearing and settlement system may not be the subject of any stay provision or order affecting the ability of creditors to exercise rights and remedies with respect to the collateral.

• Marginal note:Sections 39.15 and 39.152 of Canada Deposit Insurance Corporation Act

  (3.1) Despite subsections (1) to (3) and the settlement rules,

  • (a) no action may be taken in respect of an eligible financial contract, as defined in subsection 39.15(9) of the Canada Deposit Insurance Corporation Act, if it is prevented by subsection 39.15(7.1), (7.104), (7.11), (7.12) or (7.2) or section 39.152 of that Act; and

  • (b) a clearing house, as defined in subsection 39.15(9) of the Canada Deposit Insurance Corporation Act, shall comply with subsection 39.15(3.3) of that Act, shall take any action required by subsection 39.15(7.12) of that Act and shall not take any action prevented by that subsection 39.15(7.12).

• Marginal note:Application of Canadian law

  (4) Notwithstanding that all or part of the administration or operation of a designated clearing and settlement system is conducted outside Canada or that its settlement rules are governed by the laws of a foreign jurisdiction, where in any judicial proceedings in Canada a court determines that the rights and obligations of any person arising out of or in connection with the operation of the designated clearing and settlement system are governed in whole or in part by Canadian law, the provisions of this section shall be applied to the extent that the Canadian law applies in determining those rights and obligations.

• Marginal note:Interpretation

  (5) In this section, settlement rules means the rules, however established, that provide the basis on which payment obligations, delivery obligations or other transfers of property or interests in, or in Quebec rights to, property are made, calculated, netted or settled and includes rules for the taking of action in the event that a participant is unable or likely to become unable to meet its obligations to the clearing house, a central counter-party, other participants or the Bank.

Notice and Approvals

Marginal note:Significant change

• 9 (1) For the purposes of this section, a change is significant if it could reasonably be expected to have a material impact on the efficiency, safety or soundness of the designated clearing and settlement system.

• Marginal note:Notice required

  (2) A clearing house shall provide the Bank with reasonable notice before making

  • (a) any significant change in relation to the designated clearing and settlement system;

  • (b) any change in relation to the design or operation of the system or to the by-laws, agreements, rules, procedures, guides or other documentation governing the system; or

  • (c) any change to the constating documents and by-laws of the clearing house.

• Marginal note:Approval required

  (3) If the Governor of the Bank is of the opinion that a significant change that the clearing house intends to make in relation to the designated clearing and settlement system would have an effect on the control of risk for the system, the clearing house, the participants or the financial system in Canada, that change shall not take effect unless it is approved in writing by the Governor, subject to any conditions that the Governor considers appropriate.

• Marginal note:Notice required of other changes

  (4) A clearing house shall, without delay after it makes any change in relation to the designated clearing and settlement system, other than a change referred to in subsection (2), provide the Bank with written notice of the change, including any change affecting

  • (a) the composition of a board of directors of the clearing house due to resignation or otherwise; or

  • (b) the appointed auditor of the clearing house.

Audits and Inspections

Marginal note:Powers of Bank

• 10 (1) The Bank may, for the purposes of carrying out its functions under this Act, conduct audits and inspections of a clearing house, and every clearing house shall, as required, assist the Bank to the extent necessary to enable the Bank to carry out an audit or inspection.

• Marginal note:Powers of Bank

  (2) For the purpose of obtaining evidence under oath in relation to an audit or inspection under subsection (1), the Bank has all the powers of a person appointed as a commissioner under Part II of the Inquiries Act.

PART I.1Clearing and Settlement System Resolution

Scope

Marginal note:Application

11 This Part applies in respect of a clearing and settlement system that is designated under subsection 4(1) if its clearing house is located in Canada.

Resolution Authority

Marginal note:Resolution Authority

11.01 The Bank is the resolution authority for clearing and settlement systems and clearing houses.

Marginal note:Objects

11.02 The objects of the Bank as the resolution authority are to

• (a) pursue the stability of the financial system in Canada;

• (b) allow for the continuity of critical clearing and settlement system functions; and

• (c) pursue the objects set out in paragraphs (a) and (b) in a manner that minimizes the exposure of public moneys to loss.

