Budget Implementation Act, 2016, No. 1 (S.C. 2016, c. 7)
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Assented to 2016-06-22
PART 4Various Measures (continued)
DIVISION 5Bank Recapitalization Regime (Bail-in) (continued)
R.S., c. C-3Canada Deposit Insurance Corporation Act (continued)
127 (1) Paragraph 10(1)(a) of the Act is replaced by the following:
(a) acquire assets from a member institution;
(a.1) make or guarantee loans or advances, with or without security, to a member institution;
(a.11) make or guarantee a deposit with a member institution;
(a.12) assume liabilities of a member institution;
(2) Paragraph 10(1)(f) of the Act is replaced by the following:
(f) acquire assets and assume liabilities of a member institution from its liquidator or receiver;
(3) Section 10 of the Act is amended by adding the following after subsection (3):
Marginal note:Assets and liabilities
(3.1) A corporation described in paragraph (2)(a) or (b) may acquire assets and assume liabilities of a member institution from that institution or from its liquidator or receiver.
128 (1) Subsection 29(1) of the Act is amended by striking out “and” at the end of paragraph (b) and by adding the following after that paragraph:
(b.1) if the member institution is a domestic systemically important bank, provide an assessment of its capacity to absorb losses that it is required to maintain under section 485 of the Bank Act; and
Marginal note:2001, c. 9, s. 210
(2) Subsection 29(3) of the Act is replaced by the following:
Marginal note:Right of Corporation to information
(3) The Corporation is entitled to all information obtained by or produced by or for the person, whether in the course of conducting the examination or inspection or otherwise, regarding the affairs of the member institution or any of its affiliates or of any person dealing with the member institution or any of its affiliates.
Marginal note:R.S., c. 18 (3rd Supp.), s. 62; 1996, c. 6, s. 35; 2005, c. 30, s. 106
129 Subsection 30(1) of the Act is replaced by the following:
Marginal note:Reporting breaches
30 (1) If, in the Corporation’s opinion, a member institution is in breach of a provision of this Act or the regulations, a by-law of the Corporation or a condition of its policy of deposit insurance, the Corporation may send a report of the facts to the chief executive officer or chairperson of the board of directors of the member institution. The report may be sent by registered mail or delivered by hand and a copy of it must be provided to the Minister.
Marginal note:1996, c. 6, s. 41; 1999, c. 31, s. 28(F)
130 Sections 39.11 and 39.12 of the Act are replaced by the following:
Marginal note:Request of Corporation
39.11 On receipt of a report made by the Superintendent under section 39.1, the Corporation may
(a) after determining that a transaction referred to in section 39.2 is reasonably likely to be expeditiously carried out after the making of the order, request the Minister to recommend that one or more orders be made under subsection 39.13(1); or
(b) in the case of a domestic systemically important bank, request the Minister to recommend that one or more orders be made under subsection 39.13(1) and that an order be made under subsection 39.13(1.3).
Marginal note:Recommendation of Minister
39.12 If a request referred to in section 39.11 is made by the Corporation, the Minister may, if he or she is of the opinion that it is in the public interest to do so, recommend to the Governor in Council that one or more orders be made under subsection 39.13(1) in respect of the federal member institution and, in the case of a domestic systemically important bank, that an order be made under subsection 39.13(1.3) in respect of that institution.
Marginal note:2009, c. 2, s. 243(1)
131 (1) Paragraph 39.13(1)(a) of the Act is replaced by the following:
(a) vest in the Corporation the shares and subordinated debt of the federal member institution that are specified in the order;
(2) Subsection 39.13(1) of the Act is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) direct the Corporation to carry out a conversion under subsection 39.2(2.3).
(3) Section 39.13 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Conditions for conversion
(1.2) An order may be made under paragraph (1)(d) in respect of the federal member institution only if the institution is a domestic systemically important bank and an order has also been made under paragraph (1)(a) or (b) in respect of the institution.
Marginal note:Order — longer period
(1.3) The Governor in Council may, on the recommendation of the Minister made under section 39.12, by order, require the Corporation to apply for a winding-up order in respect of the federal member institution in accordance with subsection 39.22(1.1).
