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Bank Act (S.C. 1991, c. 46)

Full Document:  

Act current to 2019-06-20 and last amended on 2019-06-17. Previous Versions

PART XVBank Holding Companies (continued)

DIVISION 9Investments (continued)

General Constraints on Investments (continued)

Marginal note:Restriction on control and substantial investments

  •  (1) Subject to subsections (2) to (3.4), no bank holding company shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.

  • Marginal note:Exception: indirect investments

    (2) A bank holding company may acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of

    • (a) an acquisition of control of an entity referred to in any of paragraphs 930(1)(a) to (j), a specialized financing entity or a prescribed entity that controls or has a substantial investment in the entity; or

    • (b) an acquisition of shares or ownership interests in the entity by

      • (i) an entity referred to in any of paragraphs 930(1)(a) to (j), a specialized financing entity or a prescribed entity that is controlled by the bank holding company, or

      • (ii) an entity controlled by an entity referred to in any of paragraphs 930(1)(a) to (j), a specialized financing entity or a prescribed entity that is controlled by the bank holding company.

  • Marginal note:Exception: temporary investments, realizations and loan workouts

    (3) A bank holding company may acquire control of, or acquire or increase a substantial investment in, an entity by way of

    • (a) a temporary investment permitted by section 933;

    • (b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 934; or

    • (c) a realization of security permitted by section 935.

  • Marginal note:Business growth fund

    (3.1) Subject to section 927.1 and subsections (3.2) to (3.4), a bank holding company may hold, acquire or increase a substantial investment in the business growth fund or any entity that the business growth fund controls.

  • Marginal note:For greater certainty

    (3.2) For greater certainty, a bank holding company is prohibited from acquiring control of the business growth fund or any entity that the business growth fund controls.

  • Marginal note:Prohibition — entity

    (3.3) A bank holding company is prohibited from holding or acquiring a substantial investment in the business growth fund or any entity that the business growth fund controls if the business growth fund or any entity that the business growth fund controls hold or acquires shares of, or other ownership interests in, any of the following entities, or in any entity that controls any of the following entities:

    • (a) an entity referred to in any of paragraphs 930(1)(a) to (j);

    • (b) an entity that is primarily engaged in the leasing of motor vehicles in Canada for the purpose of extending credit to a customer or financing a customer’s acquisition of a motor vehicle;

    • (c) an entity that is primarily engaged in providing temporary possession of personal property, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property;

    • (d) an entity that acts as an insurance broker or agent in Canada; or

    • (e) an entity that is engaged in any prescribed activity.

  • Marginal note:Prohibition — capital and loans

    (3.4) A bank holding company is prohibited from holding or acquiring a substantial investment in the business growth fund or any entity that the business growth fund controls if the business growth fund or any entity that the business growth fund controls holds shares of, or other ownership interests in, an entity or holds a loan made to an entity and, in respect of that entity and its affiliates, the aggregate value of the following exceeds $100,000,000:

    • (a) all ownership interests that are held by the bank holding company, the bank holding company’s subsidiaries, the business growth fund or the entities that the business growth fund controls, the value of those ownership interests as determined by the amount paid for them at the time each was first acquired by any of those entities; and

    • (b) the outstanding principal of all loans held by the business growth fund or the entities that the business growth fund controls.

  • Marginal note:Exception: uncontrolled event

    (4) A bank holding company is deemed not to contravene subsection (1) if the bank holding company acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the bank holding company.

  • Marginal note:Non-application of subsection (2)

    (4.1) No bank holding company shall, under subsection (2), acquire control of, or acquire or increase a substantial investment in, an entity referred to in paragraph 930(1)(j).

  • Marginal note:Holding

    (4.2) If a bank holding company holds a substantial investment in an entity referred to in paragraph 930(1)(j) that it acquired or increased under subsection (2) before the coming into force of subsection (4.1), the bank holding company may continue to hold that substantial investment.

  • Marginal note:Application of other provision

    (5) Despite having acquired control of, or a substantial investment in, an entity under a particular provision of this Part, a bank holding company may continue to control the entity or hold the substantial investment in the entity as though it had made the acquisition under another provision of this Part so long as the conditions of that other provision are met.

  • Marginal note:Timing of deemed acquisition

    (6) If a bank holding company decides to exercise its right under subsection (5), the bank holding company is deemed to be acquiring the control or the substantial investment under the other provision.

