Canada Gazette, Part I, Volume 154, Number 42: By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law

October 17, 2020

Statutory authority
Canada Deposit Insurance Corporation Act

Sponsoring agency
Canada Deposit Insurance Corporation

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the By-law.)

Background

The Board of Directors of the Canada Deposit Insurance Corporation (CDIC) made the Canada Deposit Insurance Corporation Differential Premiums By-law (By-law) on March 3, 1999, pursuant to subsection 21(2) and paragraph 11(2)(g) of the Canada Deposit Insurance Corporation Act (CDIC Act). Subsection 21(2) of the CDIC Act authorizes the CDIC Board of Directors to make by-laws establishing a system of classifying member institutions into different categories; setting out the criteria or factors the CDIC will consider in classifying members into categories; establishing the procedures the CDIC will follow in classifying members; and fixing the amount of, or providing a manner of determining the amount of, the annual premium applicable to each category. The CDIC Board of Directors amended the By-law on January 12 and December 6, 2000, July 26, 2001, March 7, 2002, March 3, 2004, February 9 and April 15, 2005, February 8 and December 6, 2006, December 3, 2008, December 2, 2009, December 8, 2010, December 7, 2011, December 5, 2012, December 4, 2013, April 22, 2015, February 4, 2016, December 7, 2016, December 6, 2017, December 5, 2018, March 6, 2019, and December 4, 2019.

Issues

The CDIC annually reviews the By-law to confirm that it is up to date and that the terminology referenced in the By-law aligns with the terminology that is used in regulatory filings requested by the Office of the Superintendent of Financial Institutions (OSFI). Such alignment will ensure that CDIC member institutions have clarity on the data requirements, and that CDIC receives the appropriate information from its member institutions. As a result, technical amendments are proposed in the By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law (the Amending By-law).

The amendments align the By-law with OSFI’s Basel Capital Adequacy Reporting form (BCAR form).

Description

The table below provides more detail about the proposed amendments in the Amending By-law.

Amending By-law Section By-law Section Explanation
Schedule 2, Part 2, Reporting Form
1(1) 6.2 Amendment clarifies the calculation to be made in relation to net impaired
off-balance sheet assets.
1(2) Tables 6A and 6B Amendments align the information to be included in Tables 6A and 6B with OSFI’s BCAR form. The amendments reflect the addition, removal, and modification of several rows and columns in Schedules 39 and 40 of the BCAR form, which the tables refer to.
2 7.4.23 Amendments clarify that Stage 1 and 2 allowance on balance sheet assets is comprised of the sum of two data points, since the relevant data point has been split into two data points in this year’s BCAR form.

One-for-one rule

The one-for-one rule does not apply, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply, as there are no costs to small business.

Alternatives

There are no available alternatives. The amendments must be done by way of a By-law amendment.

Consultation

As the amendments are technical in nature and do not affect the substantive elements of the By-law, only consultation by way of prepublication in the Canada Gazette, Part I, is necessary.

Rationale

The proposed Amending By-law will ensure the By-law remains technically up to date, would achieve the stated objective, and addresses the identified issues. The Amending By-law would not impose any additional regulatory costs or administrative burden on industry.

Implementation, compliance and enforcement, and service standards

The proposed Amending By-law would come into effect for the 2021 premium year. There are no compliance or enforcement issues.

Contact

Noah Arshinoff
Senior Legal Counsel
Canada Deposit Insurance Corporation
50 O’Connor Street, 17th Floor
Ottawa, Ontario
K1P 6L2
Telephone: 613‑218‑0176
Email: narshinoff@cdic.ca

PROPOSED REGULATORY TEXT

Notice is given that the Board of Directors of the Canada Deposit Insurance Corporation, pursuant to subsection 21(2) footnote a of the Canada Deposit Insurance Corporation Act footnote b, proposes to make the annexed By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law.

Interested persons may make representations concerning the proposed By-law 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 Noah Arshinoff, Senior Legal Counsel, Canada Deposit Insurance Corporation, 50 O’Connor Street, 17th Floor, Ottawa, Ontario K1P 6L2 (email: narshinoff@cdic.ca).