Marginal note:1996, c. 6, s. 41; 2009, c. 2, s. 243(2)(F)
(4) The portion of subsection 39.13(2) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:But du décret portant dévolution
(2) Le décret pris au titre de l’alinéa (1)a) :
Marginal note:1996, c. 6, s. 41
(5) Paragraphs 39.13(2)(a) and (b) of the Act are replaced by the following:
(a) vests in the Corporation the shares and subordinated debt that are subject to the order, free from any adverse claim, including any claim that a transfer was wrongful or that a particular adverse person was the owner of or had an interest or right in respect of the shares or subordinated debt, even though the Corporation knows of the adverse claim;
(b) extinguishes any such adverse claim to the extent that the claim is a claim that a person other than the Corporation is the owner of or has an interest or right in respect of the shares or subordinated debt;
Marginal note:1996, c. 6, s. 41
(6) Paragraph 39.13(2)(d) of the Act is replaced by the following:
(d) does not prevent a secured creditor or assignee or successor in interest of the person who was the holder of the shares or subordinated debt immediately before the making of the order from being entitled to receive compensation under section 39.23; and
(7) Subsection 39.13(2) of the Act is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) gives the Corporation the right to recover, out of the assets of the federal member institution and in priority to all other claims, all the costs, charges and expenses properly incurred by the Corporation in furtherance of the order, including those related to its operation of the institution.
Marginal note:1996, c. 6, s. 41
(8) Paragraph 39.13(3)(c) of the Act is replaced by the following:
(c) gives the Corporation the right to recover, out of the assets of the federal member institution and in priority to all other claims, all the costs, charges and expenses properly incurred by the Corporation in furtherance of the order, including those related to its operation of the institution.
Marginal note:1996, c. 6, s. 41
(9) Subsection 39.13(4) of the Act is replaced by the following:
Marginal note:For greater certainty — bankruptcy
(4) For greater certainty, shares and subordinated debt that are subject to an order made under paragraph (1)(a) and that, immediately before the making of the order, are vested in a trustee in bankruptcy under the Bankruptcy and Insolvency Act are vested in the Corporation.
Marginal note:For greater certainty — exercising rights
(4.1) For greater certainty, an order made under paragraph (1)(a) or (b) prevents any person, other than the Corporation, who is the holder of shares or subordinated debt or other debts or liabilities of the federal member institution or who is a party to or a beneficiary of a contract with the institution, and any secured creditor or assignee or successor in interest of such a person, from exercising any voting or other rights arising from the person’s status in any manner that could defeat or interfere with the rights, powers, privileges and immunities of the Corporation as holder of shares or subordinated debt or as receiver, as the case may be.
Marginal note:1996, c. 6, s. 41
(10) Paragraph 39.13(5)(b) of the English version of the Act is replaced by the following:
(b) an asset of the federal member institution that is acquired from the Corporation, as receiver, shall, except to the extent that it is an asset referred to in subparagraph (3)(b)(iii), be acquired free of any adverse claim of the federal member institution or any other person, and
Marginal note:1996, c. 6, s. 41
(11) Subsection 39.13(6) of the Act is replaced by the following:
Marginal note:Order conclusive
(6) An order made under this section and any action taken or decision made in furtherance of such an order are for all purposes final and conclusive and shall not be questioned or reviewed in any court.
Marginal note:2009, c. 2, s. 244; 2012, c. 5, s. 197
132 Sections 39.131 and 39.132 of the Act are repealed.
Marginal note:1996, c. 6, s. 41
133 (1) Subsection 39.14(1) of the Act is replaced by the following:
Marginal note:Powers of Corporation
39.14 (1) If an order is made under paragraph 39.13(1)(a) or (b) in respect of a federal member institution, the powers, duties, functions, rights and privileges of the directors of the federal member institution and those of its officers who are responsible for its management are suspended except to the extent that is specified in writing by the Corporation. The Corporation may exercise those powers, rights and privileges and perform those duties and functions.
Marginal note:1996, c. 6, s. 41
(2) Subsection 39.14(2) of the Act is replaced by the following:
Marginal note:Shareholders
(1.2) If an order is made under paragraph 39.13(1)(a) or (b) in respect of a federal member institution, the powers, rights and privileges of its shareholders to vote or give approvals are suspended and the Corporation may exercise those powers, rights and privileges.
Marginal note:Persons to assist
(2) The Corporation may appoint one or more persons to assist it in the management of any federal member institution or in carrying out the Corporation’s functions as holder of shares or subordinated debt or as receiver and may delegate to those persons any of the powers, duties, functions, rights or privileges of the directors and officers of the federal member institution.
Marginal note:1996, c. 6, s. 41
(3) Subsection 39.14(3) of the Act is repealed.
(4) Section 39.14 of the Act is amended by adding the following after subsection (3):
Marginal note:Power to appoint and remove
(4) If an order is made under paragraph 39.13(1)(b) in respect of a federal member institution, the Corporation may appoint or remove any director of the federal member institution.
