Order Amending paragraph (a) of Order in Council P.C. 2019-222 of March 25, 2019 by Replacing “April 30, 2021” with “April 30, 2022”: SI/2020-36
Canada Gazette, Part II, Volume 154, Number 12
SI/2020-36 June 10, 2020
BUDGET IMPLEMENTATION ACT, 2018, NO. 1
Order Amending paragraph (a) of Order in Council P.C. 2019-222 of March 25, 2019 by Replacing “April 30, 2021” with “April 30, 2022”
P.C. 2020-337 May 18, 2020
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 213(1) of the Budget Implementation Act, 2018, No. 1, chapter 12 of the Statutes of Canada, 2018, amends paragraph (a) of Order in Council P.C. 2019-222 of March 25, 2019 by replacing “April 30, 2021” with “April 30, 2022”.
(This note is not part of the Order.)
This Order in Council, pursuant to subsection 213(1) of the Budget Implementation Act, 2018, No. 1 chapter 12 of the Statutes of Canada, 2018 (BIA1 2018), amends Order in Council SI/2019-17 (P.C. 2019-222) to fix April 30, 2022, as the day on which Division 2 of Part 6 of that Act comes into force, other than section 203, subsection 204(2), section 206 and subsections 211(1) and (3) to (5). The coming into force of these other sections remains fixed as April 30, 2020, as per the previous order in council.
The purpose of this Order is to delay the coming-into-force date for certain amendments to the Canada Deposit Insurance Corporation Act (CDIC Act) that will modernize and enhance the Canadian deposit insurance framework to better protect depositors and support the ongoing stability of the financial system in Canada. Delaying the coming into force of these amendments will allow financial institutions to focus on managing the uncertainties related to the COVID-19 pandemic, contributing to financial stability and supporting businesses and individuals through these difficult times, while providing them with additional time to meet the new requirements of the CDIC Act and support the ongoing stability of the financial system in Canada.
Deposit insurance is an important element of the financial safety net. It contributes to maintaining public confidence in the financial system by protecting depositors’ savings in the unlikely event that a deposit-taking institution fails.
Canada’s deposit insurance framework is established under the CDIC Act and administered by the Canada Deposit Insurance Corporation (CDIC), a federal crown corporation under the purview of the Minister of Finance. CDIC provides deposit insurance to depositors in Canadian banks, federally incorporated trust and loan companies, federal credit unions, provincially incorporated trust and loan companies, and cooperative retail associations. CDIC insures eligible deposits at each of their member institutions up to $100,000 CAD per separately insured category in the event of a failure. Coverage is free and automatic. Depositors in Canada do not have to apply for coverage, or make a claim in the event of a failure. CDIC is funded by premiums paid by member institutions and does not receive public funds to operate. CDIC currently has 86 members.
Deposit Insurance Review (DIR)
Canada’s financial system proved to be resilient during the 2008 financial crisis. At that time, modifications to Canada’s deposit insurance framework were not needed to maintain confidence in the financial sector. Since the 2008 crisis, the global banking landscape has changed significantly, including the introduction of financial regulatory reforms aimed at reducing the probability of a future financial crisis. In light of such changes, the Government of Canada announced in Budget 2014 the launch of a comprehensive review of Canada’s deposit insurance framework to ensure that it would continue to provide adequate protection for the savings of Canadians.
Based on the review, which included public consultations held in 2016, several proposed amendments to the CDIC Act were introduced in Division 2 of Part 6 of BIA1 2018. These changes, referred to as the DIR provisions, received royal assent on June 21, 2018, but must be brought into force by order in council.
An order in council (P.C. 2019-222) was made on March 25, 2019, fixing the coming-into-force dates of the DIR provisions and published in the Canada Gazette on April 3, 2019 (SI/2019-17).
This Order brought the DIR provisions into force in two phases. The Order fixed April 30, 2020, as the day on which Phase I came into force and April 30, 2021, as the day on which Phase II comes into force.
Phase I consisted of
- removing travellers’ cheques, which are no longer issued by member institutions, as an eligible deposit;
- eliminating the five-year term limit on GICs, as longer term products are now available; and
- extending coverage to foreign currency deposits, which are widely used by Canadians.
Phase II consisted of
- treating all registered products in the same manner by adding new deposit categories for RESPs and RDSPs so that every registered product would be covered up to the same $100,000 limit;
- removing separate coverage for mortgage tax accounts (funds held in mortgage tax accounts would still receive coverage under other coverage categories as long as the funds are held as an eligible deposit, e.g. as an individual or joint deposit); and
- improving the rules for trust deposit accounts, by clarifying record keeping requirements and facilitating more timely payouts in the event that a bank fails.
In the face of current global developments related to COVID-19, financial institutions have been asked by the Government to focus on managing this uncertainty rather than devoting resources to previously announced regulatory changes. Canadian banks recognize the negative impact that COVID-19 may be having on some of their customers. They have made a commitment to the Government that they will support businesses and individuals through these difficult times. This Order therefore delays the coming-into-force date of certain DIR provisions. The Order fixes April 30, 2022, as the coming-into-force date for the Phase II DIR provisions pertaining to registered deposits, mortgage tax accounts, and trust deposits. The coming-into-force of the Phase I DIR provisions related to travellers’ cheques, GICs, and foreign currency remains fixed as April 30, 2020, as per the previous order in council.
The DIR provisions will come into force on different dates to take into account views of the major interest groups, including consumer groups, financial institutions, and financial sector and legal industry associations. These stakeholders are generally supportive of the DIR provisions, and they support the goals of depositor protection and financial stability. However, some concerns were raised about having an appropriate amount of time to update internal information systems in order to implement the DIR provisions. On balance, stakeholders agreed that as long as sufficient time is provided to update systems based on the complexity of the different changes, the DIR provisions would be workable. This delay of the coming-into-force date for certain amendments to the CDIC Act was requested by CDIC member institutions and industry associations.
The coming into force of the DIR provisions is not expected to have differential impacts on the basis of sex, gender, age, race, ethnicity, sexuality, religion, and/or mental or physical disability. All depositors in Canada are expected to benefit from the proposed measures, which support greater financial stability.
There are no financial implications for the Government of Canada with this Order in Council.
Overall, the DIR provisions will help protect depositors; improve understanding of insurance coverage; and ultimately, better support Canada’s ongoing financial stability. The DIR provisions will modernize the scope of deposit insurance coverage to better protect depositors while clarifying and simplifying the deposit insurance framework for depositors making it easier to understand.
The Department of Finance Canada held public consultations on changes considered to the deposit insurance framework in the fall of 2016. Approximately 15 submissions were received from a range of stakeholders. In addition, CDIC held public consultations on proposed changes to the Canada Deposit Insurance Corporation Joint and Trust Account Disclosure By-Law needed to implement the DIR provisions.
The decision to sequence the coming-into-force dates of the different DIR provisions, as well as the decision to delay Phase II, reflects the input provided by stakeholders and interested parties.
Financial Stability and Capital Markets Division
Financial Sector Policy Branch
Department of Finance Canada
90 Elgin Street