ARCHIVED — Vol. 146, No. 27 — July 7, 2012

Regulations Amending Certain Regulations Made Under the Bank Act

Statutory authority

Bank Act

Sponsoring department

Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

For the Regulatory Impact Analysis Statement, see Prospectus (Federal Credit Unions) Regulations.

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to the definitions “equity” (see footnote a), “going-private transaction” (see footnote b) and “regulatory capital” (see footnote c) in section 2, subsection 141.1(2) (see footnote d), section 144.1 (see footnote e), subsections 144.2(1) (see footnote f) and 151(6) (see footnote g), section 162, subsections 271(1.1) (see footnote h), 448.1(3) (see footnote i) and 458.1(2) (see footnote j), sections 474 (see footnote k), 500 and 936 (see footnote l) and subsection 978(1) (see footnote m) of the Bank Act (see footnote n), proposes to make the annexed Regulations Amending Certain Regulations Made Under the Bank Act.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be addressed to Jane Pearse, Director, Financial Institutions Division, Department of Finance, L’Esplanade Laurier, East Tower, 15th Floor, 140 O’Connor Street, Ottawa, Ontario K1A 0G5 (tel.: 613-992-1631; fax: 613-943-1334; email: finlegis@fin.gc.ca).

Ottawa, June 19, 2012

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING CERTAIN REGULATIONS MADE UNDER THE BANK ACT

RELATED PARTY TRANSACTIONS (BANKS) REGULATIONS

1. (1) Paragraph 4(a) of the Related Party Transactions (Banks) Regulations (see footnote 1) is replaced by the following:

  • (a) an allocation of an amount by or to the bank pursuant to subsection 18(2.3), 125(3), 127(10.3), 137(2), (4.1), (4.2) or (5.1), 181.5(2), 190.15(2) or 191.1(3) of the Income Tax Act;

(2) Paragraphs 4(d) to (f) of the Regulations are replaced by the following:

  • (d) the issue by or to the bank of conversion privileges, options or rights to acquire securities or membership shares the issuance of which is not otherwise provided for in the terms and conditions pursuant to which a security or membership share is being or has been issued;

  • (e) the purchase, for the purpose of cancellation, of any shares, membership shares or debt obligations issued by or to the bank the purchase of which is not otherwise provided for in the terms and conditions pursuant to which the shares, membership shares or debt obligations were issued;

  • (f) the redemption of any redeemable shares, membership shares or any debt obligations issued by or to the bank the redemption of which is not otherwise provided for in the terms and conditions pursuant to which the shares, membership shares or debt obligations were issued; or

AFFILIATED PERSONS (BANKS) REGULATIONS

2. Paragraph 3(b) of the Affiliated Persons (Banks) Regulations (see footnote 2) is replaced by the following:

  • (b) has a significant interest in a class of shares or in membership shares of the bank;

REGULATORY CAPITAL (BANKS) REGULATIONS

3. (1) Subsection 3(1) of the Regulatory Capital (Banks) Regulations (see footnote 3) is amended by adding the following after paragraph (a):

  • (a.1) members’ equity, if the bank is a federal credit union,

(2) The portion of subsection 3(2) of the Regulations before paragraph (b) is replaced by the following:

(2) In calculating the amount of regulatory capital under subsection (1), an amount may be included in respect of a security or membership share only if

  • (a) the security or membership share is, by its terms, subordinate in right of payment to all deposit liabilities and all other liabilities of the entity that issued the security or membership share other than liabilities that, by their terms, rank equally with, or are subordinate to, that security or membership share;

(3) Paragraph 3(2)(b) of the English version of the Regulations is replaced by the following:

  • (b) the security or membership share is issued and fully paid-up; and

EQUITY OF A BANK OR A BANK HOLDING COMPANY REGULATIONS

4. Subsections 1(2) and (3) of the Equity of a Bank or a Bank Holding Company Regulations (see footnote 4) are replaced by the following:

Financial statement equity

(2) For the purposes of these Regulations, the financial statement equity of an entity is the sum of the shareholders’ and members’ equity of the entity, and the minority interests in entities controlled by the entity, as they appear in the consolidated financial statements of the entity.

Acting in concert

(3) If two or more persons are deemed under section 9, 9.1, 9.2 or 371 of the Act, for the purposes of Part VII or Division 7 of Part XV of the Act, to be a single person who is acquiring beneficial ownership of the aggregate number of shares or membership shares of a bank, shares of a bank holding company or shares or ownership interests of an entity that are beneficially owned by them, those persons are deemed, for the purposes of these Regulations, to be a single person who has acquired beneficial ownership of the aggregate number of shares or membership shares of the bank, shares of the bank holding company or shares or ownership interests of the entity that are beneficially owned by them.