Marginal note:Corporation’s directions
(5) If an order is made under paragraph 39.13(1)(a) or (b) in respect of a federal member institution, the Corporation may give directions to the board of directors of the federal member institution, including to make, amend or repeal any by-law of the institution.
Marginal note:Implementation
(6) The board of directors of the federal member institution shall ensure that a direction given under subsection (5) is implemented in a prompt and efficient manner and shall, after implementing a direction, notify the Corporation without delay that it has been implemented.
Marginal note:By-laws — board of directors
(7) The board of directors of the federal member institution may, with the prior approval of the Corporation, make, amend or repeal any by-law of the institution.
Marginal note:1996, c. 6, s. 41; 2009, c. 2, s. 245(2)
134 (1) Paragraphs 39.15(1)(d) to (f) of the Act are replaced by the following:
(d) except in the normal course of clearing and settlement processes, including the consolidation of accounts in respect of those processes or the services referred to in paragraph (5)(c), no creditor has any right of set-off or compensation against the federal member institution;
(e) no person may terminate or amend any agreement with the federal member institution or claim an accelerated payment, or forfeiture of the term, under such an agreement by reason only of
(i) the insolvency or deteriorated financial condition of the federal member institution or any of its affiliates, providers of credit support or guarantors,
(ii) a non-monetary default, before the order was made, by the federal member institution or any of its affiliates in the performance of obligations under the agreement,
(iii) a monetary default, before the order was made, under the agreement by the federal member institution or any of its affiliates that is remedied within 60 days after the day on which the order is made,
(iv) the making of the order or any change of control or ownership of the federal member institution or any of its affiliates that is related to the making of the order,
(v) the assignment or assumption of the agreement to or by a bridge institution or a third party,
(vi) the transfer to a third party of all or part of the assets or liabilities of the federal member institution or any of its affiliates,
(vii) a conversion under subsection 39.2(2.3) in respect of the federal member institution, or
(viii) a conversion of any of the federal member institution’s shares or liabilities in accordance with the contractual terms of those shares or liabilities; and
(f) no person may terminate the federal member institution’s membership in an organization by reason only of
(i) the insolvency or deteriorated financial condition of the federal member institution or any of its affiliates, providers of credit support or guarantors,
(ii) a non-monetary default, before the order was made, by the federal member institution or any of its affiliates in the performance of obligations under the rules of the organization,
(iii) a monetary default, before the order was made, under the rules of the organization by the federal member institution or any of its affiliates that is remedied within 60 days after the day on which the order is made,
(iv) the making of the order or any change of control or ownership of the federal member institution or any of its affiliates that is related to the making of the order,
(v) the transfer of the federal member institution’s membership to a bridge institution or a third party,
(vi) the transfer to a third party of all or part of the assets or liabilities of the federal member institution or any of its affiliates,
(vii) a conversion under subsection 39.2(2.3) in respect of the federal member institution, or
(viii) a conversion of any of the federal member institution’s shares or liabilities in accordance with the contractual terms of those shares or liabilities.
Marginal note:2009, c. 2, s. 245(3)
(2) Subparagraphs 39.15(2)(b)(i) to (iv) of the Act are replaced by the following:
(i) the insolvency or deteriorated financial condition of the federal member institution or any of its affiliates, providers of credit support or guarantors,
(ii) a non-monetary default, before the order was made, by the federal member institution or any of its affiliates in the performance of obligations under the agreement,
(iii) a monetary default, before the order was made, under the agreement by the federal member institution or any of its affiliates that is remedied within 60 days after the day on which the order is made,
(iv) the making of the order or any change of control or ownership of the federal member institution or any of its affiliates that is related to the making of the order,
(v) the assignment or assumption of the agreement to or by a bridge institution or a third party,
(vi) the transfer to a third party of all or part of the assets or liabilities of the federal member institution or any of its affiliates,
(vii) a conversion under subsection 39.2(2.3) in respect of the federal member institution, or
(viii) a conversion of any of the federal member institution’s shares or liabilities in accordance with the contractual terms of those shares or liabilities.