  • 2001, c. 9, s. 183
  • 2007, c. 6, s. 121
  • 2013, c. 40, s. 169
  • 2018, c. 27, s. 144

Marginal note:Regulations re limits

 The Governor in Council may make regulations

  • (a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Division;

  • (b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by a bank holding company and its prescribed subsidiaries to or in a person and any persons connected with that person;

  • (c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and

  • (d) prescribing terms and conditions under which a bank holding company may acquire control of, or acquire or increase a substantial investment in, a specialized financing entity.

  • 2001, c. 9, s. 183

Subsidiaries and Equity Investments

Marginal note:Permitted investments

  •  (1) Subject to subsections (4) to (6), a bank holding company may acquire control of, or acquire or increase a substantial investment in

    • (a) a bank;

    • (b) a bank holding company;

    • (c) a body corporate to which the Trust and Loan Companies Act applies;

    • (d) an association to which the Cooperative Credit Associations Act applies;

    • (e) an insurance company or a fraternal benefit society incorporated or formed by or under the Insurance Companies Act;

    • (f) an insurance holding company;

    • (g) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;

    • (h) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;

    • (i) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or

    • (j) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.

  • Marginal note:Permitted investments

    (2) Subject to subsections (3) to (6), a bank holding company may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (j), whose business is limited to one or more of the following:

    • (a) engaging in any financial service activity that a bank is permitted to engage in under any of paragraphs 409(2)(a) to (d) or any other activity that a bank is permitted to engage in under section 410 or 411;

    • (b) acquiring or holding shares of, or ownership interests in, entities in which a bank holding company is permitted under this Division to hold or acquire;

    • (c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the bank holding company or any member of the bank holding company’s group:

      • (i) the bank holding company,

      • (ii) any member of the bank holding company’s group,

      • (iii) any entity that is primarily engaged in the business of providing financial services,

      • (iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or

      • (v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;

    • (d) engaging in any activity that a bank is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to

      • (i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any member of the bank holding company’s group, or

      • (ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;

    • (e) engaging in the activities referred to in the definition closed-end fund, mutual fund distribution entity, mutual fund entity or real property brokerage entity in subsection 464(1); and

    • (f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.

  • Marginal note:Restriction

    (3) A bank holding company may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include

    • (a) activities that a bank is not permitted to engage in under any of sections 412, 417 and 418;

    • (b) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted to a bank under paragraph 409(2)(c);

    • (c) activities that a bank is not permitted to engage in under section 416 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;

    • (d) acquiring control of or acquiring or holding a substantial investment in another entity unless

      • (i) in the case of an entity that is controlled by the bank holding company, a bank would be permitted under Part IX to acquire a substantial investment in the other entity, or

      • (ii) in the case of an entity that is not controlled by the bank holding company, a bank would be permitted to acquire a substantial investment in the other entity under subsection 466(2), paragraph 466(3)(b) or (c) or subsection 466(4) or 468(1) or (2); or

    • (e) any prescribed activity.

  • Marginal note:Exception

    (3.1) Despite paragraph (3)(a), a bank holding company may acquire control of, or acquire or increase a substantial investment in, any entity that acts as a trustee for a trust if the entity has been permitted under the laws of a province to act as a trustee for a trust and the following conditions are satisfied:

    • (a) the entity acts as a trustee only with respect to a closed-end fund or mutual fund entity; and

    • (b) if the entity engages in other business, that business is limited to engaging in one or more of the following:

      • (i) the activities of a mutual fund distribution entity,

      • (ii) any activity that a bank is permitted to engage in under paragraph 410(1)(c.2), and

      • (iii) the provision of investment counselling services and portfolio management services.

  • Marginal note:Control

    (4) Subject to subsection (8) and the regulations, a bank holding company may not acquire control of, or acquire or increase a substantial investment in,

    • (a) an entity referred to in paragraph (1)(a) or (b), unless

      • (i) the bank holding company controls, within the meaning of paragraphs 3(1)(a) and (d), the entity or would thereby acquire control, within the meaning of those paragraphs, of the entity, or

      • (ii) the bank holding company is permitted by regulations made under paragraph 936(a) to acquire or increase the substantial investment;

    • (b) an entity referred to in any of paragraphs (1)(c) to (j), unless

      • (i) the bank holding company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