MINORITY INVESTMENT (BANK HOLDING COMPANIES) REGULATIONS

5. Paragraph (a) of the definition “value” in section 1 of the Minority Investment (Bank Holding Companies) Regulations (see footnote 5) is replaced by the following:

  • (a) in respect of a share, membership share, ownership interest or loan held by a bank holding company at a particular time, the book value of the share, membership share, ownership interest or loan that would be reported on the 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

6. Paragraph 3(a) of the Regulations is replaced by the following:

  • (a) all shares, membership shares and ownership interests beneficially owned by the bank holding company, and all shares, membership shares and ownership interests beneficially owned by entities controlled by the bank holding company, in designated entities in which the bank holding company has a substantial investment but over which it does not exercise control,

7. Section 4 of the English version of the Regulations is replaced by the following:

Restriction concerning loans

4. Subject to sections 5 and 6, a bank holding company that has a substantial investment in a designated entity over which it does not exercise control must not make a loan to, or give a guarantee on behalf of, the designated entity, or permit entities controlled by it to do so, if, after the making of the loan or the giving of the guarantee, the total value of the shares, membership shares, ownership interests, loans and guarantees referred to in paragraphs 3(a) to (c) would exceed 50% of the bank holding company’s regulatory capital.

8. Section 6 of the Regulations is replaced by the following:

Calculation of “total value” in section 3 or 4

6. For the purpose of calculating the total value referred to in section 3 or 4 in respect of a bank holding company, no amount may be included in respect of shares, membership shares or ownership interests acquired under sections 933 to 935 of the Act or acquired by a bank controlled by the bank holding company under subsection 193(12) or (13) of the Bank Act, chapter B-1 of the Revised Statutes of Canada, 1985.

MINORITY INVESTMENT (BANKS) REGULATIONS

9. Paragraph (a) of the definition “value” in section 1 of the Minority Investment (Banks) Regulations (see footnote 6) is replaced by the following:

  • (a) in respect of a share, membership share, ownership interest or loan held by a bank at a particular time, the book value of the share, membership share, ownership interest or loan that would be reported on the balance sheet of the bank prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 308(4) of the Act; and

10. Paragraph 3(a) of the Regulations is replaced by the following:

  • (a) all shares, membership shares and ownership interests beneficially owned by the bank, and all shares, membership shares and ownership interests beneficially owned by entities controlled by the bank, in designated entities in which the bank has a substantial investment but over which it does not exercise control,

11. Section 4 of the English version of the Regulations is replaced by the following:

Restriction concerning loans

4. Subject to sections 5 and 6, a bank that has a substantial investment in a designated entity over which it does not exercise control must not make a loan to, or give a guarantee on behalf of, the designated entity, or permit entities controlled by it to do so, if, after the making of the loan or the giving of the guarantee, the total value of the shares, membership shares, ownership interests, loans and guarantees referred to in paragraphs 3(a) to (c) would exceed 50% of the bank’s regulatory capital.

12. Section 6 of the Regulations is replaced by the following:

Calculation of “total value” in section 3 or 4

6. For the purpose of calculating the total value referred to in section 3 or 4, no amount may be included in respect of shares, membership shares or ownership interests acquired under sections 471 to 473 of the Act or subsection 193(12) or (13) of the Bank Act, chapter B-1 of the Revised Statutes of Canada, 1985.

ACCESS TO BASIC BANKING SERVICES REGULATIONS

13. Subsection 4(1) of the Access to Basic Banking Services Regulations (see footnote 7) is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

  • (d) if the member bank is a federal credit union and if it so requests, the individual shall become a member of the bank.

14. Section 9 of the Regulations is repealed.

15. Paragraph 14(a) of the Regulations is replaced by the following:

  • (a) the personal identification requirements to be met under these Regulations by an individual, for the purpose of cashing certain Government of Canada cheques and other instruments under subsection 458.1(1) of the Act; and

CIVIL REMEDIES (BANKS AND BANK HOLDING COMPANIES) REGULATIONS

16. The Civil Remedies (Banks and Bank Holding Companies) Regulations (see footnote 8) is amended by adding the following after section 2:

2.1 For the purpose of subsection 271(1.1) of the Act, the prescribed percentage of the membership shares of the federal credit union is 10%.

GOING-PRIVATE TRANSACTION (BANKS AND BANK HOLDING COMPANIES) REGULATIONS

17. Subsection 2(2) of the Going-Private Transaction (Banks and Bank Holding Companies) Regulations (see footnote 9) is replaced by the following:

(2) For the purpose of subsection (1), “participating securities” means

  • (a) in the case of a bank holding company or bank other than a federal credit union, securities of a bank or a bank holding company that give the holder of the securities a right to share in the earnings of the bank or bank holding company and, after the liquidation, dissolution or winding up of the bank or bank holding company, a right to share in its assets; and

  • (b) in the case of a federal credit union, securities of the federal credit union.

