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Bank Act (S.C. 1991, c. 46)

Full Document:  

Act current to 2021-11-17 and last amended on 2021-06-30. Previous Versions

PART IXInvestments (continued)

Aggregate Limit

Marginal note:Aggregate limit

 A bank shall not, and shall not permit its prescribed subsidiaries to,

  • (a) purchase or otherwise acquire

    • (i) participating shares of a body corporate, other than those of a permitted entity in which the bank has, or by virtue of the acquisition would have, a substantial investment,

    • (ii) ownership interests in an unincorporated entity, other than ownership interests in a permitted entity in which the bank has, or by virtue of the acquisition would have, a substantial investment, or

    • (iii) interests in real property, or

  • (b) make an improvement to real property in which the bank or any of its prescribed subsidiaries has an interest

if the aggregate value of

  • (c) all participating shares and ownership interests referred to in subparagraphs (a)(i) and (ii) that are beneficially owned by the bank and its prescribed subsidiaries, and

  • (d) all interests of the bank in real property referred to in subparagraph (a)(iii)

exceeds, or the acquisition or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the bank.

  • 1991, c. 46, s. 478
  • 1997, c. 15, s. 63
  • 2001, c. 9, s. 127

Miscellaneous

Marginal note:Regulations

 For the purposes of this Part, the Governor in Council may make regulations

  • (a) defining the interests of a bank in real property;

  • (b) determining the method of valuing those interests; or

  • (c) exempting classes of banks from the application of sections 475 to 478.

  • 1991, c. 46, s. 479
  • 1997, c. 15, s. 64
  • 2001, c. 9, s. 127

Marginal note:Divestment order

  •  (1) The Superintendent may, by order, direct a bank to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.

  • Marginal note:Divestment order

    (2) If, in the opinion of the Superintendent,

    • (a) an investment by a bank or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the bank to control the body corporate or the unincorporated entity, or

    • (b) the bank or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before

      • (i) the board of directors of a body corporate, or

      • (ii) a similar group or committee of an unincorporated entity,

      or whereby no proposal may be approved except with the consent of the bank, the entity it controls or the nominee,

    the Superintendent may, by order, require the bank, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the bank no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).

  • Marginal note:Divestment order

    (3) If

    • (a) a bank

      • (i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 470(1), (2) or (4), or

      • (ii) is in default of an undertaking referred to in subsection 470(1) or (2) and the default is not remedied within ninety days after the day of receipt by the bank of a notice from the Superintendent of the default, or

    • (b) a permitted entity referred to in subsection 470(4) is in default of an undertaking referred to in that subsection and the default is not remedied within ninety days after the day of receipt by the bank of a notice from the Superintendent of the default,

    the Superintendent may, by order, require the bank, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the bank no longer has a substantial investment in the entity to which the undertaking relates.

  • Marginal note:Exception

    (4) Subsection (2) does not apply in respect of an entity in which a bank has a substantial investment permitted by this Part.

  • 1991, c. 46, s. 480
  • 2001, c. 9, s. 127

Marginal note:Deemed temporary investment

 If a bank controls or has a substantial investment in an entity as permitted by this Part and the bank becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 468(5) or (6), the bank is deemed to have acquired, on the day the bank becomes aware of the change, a temporary investment in respect of which section 471 applies.

  • 1991, c. 46, s. 481
  • 1997, c. 15, s. 65
  • 2001, c. 9, s. 127

Marginal note:Asset transactions

  •  (1) A bank shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if

    A + B > C

    where

    A
    is the value of the assets;
    B
    is the total value of all assets that the bank and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and
    C
    is ten per cent of the total value of the assets of the bank, as shown in the last annual statement of the bank prepared before the acquisition or transfer.
  • Marginal note:Approval of series of transactions

    (1.1) The Superintendent may, for the purposes of subsection (1), approve a transaction or series of transactions relating to the acquisition or transfer of assets that may be entered into with a person, or with persons of any class of persons, regardless of whether those persons are known at the time of the granting of the approval or not.

