Order Amending Schedule IV to the Bank Act (CPTPP and CUKTCA): SOR/2021-146
Canada Gazette, Part II, Volume 155, Number 14
SOR/2021-146 June 17, 2021
P.C. 2021-588 June 17, 2021
His Excellency the Administrator of the Government of Canada in Council, on the recommendation of the Minister of Finance, pursuant to section 14.11 footnote a of the Bank Act footnote b, makes the annexed Order Amending Schedule IV to the Bank Act (CPTPP and CUKTCA).
Order Amending Schedule IV to the Bank Act (CPTPP and CUKTCA)
1 (1) Schedule IV to the Bank Act footnote b is amended by adding the following after “Agreement within the meaning of section 2 of the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act”:
- within the meaning of section 2 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation Act
(2) Schedule IV to the Act is amended by adding the following at the end of that Schedule:
- within the meaning of section 2 of the Canada–United Kingdom Trade Continuity Agreement Implementation Act
Coming into Force
2 This Order comes into force on the day on which section 159 of the Canada–United States–Mexico Agreement Implementation Act, chapter 1 of the Statutes of Canada, 2020, comes into force, but if it is registered after that day, it comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
Under the Canada–United States–Mexico Agreement (CUSMA), Canada agreed to exempt eligible foreign-owned financial institutions from the requirement under the financial institution statutes to maintain copies of records in Canada as a condition for conducting business in Canada (the data localization commitment).
The Canada–United Kingdom Trade Continuity Agreement (CUKTCA) substantively replicates the Canada–European Union Comprehensive Economic and Trade Agreement (CETA) on a transitional basis following the United Kingdom's (U.K.) withdrawal from the European Union until the two parties negotiate a new bilateral free trade agreement. The CUKTCA Most Favoured Nation commitment requires Canada to extend to the U.K. any differential and preferential treatment given in Canada's other free trade agreements. Canada is therefore required to grant the treatment under the CUSMA data localization commitment to any financial institution operating in Canada that is controlled by a financial institution of the U.K.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Most Favoured Nation commitment requires Canada to extend to the parties of that agreement any differential and preferential treatment given in any new Canadian free trade agreement signed following its entry into force. Given that Canada must extend the CUSMA data localization commitment to the U.K., it is granting differential and preferred treatment to another country after the entry into force of the CPTPP. This results in an obligation to extend that same treatment to CPTPP parties.
Under the Bank Act, Trust and Loan Companies Act, Insurance Companies Act and the Canada Deposit Insurance Corporation Act (the federally regulated financial institutions [FRFI] Acts), FRFI may transfer financial information abroad for processing and storage, subject to requirements under Canada's privacy laws. However, financial institutions must maintain copies of certain financial and corporate records in Canada.
The above-mentioned data localization commitment is subject to regulators having immediate, direct, complete and ongoing access to the information they need. Eligible foreign financial institutions transferring and storing information outside of Canada are also subject to Canada's privacy framework established by the Personal Information Protection and Electronic Documents Act.
To comply with this trade commitment, the Canada–United States–Mexico Agreement Implementation Act (CUSMA Implementation Act) creates exemptions from the prevailing records retention requirements in the FRFI Acts to permit eligible foreign-owned financial institutions to store their records solely outside of Canada. The CUSMA Implementation Act also includes authority for either the Superintendent or the Canada Deposit Insurance Corporation to revoke these new exceptions if they are of the opinion that regulatory accessibility requirements are not met, or if they are directed to do so by the Minister of Finance. In such an event, a foreign financial institution would be directed by an order of the Superintendent to maintain copies of records in Canada (i.e. revert to the pre-CUSMA requirements to store a copy of their records in Canada).
The new legislative provisions came into force on June 30, 2021, in accordance with the one-year transition period Canada negotiated in the CUSMA Financial Services chapter to implement the data localization commitment. These provisions will be administered by the Office of the Superintendent of Financial Institutions and the Canada Deposit and Insurance Corporation through supervisory guidance, by-laws and regulations, as needed.
The data localization commitment applies to the CUSMA parties (Mexico and the United States) and to countries with whom Canada has a free trade agreement with a qualifying Most Favoured Nation commitment. The CUSMA Implementation Act creates Schedule IV to the Bank Act, which lists the trade agreements under which Canada is obligated to extend the data localization commitment. Schedule IV includes Canada's agreements with Chile, Peru, Colombia, Panama, Honduras, Korea, and the European Union, as those jurisdictions had free trade agreements with qualifying Most Favoured Nation commitments in force with Canada when Canada signed the CUSMA on November 30, 2018. To implement Canada's future trade obligations in respect of the data localization commitment, the CUSMA Implementation Act creates an authority in the Bank Act to add or delete trade agreements on this Schedule by Order in Council.
To meet Canada's international legal obligations.
The Order Amending Schedule IV to the Bank Act (CPTPP and CUKTCA) [the Order] adds the CPTPP and the CUKTCA to Schedule IV of the Bank Act.
Financial sector stakeholders, federal financial regulatory authorities and officials from the provinces and territories were consulted extensively throughout the renegotiation of the North American Free Trade Agreement, which led to the signing of the CUSMA.
The Order extends an already-developed policy framework to a new set of eligible countries. It does not alter or change that policy framework, so no additional consultation or prepublication was needed.
Modern treaty obligations and Indigenous engagement and consultation
An assessment of modern treaty obligations was done and no impact was identified. Given the Order implements an international obligation through the above-mentioned consultation process, no Indigenous consultation was required to support the making of the Order.
The Bank Act permits trade agreements to be added or removed from Schedule IV via Order in Council. While a legislative amendment could have been used to make the revisions to Schedule IV, the regulatory option was the most efficient option.
Benefits and costs
The Order fulfills Canada's trade law obligations to the parties of the CUKTCA and CPTPP under each agreement's Most Favoured Nation commitment. The Order generates no incremental cost to business or the Government. An efficiency gain is anticipated in relation to compliance as eligible financial institutions would not be required to have additional computer servers in Canada to store copies of their data.
Small business lens
There is no small business impact, as no affected financial institution is a small business.
The one-for-one rule does not apply because there would be no change in regulatory filing requirements for eligible financial institutions as a result of the Order.
Regulatory cooperation and alignment
Canada is obliged to grant this treatment to the U.K. and CPTPP parties because of international trade commitments.
Strategic environmental assessment
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for this Order.
Implementation, compliance and enforcement, and service standards
The Office of the Superintendent of Financial Institutions and the Canada Deposit Insurance Corporation carry out the regulatory supervision of Canada's federally regulated financial institutions. These agencies will oversee the administration of the CUSMA data localization commitment.
Financial Institutions Division
Department of Finance
90 Elgin Street