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Investment Limits (Bank Holding Companies) Regulations (SOR/2001-392)

Regulations are current to 2020-01-27

Investment Limits (Bank Holding Companies) Regulations

SOR/2001-392

BANK ACT

Registration 2001-10-04

Investment Limits (Bank Holding Companies) Regulations

P.C. 2001-1763 2001-10-04

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections 929Footnote a, 941a and 978a of the Bank ActFootnote b, hereby makes the annexed Investment Limits (Bank Holding Companies) Regulations.

Interpretation

Marginal note:Definitions

 The following definitions apply in these Regulations.

Act

Act means the Bank Act. (Loi)

designated entity

designated entity means an entity other than

  • (a) a joint venture;

  • (b) an insurance company;

  • (c) a securities dealer; or

  • (d) a subsidiary of an insurance company or securities dealer. (entité désignée)

insurance company

insurance company means an insurance company incorporated by or under the laws of Canada or a province. (société d’assurances)

joint venture

joint venture means a real property entity

  • (a) that was formed by a bank holding company, or by a designated entity controlled by a bank holding company, and one or more other persons for the purpose of a specific business undertaking;

  • (b) in which the bank holding company or designated entity has a substantial investment; and

  • (c) in respect of which the persons who formed it have agreed on joint control, regardless of the distribution of their equity. (coentreprise)

real property entity

real property entity means an entity that is primarily engaged in holding, managing or otherwise dealing with

  • (a) real property;

  • (b) shares of a body corporate that is primarily engaged in holding, managing or otherwise dealing with real property, including shares of a body corporate that is another real property entity; or

  • (c) ownership interests in an unincorporated entity that is primarily engaged in holding, managing or otherwise dealing with real property, including ownership interests in an unincorporated entity that is another real property entity. (entité immobilière)

related real property entity

related real property entity, in respect of a bank holding company, means

  • (a) a real property entity, other than a designated entity controlled by the bank holding company, in which the bank holding company or a designated entity controlled by the bank holding company beneficially owns sufficient shares or ownership interests to cause the bank holding company or designated entity to have a substantial investment in the real property entity; or

  • (b) a real property entity that is controlled by a real property entity described in paragraph (a). (entité immobilière apparentée)

securities dealer

securities dealer means an entity described in paragraph (g) of the definition financial institution in section 2 of the Act. (négociant en valeurs mobilières)

third party

third party, in respect of a bank holding company, means a person other than

  • (a) the bank holding company;

  • (b) a designated entity controlled by the bank holding company; or

  • (c) a related real property entity of the bank holding company. (tierce partie)

Marginal note:Book value of interest in real property

 For the purposes of sections 8 to 11, the book value of an asset that is an interest of a bank holding company in real property, at a particular time, is

  • (a) if the asset is real property, the gross book value of the real property, less any accumulated depreciation on the real property, that would be reported on a balance sheet of the bank holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 840(4) of the Act; and

  • (b) if the asset is a security or loan, the book value of the security or loan that would be reported on a balance sheet of the bank holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 840(4) of the Act.

Exemptions

Marginal note:Exempt bank holding companies

 Sections 938 to 940 of the Act do not apply to

  • (a) a widely held bank holding company with equity of one billion dollars or more; or

  • (b) a bank holding company with equity of one billion dollars or more that is controlled by

    • (i) a widely held bank holding company,

    • (ii) a widely held insurance holding company,

    • (iii) an eligible financial institution, as defined in subsection 370(1) of the Act, other than a foreign bank, or

    • (iv) a foreign bank that is widely held.

  • SOR/2005-25, s. 1

Prescribed Subsidiary

Marginal note:Prescribed subsidiary

 For the purposes of sections 938 to 940 of the Act, a prescribed subsidiary of a bank holding company is a subsidiary of the bank holding company other than

  • (a) an insurance company;

  • (b) a securities dealer; or

  • (c) a subsidiary of an insurance company or securities dealer.

Prescribed Percentage

Marginal note:Prescribed percentage

  •  (1) For the purposes of sections 938 and 939 of the Act, the prescribed percentage is 70%.

  • Marginal note:Prescribed percentage

    (2) For the purpose of section 940 of the Act, the prescribed percentage is 100%.

Valuation of Equity

Marginal note:Value equals book value

 For the purposes of sections 939 and 940 of the Act, the value of the participating shares and ownership interests referred to in those sections that are beneficially owned by a bank holding company and its subsidiaries prescribed by section 4 is equal to their book value as reported on the consolidated balance sheet of the bank holding company.