  • Marginal note:Exception

    (2) Subsection (1) does not apply in respect of

    • (a) assets that are debt obligations that are

      • (i) guaranteed by any financial institution other than the bank,

      • (ii) fully secured by deposits with any financial institution, including the bank, or

      • (iii) fully secured by debt obligations that are guaranteed by any financial institution other than the bank;

    • (b) assets that are debt obligations issued

      • (i) by, or by any agency of,

        • (A) the Government of Canada,

        • (B) the government of a province,

        • (C) a municipality, or

        • (D) the government of a foreign country or any political subdivision of a foreign country, or

      • (ii) by a prescribed international agency;

    • (c) assets that are debt obligations that are guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in paragraph (b);

    • (d) assets that are debt obligations that are widely distributed, as that expression is defined by the regulations;

    • (e) assets that are debt obligations of an entity controlled by the bank;

    • (f) assets acquired or transferred under a transaction or series of transactions by the bank with another financial institution as a result of the bank’s participation in one or more syndicated loans with that financial institution;

    • (g) assets purchased or sold under a sale agreement that is approved by the Minister under section 236;

    • (h) shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 468(5) is required or the approval of the Superintendent under subsection 468(6) is required;

    • (i) assets that are acquired or transferred under a transaction that has been approved by the Minister under subsection 678(1) of this Act or subsection 715(1) of the Insurance Companies Act;

    • (j) assets, other than real property, acquired or disposed of under an arrangement that has been approved by the Superintendent under subsection 494(3); or

    • (k) assets acquired or disposed of with the approval of the Superintendent under subsection 494(4).

  • (3) [Repealed, 2007, c. 6, s. 43]

  • Marginal note:Value of assets

    (4) For the purposes of “A” in subsection (1), the value of the assets is

    • (a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the bank after the acquisition, the fair market value of the assets; and

    • (b) in the case of assets that are transferred, the value of the assets as reported in the last annual statement of the bank prepared before the transfer or, if the value of the assets is not reported in that annual statement, the value of the assets as it would be reported in the annual statement of the bank if the annual statement had been prepared, in accordance with the accounting principles referred to in subsection 308(4), immediately before the transfer.

  • Marginal note:Total value of all assets

    (5) For the purposes of subsection (1), the total value of all assets that the bank or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the bank, the fair market value of the assets of the entity at the date of the acquisition.

  • Marginal note:Total value of all assets

    (6) For the purposes of subsection (1), the total value of all assets that the bank or any of its subsidiaries has transferred during the 12-month period referred to in subsection (1) is the total of the value of each of those assets as reported in the last annual statement of the bank prepared before the transfer of the asset or, if the value of any of those assets is not reported in that annual statement, as it would be reported in the annual statement of the bank if the annual statement had been prepared, in accordance with the accounting principles referred to in subsection 308(4), immediately before the transfer of the asset.

  • 1991, c. 46, s. 482
  • 1997, c. 15, s. 66
  • 2001, c. 9, s. 127
  • 2007, c. 6, s. 43

Marginal note:Transitional

 Nothing in this Part requires

  • (a) the termination of a loan made before February 7, 2001;

  • (b) the termination of a loan made after that date as a result of a commitment made before that date;

  • (c) the disposal of an investment made before that date; or

  • (d) the disposal of an investment made after that date as a result of a commitment made before that date.

But if the loan or investment would be precluded or limited by this Part, the amount of the loan or investment may not, except as provided in subsections 471(2), 472(3) and 473(3), be increased after that date.

  • 1991, c. 46, s. 483
  • 2001, c. 9, s. 127

Marginal note:Saving

 A loan or investment referred to in section 483 is deemed not to be prohibited by the provisions of this Part.

  • 1991, c. 46, s. 484
  • 2001, c. 9, s. 127

PART XCapital, Liquidity and Capacity to Absorb Losses

Marginal note:Domestic systemically important bank

  •  (1) The Superintendent may, by order, designate a bank as a domestic systemically important bank unless the Minister advises the Superintendent that the Minister is of the opinion that it is not in the public interest to do so.

  • Marginal note:Revocation

    (2) The Superintendent may, by order, revoke the designation unless the Minister advises the Superintendent that the Minister is of the opinion that it is not in the public interest to do so.

  • Marginal note:Factors

    (3) In making the designation or revoking it, the Superintendent shall take into account all factors that he or she considers relevant, including whether the distress or failure of the bank could have a significant adverse impact on the financial system in Canada.

