ARCHIVED — Vol. 146, No. 26 — December 19, 2012
SOR/2012-279 December 7, 2012
CANADIAN PAYMENTS ACT
By-law Amending Certain By-laws Made Under the Canadian Payments Act
The Board of Directors of the Canadian Payments Association, pursuant to subsection 18(1) (see footnote a) of the Canadian Payments Act (see footnote b), makes the annexed By-law Amending Certain By-laws Made Under the Canadian Payments Act.
Ottawa, October 16, 2012
Chairperson of the Board of Directors,
Canadian Payments Association
The Minister of Finance, pursuant to subsection 18(2) (see footnote c) of the Canadian Payments Act (see footnote d), approves the annexed By-law Amending Certain By-laws Made Under the Canadian Payments Act, made by the Board of Directors of the Canadian Payments Association.
Ottawa, December 7, 2012
JAMES MICHAEL FLAHERTY
Minister of Finance
BY-LAW AMENDING CERTAIN BY-LAWS MADE UNDER THE CANADIAN PAYMENTS ACT
CANADIAN PAYMENTS ASSOCIATION BY-LAW NO. 1 — GENERAL
1. Paragraphs 30(2)(c) and (d) of the Canadian Payments Association By-law No. 1 — General (see footnote 1) are replaced by the following:
- (c) no more than three members representing the class of members described in paragraph 9(3)(a) of the Act;
- (d) no more than one member representing the class of members described in paragraph 9(3)(b) of the Act; and
CANADIAN PAYMENTS ASSOCIATION BY-LAW NO. 3 — PAYMENT ITEMS AND AUTOMATED CLEARING SETTLEMENT SYSTEM
2. Paragraph 28(1)(a) of the Canadian Payments Association By-law No. 3 — Payment Items and Automated Clearing Settlement System (see footnote 2) is replaced by the following:
- (a) a central or cooperative credit association that has been appointed to be the group clearer and one or more of the following, including any combination of them:
- (i) centrals,
- (ii) cooperative credit associations,
- (iii) federal credit unions,
- (iv) locals that belong to the group clearer, or
- (v) locals that belong to another central or cooperative credit association if that central or cooperative credit association is also a member of the group; or
- (i) centrals,
COMING INTO FORCE
3. This By-law comes into force on the day on which section 207 of the Financial System Review Act , chapter 5 of the Statutes of Canada, 2012, comes into force, but if it is registered after that day, it comes into force on the day on which it is registered.
(This statement is not part of the By-law.)
Issue and objectives
The Canadian Payments Association (CPA) is a not-for-profit organization that is responsible for establishing and operating national clearing and settlement payments systems and facilitating the interaction of its payments systems with other systems involved in the exchange, settlement and clearing of payments. The CPA is also responsible for developing rules that apply to its member institutions which ensure the safety, soundness and efficiency of the payments systems.
Canadian Payments Association by-laws are made by the CPA Board of Directors and set out rules relating to the requirements for membership in the CPA; the payment of fees and dues of members; the payment of penalties related to the failure to comply with the by-laws, rules and orders of the CPA; the exchange, clearing and settlement of payment items; the authenticity and integrity of payment items and messages; and limiting the liability of the CPA and its members for any loss or damage suffered by a member. CPA by-laws require the approval of the Minister of Finance and must be published in the Canada Gazette.
To promote the continued growth and competitiveness of the financial sector, the Government has introduced a legislative framework to enable large credit unions to continue their operations as federal entities, known as federal credit unions (FCUs). Consequential to the legislative framework, amendments to CPA by-laws and regulations are required to enable the FCU framework. Amendments to CPA regulations are on a separate track and are made by the Governor in Council.
Description and rationale
The amendment to By-law No. 1 (General) is a technical change to mirror recent amendments to paragraphs 9(3)(a) and (b) of the Canadian Payments Act, which require FCUs to participate in the governance of the CPA as part of the cooperatives class. Specifically, this amendment provides that FCUs will participate within the cooperatives class for the purpose of selection of board members to the CPA finance committee.
The amendment to By-law No. 3 (Payment Items and Automated Clearing Settlement System) provides FCUs with the option of belonging to a group (a collection of financial institutions that bind themselves together through a group clearing arrangement [GCA]), wherein its payment items will be cleared by a group clearer.
The credit union system GCA under the CPA framework provides credit unions access to the payments system. Payment item clearing is a volume-driven business. By aggregating volumes through a clearing group, the over 400 credit unions participating through the GCA have been able to collectively attain the scale necessary to justify taking on the obligations and substantial infrastructure investments required for direct participation in the CPA.
There are no cost implications to these changes. However, those credit unions that choose to continue as federal credit unions will be required to meet the regulatory and compliance requirements under the federal regime.
Throughout the development of the by-laws, the Department of Finance consulted with key stakeholders in the credit union system, including provincial governments, individual credit unions, provincial credit union centrals, national centrals, federal agencies, and financial sector associations, including the Canadian Payments Association. The credit union system provided feedback on the proposed policy regarding the requirements for a FCU to participate in a group and some changes were made to provide further clarity.
After prepublication of the By-law on July 7, 2012, in Part Ⅰ of the Canada Gazette, the Department of Finance received one submission, which was supportive of the By-law.
Implementation, enforcement and service standards
The regulatory framework for federal credit unions is being implemented primarily under the Bank Act. The CPA Board of Directors has the authority to make by-laws pursuant to section 18 of the Canadian Payments Act. The CPA will be responsible for ensuring that its member institutions comply with the amendments. The amendments do not require any new mechanisms to ensure compliance and enforcement.
Financial Sector Division
Department of Finance
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