MEETINGS AND PROPOSALS (BANKS AND BANK HOLDING COMPANIES) REGULATIONS

18. The Meetings and Proposals (Banks and Bank Holding Companies) Regulations (see footnote 10) are amended by adding the following after section 3:

3.1 For the purpose of subsection 141.1(2) of the Act, the prescribed number of days is 90 days.

19. The heading before section 4 of the Regulations is replaced by the following:

SHAREHOLDER AND MEMBER PROPOSALS

20. Section 4 of the Regulations is amended by adding the following after subsection (2):

(3) For the purpose of subsection 144.1(2) of the Act, the prescribed period is six months.

21. The portion of section 5 of the Regulations before paragraph (a) is replaced by the following:

5. For the purposes of subsections 143(1.4), 144.1(5) and 732(1.4) of the Act,

22. Sections 6 to 12 of the Regulations are replaced by the following:

6. For the purposes of subsections 143(3), 144.1(6) and 732(3) of the Act, the proposal and the statement in support of it together are not to exceed 500 words.

7. For the purposes of paragraphs 143(5)(a), 144.1(8)(a) and 732(5)(a) of the Act, the prescribed number of days is 90 days.

8. For the purposes of paragraphs 143(5)(c), 144.1(8)(c) and 732(5)(c) of the Act, the prescribed period is two years.

9. (1) For the purposes of paragraphs 143(5)(d), 144.1(8)(d) and 732(5)(d) of the Act, the prescribed minimum amount of support for a proposal is

  • (a) if the proposal was introduced at one annual meeting, 3% of the total number of shares voted or 3% of the total number of members that voted if the bank is a federal credit union;

  • (b) if the proposal was introduced at two annual meetings, 6% of the total number of shares voted at its last presentation or 6% of the total number of members that voted at its last presentation if the bank is a federal credit union; and

  • (c) if the proposal was introduced at three or more annual meetings, 10% of the total number of shares voted at its last presentation or 10% of the total number of members that voted at its last presentation if the bank is a federal credit union.

(2) For the purposes of paragraphs 143(5)(d), 144.1(8)(d) and 732(5)(d) of the Act, the prescribed period is five years.

10. For the purposes of subsections 143(5.1), 144.1(9) and 732(5.1) of the Act, the prescribed period is two years.

11. For the purposes of subsections 144(1), 144.2(1) and 733(1) of the Act, the prescribed period for the person to be notified is 21 days.

ELECTRONIC VOTING

12. For the purposes of paragraph 151(6)(a) and subsection 740(5) of the Act, when a vote is held at a meeting, the voting may be carried out by means of a telephonic, electronic or other communication facility if the facility

  • (a) enables the votes to be gathered in a manner that permits their subsequent verification; and

  • (b) permits the tallied votes to be presented to the bank or the bank holding company without it being possible for the bank or the bank holding company to identify how each shareholder, member, group of shareholders or group of members voted.

COMING INTO FORCE

23. These Regulations come into force on the day on which section 1894 of the Jobs and Economic Growth Act, chapter 12 of the Statutes of Canada, 2010, comes into force or, if later, on the day on which they are registered.

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Footnote a
S.C. 2001, c. 9, s. 35(7)

Footnote b
S.C. 2005, c. 54, s. 1(2)

Footnote c
S.C. 2001, c. 9, s. 35(2)

Footnote d
S.C. 2010, c. 12, s. 1954

Footnote e
S.C. 2010, c. 12, s. 1957

Footnote f
S.C. 2010, c. 12, s. 1957

Footnote g
S.C. 2010, c. 12, s. 1961(2)

Footnote h
S.C. 2010, c. 12, s. 2017(1)

Footnote i
S.C. 2001, c. 9, s. 117

Footnote j
S.C. 2001, c. 9, s. 123

Footnote k
S.C. 2001, c. 9, 127

Footnote l
S.C. 2001, c. 9, s. 183

Footnote m
S.C. 2010, c. 12, s. 2092

Footnote n
S.C. 1991, c. 46

Footnote 1
SOR/92-309

Footnote 2
SOR/92-325

Footnote 3
SOR/92-531

Footnote 4
SOR/2001-377

Footnote 5
SOR/2001-401

Footnote 6
SOR/2001-402

Footnote 7
SOR/2003-184

Footnote 8
SOR/2006-299

Footnote 9
SOR/2006-307

Footnote 10
SOR/2006-314