Marginal note:2009, c. 2, s. 245(4)
(3) Subparagraphs 39.15(2.1)(b)(i) to (iv) of the Act are replaced by the following:
(i) the insolvency or deteriorated financial condition of the federal member institution or any of its affiliates, providers of credit support or guarantors,
(ii) a non-monetary default, before the order was made, by the federal member institution or any of its affiliates in the performance of obligations under the rules of the organization,
(iii) a monetary default, before the order was made, under the rules of the organization by the federal member institution or any of its affiliates that is remedied by the institution within 60 days after the day on which the order is made,
(iv) the making of the order or any change of control or ownership of the federal member institution or any of its affiliates that is related to the making of the order,
(v) the transfer of the federal member institution’s membership to a bridge institution or a third party,
(vi) the transfer to a third party of all or part of the assets or liabilities of the federal member institution or any of its affiliates,
(vii) a conversion under subsection 39.2(2.3) in respect of the federal member institution, or
(viii) a conversion of any of the federal member institution’s shares or liabilities in accordance with the contractual terms of those shares or liabilities.
Marginal note:2001, c. 9, s. 212(1); 2009, c. 2, s. 245(5)
(4) Subsections 39.15(3) and (3.1) of the Act are replaced by the following:
Marginal note:Clearing arrangements
(3) Subsections (1) to (2.1) do not apply so as to prevent a member of the Canadian Payments Association from acting or ceasing to act as a clearing agent for a federal member institution in accordance with the Canadian Payments Act and the by-laws and rules of that Association.
Marginal note:Exception
(3.1) Despite subsection (3), if a clearing agent that is a member of the Canadian Payments Association acts in that capacity for a federal member institution at the time an order is made under subsection 39.13(1) in respect of the institution, the clearing agent shall continue to act in that capacity for the institution after the order is made, if the Corporation has given an undertaking to provide the financial assistance that the institution needs in order to discharge its obligations to the clearing agent as they become due.
Marginal note:Clearing house
(3.2) Subsections (1) to (2.1) do not apply so as to prevent a clearing house
(a) from acting or ceasing to act in that capacity for a federal member institution; or
(b) from exercising its rights under its settlement rules, as defined in subsection 8(5) of the Payment Clearing and Settlement Act.
Marginal note:Exception
(3.3) Despite subsection (3.2), a clearing house that acts in that capacity for a federal member institution at the time an order is made under subsection 39.13(1) in respect of the institution shall continue to act in that capacity for the institution and subsections (1) to (2.1) apply in respect of the clearing house, if the Corporation has given an undertaking to provide the financial assistance that the institution needs in order to discharge its obligations to the clearing house as they become due.
Marginal note:2009, c. 2, s. 245(6)
(5) Paragraph 39.15(6)(b) of the Act is replaced by the following:
(b) the Superintendent, on the application of the federal member institution, exempted the security agreement from the application of those paragraphs and that subsection before the making of an order under subsection 39.13(1) and the Corporation does not undertake
(i) to ensure that the obligations secured by the security interest will be assumed by a bridge institution or a third party, or
(ii) to provide the federal member institution with the financial assistance that it needs to discharge the obligations secured by the security interest as they become due.
Marginal note:2007, c. 29, s. 103(1)
(6) Subsection 39.15(7) of the Act is replaced by the following:
Marginal note:Eligible financial contracts
(7) Nothing in subsection (1), (2) or (2.1) prevents the following actions from being taken in accordance with the provisions of an eligible financial contract:
(a) the termination or amendment of the contract;
(b) the accelerated payment or forfeiture of the term under the contract;
(c) the exercise of remedies for a failure to pay an amount payable under or in connection with the contract;
(d) the netting or setting off or compensation of an amount payable under or in connection with the contract; or
(e) except in respect of the actions referred to in paragraphs (c) and (d), any dealing with financial collateral, including
(i) the sale or foreclosure or, in Quebec, the surrender of financial collateral, and
(ii) the setting off or compensation of financial collateral or the application of the proceeds or value of financial collateral.
Marginal note:2012, c. 31, s. 166(1)
(7) The portion of subsection 39.15(7.01) of the Act before paragraph (b) is replaced by the following:
Marginal note:Stay — bridge institutions
(7.01) If an order directing the incorporation of a bridge institution is made, the actions referred to in paragraphs (7)(a), (b) and (e) are not to be taken during the period beginning on the coming into force of the order and ending on the following business day at 5:00 p.m. at the location of the Corporation’s head office, by reason only of
(a) the insolvency or deteriorated financial condition of the federal member institution, any of its affiliates or any of its providers of credit support or guarantors in respect of the institution’s obligations under the eligible financial contract;
Marginal note:2012, c. 31, s. 166(1)
(8) Subsections 39.15(7.02) to (7.1) of the Act are replaced by the following:
Marginal note:Stay — eligible financial contracts
(7.1) If an order made under subsection 39.13(1) does not direct the incorporation of a bridge institution, or if it directs the incorporation of a bridge institution and the Corporation undertakes, before the time referred to in subsection (7.01), to assign the eligible financial contract to the bridge institution, the actions referred to in paragraphs (7)(a), (b) and (e) are not to be taken by reason only of
(a) the insolvency or deteriorated financial condition of the federal member institution, any of its affiliates or any of its providers of credit support or guarantors in respect of the institution’s obligations under the eligible financial contract;
(b) the assignment or assumption of the eligible financial contract to or by a bridge institution or a third party;
(c) the making of the order or any change of control or ownership of the federal member institution or any of its affiliates that is related to the making of the order;
(d) a conversion under subsection 39.2(2.3) in respect of the federal member institution; or
(e) a conversion of any of the federal member institution’s shares or liabilities in accordance with the contractual terms of those shares or liabilities.