Ottawa, October 6, 2020

Peter Routledge
President and Chief Executive Officer
Canada Deposit Insurance Corporation

By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law

Amendments

1 (1) The paragraph after the heading “6.2 Net Impaired Off-Balance Sheet Assets” in item 6 of the Reporting Form set out in Part 2 of Schedule 2 to the Canada Deposit Insurance Corporation Differential Premiums By-law footnote 1 is replaced by the following:

Calculate the net impaired off-balance sheet assets by subtracting the total of the column “Individual allowance for expected credit losses” in Table 6A from the total of the column “Credit equivalent amount” in that Table. If the result is negative, report “zero”.

(2) Tables 6A and 6B to item 6 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law are replaced by the following:

Table 6A — Impaired Off-balance Sheet Assets
Complete Table 6A as of the end of the fiscal year ending in the year preceding the filing year, referring to Schedule 39 – Off-balance Sheet Exposures Excluding Derivatives and Securitization Exposures and Schedule 40 – Derivative Contracts of the BCAR form and to the Capital Adequacy Requirements guideline of the Guidelines.
Impaired Instruments

Notional principal amount

a

Credit conversion factor

b

Credit equivalent amount

(a × b)

Individual allowance for expected credit losses
Direct credit substitutes – excluding credit derivatives   100%    
Direct credit substitutes – credit derivatives   100%    
Transaction-related contingencies   50%    
Short-term self-liquidating trade-related contingencies   20%    
Sale & repurchase agreements   100%    
Forward asset purchases   100%    
Forward forward deposits   100%    
Partly paid shares and securities   100%    
NIFs & RUFs   50%    
Undrawn commitments – excluding securitization exposure Standardized Approach   0%    
  20%    
  50%    
Advanced IRB Approach   table 2 note **    
  table 2 note **    
  table 2 note **    
Impaired OTC Derivative Contracts    
Credit derivative contracts table 2 note *  
Interest rate contracts table 2 note *  
Foreign exchange contracts table 2 note *  
Equity-linked contracts table 2 note *  
Commodity contracts table 2 note *  
Other contracts table 2 note *  
  Total  
Use these totals to calculate element 6.2

Table 2 note(s)

Table 2 note *

Fill in the totals from Table 6B.

Return to table 2 note * referrer

Table 2 note **

Refer to the Capital Adequacy Requirements guideline of the Guidelines to determine the applicable credit conversion factor.

Return to table 2 note ** referrer
Table 6B — Impaired OTC Derivative Contracts
Complete Table 6B as of the end of the fiscal year ending in the year preceding the filing year, referring to Schedule 40 – Derivative Contracts of the BCAR form and to the Capital Adequacy Requirements guideline of the Guidelines.

Impaired OTC Derivative Contracts (in thousands of dollars)

Credit derivative contracts

Interest rate contracts

Foreign exchange contracts

Equity-linked contracts

Commodity contracts

Other contracts

Potential Future Credit Exposure (PFE)

Total contracts not subject to permissible netting

            

Total contracts subject to permissible netting

            

Exposure at Default (EAD) (after taking into account collateral and guarantees)

Total contracts not subject to permissible netting

            

Total contracts subject to permissible netting

            

Total Impaired OTC Derivative Contracts (carry forward to "Credit equivalent amount" column in Table 6A)

            

2 The paragraph after the heading “7.4.23 Stage 1 and Stage 2 allowance on balance sheet assets” in item 7 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law is replaced by the following:

Indicate the sum of the amounts set out for “Stage 1 and Stage 2 allowance (excluding securitization allowance) on balance sheet assets for capital purposes” and “Allowance on assets capitalized under the securitization framework not recognized for capital purposes”, as set out in Schedule 45 – Balance Sheet Coverage by Risk Type and Reconciliation to Consolidated Balance Sheet of the BCAR form.

Coming into Force

3 This By-law comes into force on the day on which it is registered.