Vol. 147, No. 13 — June 19, 2013
SI/2013-61 June 19, 2013
JOBS, GROWTH AND LONG-TERM PROSPERITY ACT
Order Fixing the Day after the Day on which this Order is made as the Day on which Paragraph 21.52(1)(b) of the National Housing Act Comes into Force and July 1, 2013 as the Day on which Sections 361 to 364 of the Jobs, Growth and Long-term Prosperity Act Come into Force
P.C. 2013-603 May 30, 2013
His Excellency the Governor General in Council,
- (a) on the recommendation of the Minister of Human Resources and Skills Development, pursuant to subsection 367(2) of the Jobs, Growth and Long-term Prosperity Act (“the Act”), chapter 19 of the Statutes of Canada, 2012, fixes the day after the day on which this Order is made as the day on which paragraph 21.52(1)(b) of the National Housing Act, as enacted by section 356 of the Act, comes into force; and
- (b) on the recommendation of the Minister of Finance, pursuant to subsection 367(3) of the Act, fixes July 1, 2013 as the day on which sections 361 to 364 of the Act come into force.
(This note is not part of the Order.)
To fix the day after the day on which the Order is made as the day on which a provision of section 356 of An Act to implement certain provisions of the budget (the Jobs, Growth and Long-term Prosperity Act), in respect of provincially regulated cooperative credit societies, comes into force; and to fix July 1, 2013, as the date on which sections 361 to 364 of An Act to implement certain provisions of the budget (the Jobs, Growth and Long-term Prosperity Act), in respect of federally regulated financial institutions, come into force.
To allow a cooperative credit society that is incorporated and regulated by or under an Actof the legislature of a province to apply for registration as a registered issuer of covered bonds as specified under the National Housing Act; and to prohibit a federally regulated financial institution from issuing a debt obligation that is guaranteed by assets held by an entity created and organized for the principal purpose of holding those assets, unless the obligation is a covered bond under the National Housing Act.
One of the lessons of the financial crisis is the importance of financial institutions having a variety of funding sources that are robust under stress. Providing funding options that are robust under stress enhances the stability of financial institutions and the financial sector. One source of funding that has become increasingly important to Canadian banks is covered bonds. Covered bonds are debt instruments that are issued by a financial institution and secured by high-quality assets, such as residential mortgages.
Recognizing the growing importance of covered bonds, the Government committed to setting out a legislative framework under which Canadian financial institutions could issue covered bonds. The Jobs, Growth and Long-term Prosperity Act (the Act) amended the National Housing Act to establish a legislative framework in respect of covered bonds that is administered by the Canadian Mortgage and Housing Corporation. The provisions of the Act created a registry of institutions that issue covered bonds and of covered bond programs. The provisions also set out the permissible assets that can be used in a covered bond program under the National Housing Act, and included measures relating to the protection of covered bond contracts and covered bond collateral in the event of the issuer’s bankruptcy or insolvency.
The legislative framework for covered bonds provides regulated Canadian mortgage lenders a private funding vehicle and supports financial stability. The framework helps lenders access new sources of funding, as some foreign investors can only invest when covered bonds are issued under a legislative framework, and makes the market for covered bonds more robust by providing legal certainty to investors about their rights to the supporting collateral.
The remaining provisions of the covered bonds legislated framework coming into force extend the framework to provincially regulated cooperative credit societies, allowing them to apply for registration as a registered issuer of covered bonds under the framework, and prohibit federally regulated financial institutions from issuing covered bonds outside of the framework.
The legislative framework for covered bonds was consulted on widely. Consultations included submissions from domestic and foreign stakeholders, including covered bond investors. In general, all stakeholders were supportive of a legislative framework for covered bonds.
Financial Institutions Division
Department of Finance Canada
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