      • (ii) the bank holding company is permitted by regulations made under paragraph 936(a) to acquire or increase the substantial investment;

    • (c) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a finance entity, a factoring entity and a financial leasing entity, unless

      • (i) the bank holding company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

      • (ii) the bank holding company is permitted by regulations made under paragraph 936(a) to acquire or increase the substantial investment; or

    • (d) an entity whose business includes an activity referred to in paragraph (2)(b), including a specialized financing entity, unless

      • (i) the bank holding company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity,

      • (ii) the bank holding company is permitted by regulations made under paragraph 936(a) to acquire or increase the substantial investment, or

      • (iii) subject to prescribed terms and conditions, if any are prescribed, the activities of the entity do not include the acquisition or holding of control of, or the acquisition or holding of shares or other ownership interests in, an entity referred to in any of paragraphs (a) to (c) or an entity that is not a permitted entity.

  • Marginal note:Minister’s approval

    (5) Subject to the regulations, a bank holding company may not, without the prior written approval of the Minister,

    • (a) acquire control of an entity referred to in paragraphs (1)(g) to (i) from a person who is not a member of the bank holding company’s group;

    • (b) acquire control of an entity referred to in paragraph (1)(j) or (4)(c), other than an entity whose activities are limited to the activities of one or more of the following entities, if the control is acquired from an entity referred to in any of paragraphs (1)(a) to (f) that is not a member of the bank holding company’s group:

      • (i) a factoring entity, or

      • (ii) a financial leasing entity;

    • (b.1) acquire control of an entity referred to in paragraph (1)(j) if the bank holding company is a bank holding company with equity of two billion dollars or more and

      A + B > C

      where

      A
      is the value of the entity’s consolidated assets, as it would have been reported in the entity’s annual financial statements if those statements had been prepared immediately before the acquisition,
      B
      is the aggregate of the values of the consolidated assets of all other entities referred to in paragraph (1)(j) that the bank holding company has acquired control of within the preceding 12 months, as the value for each entity would have been reported in its annual financial statements if those statements had been prepared immediately before the acquisition of control of that entity, and
      C
      is 10% of the value of the bank holding company’s consolidated assets, as shown in the bank holding company’s last annual statement that was prepared before its first acquisition of control of an entity referred to in paragraph (1)(j) within the preceding 12 months;
    • (c) acquire control of, or acquire or increase a substantial investment in, an entity whose business includes one or more of the activities referred to in paragraph (2)(d);

    • (d) acquire control of, or acquire or increase a substantial investment in, an entity that engages in Canada in an activity described in paragraph 410(1)(c);

    • (d.1) acquire control of, or acquire or increase a substantial investment in, an entity that engages in an activity described in paragraph 410(1)(c.1); or

    • (e) acquire control of, or acquire or increase a substantial investment in, an entity engaging in an activity prescribed for the purposes of paragraph (2)(f).

  • Marginal note:Matters for consideration

    (5.1) In addition to any matters or conditions provided for in this Act that are relevant to the granting of an approval, the Minister may, in considering whether to grant the approval under paragraph (5)(b.1), take into account all matters that he or she considers relevant in the circumstances, including

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

    • (b) the best interests of the financial system in Canada.

  • Marginal note:Superintendent’s approval

    (6) Subject to subsection (7) and the regulations, a bank holding company may not acquire control of, or acquire or increase a substantial investment in, an entity referred to in any of paragraphs (1)(g) to (j) and (4)(c) and (d) unless the bank holding company obtains the approval of the Superintendent.

  • Marginal note:Exception

    (7) Subsection (6) does not apply in respect of a particular transaction if

    • (a) the bank holding company is acquiring control of an entity, other than a specialized financing entity, and the only reason for which the bank holding company would, but for this subsection, require approval for the acquisition is that the entity carries on activities referred to in paragraph (2)(b);

    • (b) the bank holding company is acquiring control of an entity whose activities are limited to the activities of a factoring entity or a financial leasing entity;

    • (c) the Minister has approved the transaction under subsection (5) or is deemed to have approved it under subsection 931(1);

    • (d) subject to subsection (7.1), the bank holding company is acquiring control of an entity (referred to in this paragraph as the “target entity”) referred to in paragraph (4)(c) or (d) and

      A/B < C

      where

      A
      is the aggregate of the values, as they would have been reported in the bank holding company’s annual financial statements if those statements were prepared on the day of the acquisition of control of the target entity, of
      • (i) the target entity’s consolidated assets,