Interests of a Bank Holding Company in Real Property

General

Marginal note:Definition and value of interest in real property

  •  (1) For the purposes of Division 9 of Part XV of the Act, other than subsection 937(3) of the Act, sections 8 to 12 define the interests of a bank holding company in real property and set out how those interests are to be valued.

  • Marginal note:Exception

    (2) For the purpose of subsection 937(3) of the Act, the interests of a bank holding company in real property means real property referred to in paragraph 11(1)(a) and shares and ownership interests referred to in paragraph 11(1)(b) that become beneficially owned by the bank holding company, or by a designated entity controlled by the bank holding company, as a result of the realization of a security interest on a loan or debt obligation referred to in subsection 11(1).

Direct Interests — Real Property and Debt Obligations

Marginal note:Direct interests

  •  (1) The following are interests of a bank holding company in real property:

    • (a) real property beneficially owned by the bank holding company or by a designated entity controlled by the bank holding company; and

    • (b) a debt obligation, for which the bank holding company or a designated entity controlled by the bank holding company is liable, that was issued for the purpose of acquiring or improving real property referred to in paragraph (a).

  • Marginal note:Value of direct interests

    (2) The value of the interests of a bank holding company in real property is

    • (a) in respect of real property referred to in paragraph (1)(a), the book value of the real property; and

    • (b) in respect of a debt obligation referred to in paragraph (1)(b), any amount by which the book value of the debt obligation exceeds the book value of the real property referred to in that paragraph.

Indirect Interests — Real Property, Shares and Ownership Interests

Marginal note:Certain indirect interests

  •  (1) The following are interests of a bank holding company in real property:

    • (a) at a particular time, real property

      • (i) that is beneficially owned by

        • (A) a related real property entity of the bank holding company that is a joint venture, or

        • (B) an entity in which an entity described in clause (A) has a substantial investment, and

      • (ii) that would be reported on a balance sheet of the bank holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 840(4) of the Act; and

    • (b) shares and ownership interests beneficially owned by the bank holding company, or by a designated entity controlled by the bank holding company, in any related real property entity of the bank holding company other than a related real property entity referred to in paragraph (a).

  • Marginal note:Value of those interests

    (2) The value of the interests of a bank holding company in real property is

    • (a) in respect of real property referred to in paragraph (1)(a), the book value of the real property; and

    • (b) in respect of shares and ownership interests referred to in paragraph (1)(b), the book value of the shares and ownership interests.

Indirect Interests — Loans and Debt Obligations

Marginal note:Certain indirect interests

  •  (1) The following are interests of a bank holding company in real property:

    • (a) a debt obligation issued by a related real property entity of the bank holding company and beneficially owned by the bank holding company or by a designated entity controlled by the bank holding company;

    • (b) a loan made by the bank holding company, or by a designated entity controlled by the bank holding company, to a related real property entity of the bank holding company;

    • (c) a loan made by the bank holding company, or by a designated entity controlled by the bank holding company, to

      • (i) a real property entity in which a securities dealer or insurance company controlled by the bank holding company has a substantial investment, or

      • (ii) a real property entity that is controlled by a real property entity described in subparagraph (i);

    • (d) a debt obligation issued by a real property entity described in subparagraph (c)(i) or (ii) and beneficially owned by the bank holding company or by a designated entity controlled by the bank holding company;

    • (e) a debt obligation that is

      • (i) issued by a related real property entity of the bank holding company,

      • (ii) beneficially owned by a third party, and

      • (iii) guaranteed by the bank holding company or by a designated entity controlled by the bank holding company; and

    • (f) a loan made by a third party to a related real property entity of the bank holding company and guaranteed by the bank holding company or by a designated entity controlled by the bank holding company.

  • Marginal note:Value of those interests

    (2) The value of the interests of a bank holding company in real property is

    • (a) in respect of a debt obligation referred to in paragraph (1)(a) or (d), the book value of the debt obligation;

    • (b) in respect of a loan referred to in paragraph (1)(b) or (c), the book value of the loan; and

    • (c) in respect of a guaranteed debt obligation referred to in paragraph (1)(e) or a guaranteed loan referred to in paragraph (1)(f),

      • (i) if the debt obligation is issued by, or the loan is made to, an entity that is a related real property entity of the bank holding company and the entity beneficially owns real property that is an interest of the bank holding company in real property under paragraph 9(1)(a), any amount by which the face value of the guarantee exceeds the value of the real property determined in accordance with paragraph 9(2)(a), and

      • (ii) in any other case, the face value of the guarantee.