  • Marginal note:Notice and publication

    (4) If a designation is made or revoked, the Superintendent shall, as soon as feasible, cause a notice of the designation or revocation, as the case may be, to be published in the Canada Gazette and on the website of the Office of the Superintendent of Financial Institutions.

  • 2016, c. 7, s. 159

Marginal note:Adequacy of capital and liquidity

  •  (1) A bank shall, in relation to its operations, maintain

    • (a) adequate capital, and

    • (b) adequate and appropriate forms of liquidity,

    and shall comply with any regulations in relation thereto.

  • Marginal note:Domestic systemically important banks

    (1.1) If the bank is a domestic systemically important bank, it shall also maintain the minimum capacity to absorb losses that is provided for under subsection (1.2) and shall comply with any regulations in relation to that requirement.

  • Marginal note:Superintendent’s order

    (1.2) For each domestic systemically important bank, the Superintendent shall, by order made after consulting with the other members of the committee established under subsection 18(1) of the Office of the Superintendent of Financial Institutions Act, provide for the amount that constitutes the bank’s minimum capacity to absorb losses.

  • Marginal note:Amount — subsection (1.2)

    (1.21) The amount set under subsection (1.2) consists of capital, prescribed shares and prescribed liabilities, which have the value determined in accordance with any criteria the Superintendent considers appropriate.

  • Marginal note:Public interest

    (1.3) Despite subsection (1.2), if, before the order is made, the Minister advises the Superintendent that the Minister is of the opinion that the amount provided for by the Superintendent is not in the public interest, the Superintendent shall provide for another amount in accordance with that subsection.

  • Marginal note:Notice and publication

    (1.4) If an order is made under subsection (1.2), the Superintendent shall, in writing and without delay, inform the bank that is subject to the order and shall, as soon as feasible, cause the order to be published in the Canada Gazette and on the website of the Office of the Superintendent of Financial Institutions.

  • Marginal note:Regulations and guidelines

    (2) The Governor in Council may make regulations and the Superintendent may make guidelines respecting the maintenance by banks of adequate capital and adequate and appropriate forms of liquidity and the maintenance by domestic systemically important banks of the minimum capacity to absorb losses.

  • Marginal note:Directives

    (3) Notwithstanding that a bank is complying with regulations or guidelines made under subsection (2), the Superintendent may, by order, direct the bank

    • (a) to increase its capital; or

    • (b) to provide additional liquidity in such forms and amounts as the Superintendent may require.

  • Marginal note:Orders to limit or prohibit

    (3.1) If the Superintendent becomes aware that a domestic systemically important bank is not maintaining its minimum capacity to absorb losses, the Superintendent shall notify the other members of the committee established under subsection 18(1) of the Office of the Superintendent of Financial Institutions Act and may, by order, take any measures that he or she considers appropriate, including

    • (a) limiting the growth of the bank’s total assets;

    • (b) limiting or prohibiting acquisitions of assets by the bank;

    • (c) limiting or prohibiting discretionary payments in respect of the bank’s shares or subordinated indebtedness;

    • (d) limiting or prohibiting purchases by the bank, or redemptions, of the bank’s shares, subordinated indebtedness or prescribed liabilities;

    • (e) limiting or prohibiting reductions of the bank’s stated capital; and

    • (f) limiting or prohibiting the opening of new branches by the bank.

  • Marginal note:Consultation

    (3.2) Before making an order under subsection (3.1) or varying or revoking such an order, the Superintendent shall consult with the other members of the committee established under subsection 18(1) of the Office of the Superintendent of Financial Institutions Act.

  • Marginal note:Compliance

    (4) A bank shall comply with an order made under subsection (3) or (3.1) within the time that is specified in the order.

  • Marginal note:Notice of value

    (5) Where an appraisal of any asset held by a bank or any of its subsidiaries has been made by the Superintendent and the value determined by the Superintendent to be the appropriate value of the asset varies materially from the value placed by the bank or subsidiary on the asset, the Superintendent shall send to the bank, the auditor or auditors of the bank and the audit committee of the bank a written notice of the appropriate value of the asset as determined by the Superintendent.

  • 1991, c. 46, s. 485
  • 1996, c. 6, s. 7
  • 2016, c. 7, s. 160
  • 2017, c. 20, s. 111
 
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