      • (ii) the assets of the bank holding company and of any subsidiary of the bank holding company that were acquired, at any time within the 12 months preceding the acquisition of control of the target entity, from any entity that, at that time, held any of the assets referred to in subparagraph (i), and

      • (iii) the consolidated assets of any entity referred to in paragraph 4(c) or (d) the control of which is acquired by the bank holding company at the same time as the acquisition of control of the target entity — or within the 12 months preceding the acquisition of control of the target entity if, at any time within those 12 months, that entity and the target entity were affiliates — excluding any assets referred to in subparagraph (i) or (ii) and the consolidated assets of an entity in respect of which no approval of the Superintendent is required under any of paragraphs (a) to (c),

      B
      is the value of the bank holding company’s consolidated assets, as shown in its last annual statement prepared before the acquisition of control of the target entity, and
      C
      is
      • (i) 0.01, in the case of a bank holding company with equity of 12 billion dollars or more, or

      • (ii) 0.02, in the case of any other bank holding company; or

    • (e) the bank holding company is acquiring or increasing a substantial investment in an entity (referred to in this paragraph as the “target entity”) without acquiring control of it, and

      A/B < C

      where

      A
      is the aggregate of the values, as they would have been reported in the bank holding company’s annual financial statements if those statements were prepared on the day of the acquisition or increase of the substantial investment in the target entity, of
      • (i) the shares of, or other ownership interests in, the target entity that the bank holding company or a subsidiary of the bank holding company is acquiring in the transaction that results in the acquisition or increase of a substantial investment in the target entity, and the shares of, or other ownership interests in, the target entity that are held by an entity the control of which the bank holding company is acquiring in the transaction that results in the acquisition or increase of a substantial investment in the target entity,

      • (ii) the shares of, or other ownership interests in, the target entity that are held by the bank holding company or a subsidiary of the bank holding company and that were acquired by the bank holding company or the subsidiary within the 12 months preceding the transaction referred to in subparagraph (i), and

      • (iii) the shares of, or other ownership interests in, the target entity that are held by a subsidiary of the bank holding company the control of which was acquired by the bank holding company within the 12 months preceding the transaction referred to in subparagraph (i), excluding any shares or other ownership interests referred to in subparagraph (ii),

      B
      is the value of the bank holding company’s consolidated assets, as shown in its last annual statement prepared before the transaction that results in the acquisition or increase of the substantial investment in the target entity, and
      C
      is
      • (i) 0.005, in the case of a bank holding company with equity of 12 billion dollars or more, or

      • (ii) 0.01, in the case of any other bank holding company.

  • Marginal note:No exception for deemed acquisition

    (7.1) The exception in paragraph (7)(d) does not apply with respect to a deemed acquisition of control under subsection 928(6).

  • Marginal note:Control not required

    (8) A bank holding company need not control an entity referred to in paragraph (1)(j), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the bank holding company to control the entity.

  • Marginal note:Giving up control prohibited

    (9) A bank holding company that controls, within the meaning of paragraphs 3(1)(a) and (d), an entity referred to in paragraph (1)(a) or (b) may not give up control, within the meaning of paragraph 3(1)(a) or (d), of the entity while continuing to control, within the meaning of the other paragraph, the entity.

  • Marginal note:Prohibition on giving up control in fact

    (10) A bank holding company that, under paragraph (4)(b), (c) or (d), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(d), of the entity while it continues to control the entity.

  • Marginal note:Giving up control

    (11) A bank holding company that, under subsection (4), controls an entity may, with the prior written approval of the Superintendent, give up control of the entity while keeping a substantial investment in the entity if

    • (a) the bank holding company is permitted to do so by regulations made under paragraph 936(c); or

    • (b) the entity meets the conditions referred to in subparagraph (4)(d)(iii).

  • Marginal note:Subsections do not apply

    (12) If a bank holding company controls, within the meaning of paragraph 3(1)(a), (b) or (c), an entity, subsections (5) and (6) do not apply in respect of any subsequent increases by the bank holding company of its substantial investment in the entity so long as the bank holding company continues to control the entity.

  • 2001, c. 9, s. 183
  • 2007, c. 6, ss. 122, 134(F)
  • 2012, c. 5, s. 101
  • 2018, c. 27, s. 132
 
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