Indirect Interests — Secured Loans and Debt Obligations

Marginal note:Certain indirect interests

  •  (1) If a bank holding company or a designated entity controlled by a bank holding company makes a loan to, or beneficially owns or guarantees the debt obligation of, a third party, the loan or debt obligation is an interest of the bank holding company in real property if it is secured by

    • (a) real property beneficially owned by a third party in conjunction with

      • (i) the bank holding company,

      • (ii) the designated entity,

      • (iii) a related real property entity of the bank holding company,

      • (iv) a securities dealer or insurance company controlled by the bank holding company,

      • (v) an entity controlled by a securities dealer or insurance company referred to in subparagraph (iv), or

      • (vi) a real property entity described in subparagraph 10(1)(c)(i) or (ii); or

    • (b) shares or ownership interests beneficially owned by a third party in

      • (i) an entity that beneficially owns real property in conjunction with the bank holding company, a related real property entity of the bank holding company or a designated entity controlled by the bank holding company, or

      • (ii) a related real property entity of the bank holding company.

  • Marginal note:Value of those interests

    (2) The value of the interests of a bank holding company in real property is

    • (a) in respect of a loan or debt obligation that is secured by real property referred to in paragraph (1)(a), the lesser of

      • (i) the net realizable value of the third party’s interest in the real property at the time that the security interest was given, and

      • (ii) the amount determined by the formula

        A - B

        where

        A
        is
        • (A) if the loan was made by the bank holding company or a designated entity controlled by the bank holding company or the debt obligation is beneficially owned by the bank holding company or a designated entity controlled by the bank holding company, the book value of the loan or debt obligation, or

        • (B) if the debt obligation is guaranteed by the bank holding company or a designated entity controlled by the bank holding company, the face value of the guarantee, and

        B
        is the total net realizable value of any other security interests that were given for the loan or debt obligation;
    • (b) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in an entity referred to in subparagraph (1)(b)(i), the lesser of

      • (i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and

      • (ii) the amount determined by the formula

        A - (B - (C × D/E))

        where

        A
        is
        • (A) if the loan was made by the bank holding company or a designated entity controlled by the bank holding company or the debt obligation is beneficially owned by the bank holding company or a designated entity controlled by the bank holding company, the book value of the loan or debt obligation, or

        • (B) if the debt obligation is guaranteed by the bank holding company or a designated entity controlled by the bank holding company, the face value of the guarantee,

        B
        is the total net realizable value of all security interests that were given for the loan or debt obligation,
        C
        is the net realizable value of the entity’s interest in the real property referred to in subparagraph (1)(b)(i),
        D
        is the value of the shares or ownership interests that are given as the security interest, and
        E
        is the total value of the outstanding shares or ownership interests in the entity; and
    • (c) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in a related real property entity referred to in subparagraph (1)(b)(ii), the lesser of

      • (i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and

      • (ii) the amount determined by the formula

        A - B

        where

        A
        is
        • (A) if the loan was made by the bank holding company or a designated entity controlled by the bank holding company or the debt obligation is beneficially owned by the bank holding company or a designated entity controlled by the bank holding company, the book value of the loan or debt obligation, or

        • (B) if the debt obligation is guaranteed by the bank holding company or a designated entity controlled by the bank holding company, the face value of the guarantee, and

        B
        is the total net realizable value of any other security interests that were given for the loan or debt obligation.

Other Interests

Marginal note:Other interests

  •  (1) The following are interests of a bank holding company in real property:

    • (a) a guarantee given by the bank holding company, or by a designated entity controlled by the bank holding company, to an entity other than the bank holding company or designated entity for the purpose of completing the development of real property that is beneficially owned by

      • (i) the bank holding company,

      • (ii) a designated entity controlled by the bank holding company, or

      • (iii) a related real property entity of the bank holding company; and

    • (b) an agreement made by the bank holding company, or by a designated entity controlled by the bank holding company, to support a third party’s cost of operating or financing real property that is beneficially owned by

      • (i) the bank holding company,

      • (ii) a designated entity controlled by the bank holding company, or

      • (iii) a related real property entity of the bank holding company.

  • Marginal note:Value of those interests

    (2) The value of the interests of a bank holding company in real property is

    • (a) in respect of a guarantee referred to in paragraph (1)(a), the estimated cost of completing the development of the real property; and

    • (b) in respect of an agreement referred to in paragraph (1)(b), the amount of any funds advanced by the bank holding company, or by a designated entity controlled by the bank holding company, under the agreement.

Coming into Force

Marginal note:Coming into force

Footnote * These Regulations come into force on the day on which sections 929 and 941 of the Bank Act, as enacted by section 183 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, come into force.

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