Marginal note:Powers

11.03 While a clearing and settlement system or a clearing house is in resolution, the Bank may, despite paragraphs 23(a), (c) and (d) of the Bank of Canada Act, do all things necessary or incidental to carrying out its objects as the resolution authority, including

• (a) acquire assets from a clearing house;

• (b) make or guarantee loans or advances, with or without security, to a clearing house or a participant on the terms and conditions specified by the Bank;

• (c) assume liabilities of a clearing house;

• (d) act as receiver of a clearing house, when appointed by order under subsection 11.09(1);

• (e) acquire, by way of security or otherwise, shares of a clearing house and hold and alienate those shares;

• (f) acquire, hold and alienate real and personal property or immovable or movable property; and

• (g) incorporate a corporation under the Canada Business Corporations Act for the purpose of designating the corporation as a bridge clearing house.

Committee

Marginal note:Membership

• 11.04 (1) There is established a committee consisting, subject to subsection (6), of the following persons:

  • (a) the Governor of the Bank;

  • (b) the Superintendent of Financial Institutions;

  • (c) the Chief Executive Officer of the Canada Deposit Insurance Corporation; and

  • (d) the Deputy Minister of Finance.

• Marginal note:Chairperson

  (2) The Governor of the Bank is the chairperson of the committee.

• Marginal note:Object

  (3) The object of the committee is to facilitate consultations and the exchange of information among its members on all matters relating to the resolution of clearing and settlement systems and clearing houses.

• Marginal note:Consultation

  (4) In carrying out its object, the committee may consult with any government authority or regulatory body that has entered into an agreement or arrangement with the Bank under section 13.3.

• Marginal note:Information confidential

  (5) Information received by any member of the committee in carrying out the committee’s object is confidential and shall be treated accordingly. The Governor of the Bank may disclose that information to the Bank and the Bank may in turn disclose it to a person or entity in accordance with subsections 18(2) to (4).

• Marginal note:Conflicts of interest

  (6) The members of the committee shall comply with rules concerning conflicts of interest provided for in the regulations.

Resolution Plans

Marginal note:Resolution plans

• 11.05 (1) The Bank shall develop and maintain, in accordance with the regulations, a resolution plan for each clearing and settlement system.

• Marginal note:Consultation

  (2) In developing the resolution plan, the Bank shall consult with the committee established under subsection 11.04(1) and any government authority or regulatory body that has entered into an agreement or arrangement with the Bank under section 13.3 related to the clearing and settlement system.

Entry into Resolution

Marginal note:Declaration of non-viability

• 11.06 (1) The Governor of the Bank may make a declaration in writing of non-viability for a clearing and settlement system or a clearing house and enter it into resolution if the Governor is of the opinion that

  • (a) the clearing and settlement system or clearing house has ceased, or is about to cease, to be viable; and

  • (b) the clearing and settlement system or clearing house cannot restore or preserve its viability on its own initiative.

• Marginal note:Matters to consider

  (2) The Governor of the Bank, in determining whether to make a declaration under subsection (1), shall take into account all matters that the Governor considers relevant, including whether, in his or her opinion,

  • (a) the clearing house has exhausted the measures to address financial loss, shortfalls in liquidity or capital adequacy that are specified in its by-laws or rules, or in an arrangement that relates to the clearing and settlement system;

  • (b) the measures described in paragraph (a) will not be sufficient to sustain the operation of the clearing and settlement system or the clearing house;

  • (c) the clearing and settlement system or the clearing house has lost the confidence of the participants; and

  • (d) systemic risk or payments system risk is, or is likely to be, inadequately controlled.

• Marginal note:Notice

  (3) After a declaration of non-viability is made with respect to a clearing and settlement system or a clearing house, the Governor of the Bank shall, without delay, notify

  • (a) the Minister;

  • (b) the committee established under subsection 11.04(1);

  • (c) the clearing house; and

  • (d) any government authority or regulatory body that has entered into an agreement or arrangement with the Bank under section 13.3 related to the clearing and settlement system or related to the system whose clearing house is the subject of the declaration.

• Marginal note:Bankruptcy, default or insolvency

  (4) A declaration of non-viability does not constitute an act of bankruptcy or default by the clearing house, and the clearing house shall not be considered insolvent by reason only of a declaration of non-viability.

• Marginal note:Publication

  (5) The Governor of the Bank shall cause a copy of the declaration to be published in the Canada Gazette.