Marginal note:Stay terminated by order
(7.101) If the Governor in Council considers that all or substantially all of the federal member institution’s assets will be transferred to a third party, the Governor in Council may, by order, declare that subsection (7.1) ceases to apply in respect of the institution’s eligible financial contracts, or any class of those contracts, at the later of
(a) 5:00 p.m. at the location of the Corporation’s head office on the first business day after the day on which the order made under subsection 39.13(1) comes into force, and
(b) 5:00 p.m. at the location of the Corporation’s head office on the day on which the order is made under this subsection.
Marginal note:Exception
(7.102) Despite any order made under subsection (7.101), subsection (7.1) does not cease to apply in respect of an eligible financial contract if the Corporation undertakes, before the time provided for in subsection (7.101), to assign it to a third party.
Marginal note:2012, c. 31, s. 166(1)
(9) Paragraph 39.15(7.11)(b) of the Act is replaced by the following:
(b) provides, in substance, that, by reason of the occurrence of any circumstance described in any of paragraphs (7.01)(a) to (c) and (7.1)(a) to (e), the federal member institution ceases to have the rights — or, in the case of a bridge institution, does not have the rights — to use or deal with assets that the federal member institution or bridge institution would otherwise have.
(10) Section 39.15 of the Act is amended by adding the following after subsection (7.11):
Marginal note:Exception
(7.12) Subsections (7.01) and (7.1) do not apply in respect of an eligible financial contract between the federal member institution and a clearing house unless the Corporation has given the undertaking referred to in subsection (3.3) in respect of the institution.
Marginal note:2010, c. 12, s. 1889
(11) The portion of subsection 39.15(7.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Assignment of eligible financial contracts
(7.2) Subject to subsection (7.21), the Corporation may assign to a bridge institution or a third party eligible financial contracts — including any claim under such contracts — that are between a federal member institution and an entity or any of the following entities if the Corporation assigns all of those eligible financial contracts to the bridge institution or the third party:
Marginal note:2010, c. 12, s. 1889
(12) Subsection 39.15(7.3) of the Act is replaced by the following:
Marginal note:Eligible third parties
(7.21) The Corporation may assign eligible financial contracts to a third party under subsection (7.2) if the third party has met any condition that may be prescribed in the by-laws and has certified in writing that
(a) it maintains all material licences and registrations that are required for the continued operation of its business and, if applicable, that it is in good standing in respect of those licences and registrations;
(b) it has, on its balance sheet, assets that exceed its liabilities;
(c) it is able to discharge its obligations in respect of the assigned eligible financial contracts as they become due; and
(d) its creditworthiness is at least as good as the federal member institution’s creditworthiness was immediately before the order was made under subsection 39.13(1).
Marginal note:Effects of assignment of eligible financial contracts
(7.3) If any of the eligible financial contracts are assigned to or assumed by a bridge institution or a third party,
(a) the Corporation shall assign all of the federal member institution’s obligations arising from the eligible financial contracts, and the bridge institution or the third party shall assume those obligations; and
(b) the federal member institution’s interest or right in property that secures its obligations under the eligible financial contracts is transferred to the bridge institution or the third party.
(13) Subsection 39.15(9) of the Act is amended by adding the following in alphabetical order:
- business day
business day means a day, other than a Saturday or a Sunday, on which the head office of the federal member institution is open for business. (jour ouvrable)
- clearing agent
clearing agent has the same meaning as in section 1 of the Canadian Payments Association By-law No. 3 — Payment Items and Automated Clearing Settlement System. (agent de compensation)
- clearing house
clearing house means
(a) a clearing house, as defined in section 2 of the Payment Clearing and Settlement Act, that provides clearing and settlement services for a clearing and settlement system designated under section 4 of that Act; or
(b) a securities and derivatives clearing house, as defined in subsection 13.1(3) of the Payment Clearing and Settlement Act. (chambre de compensation)
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