Archived - Backgrounder: Financial System Review Act

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To ensure Canada remains a global leader in financial services and to maintain financial sector stability, the statutes that govern federally regulated financial institutions must be reviewed every five years. In addition, the Government updates financial legislation as necessary to ensure the framework remains robust. For example, the global financial crisis that began in 2007 led to a series of statutory amendments that were designed to strengthen the financial system and maintain Canada’s financial sector advantage.

The Bank Act, Cooperative Credit Associations Act, Insurance Companies Act and Trust and Loan Companies Act must be renewed by April 20, 2012, the statutory sunset date.


Pursuant to the Government’s announcement in Budget 2011 to update the financial institutions statutes by April 20, 2012, the Government launched its five-year review of legislation governing federally regulated financial institutions on September 20, 2010. The Minister of Finance invited the views of all Canadians on how to improve our financial system, and approximately 30 submissions were received from a range of stakeholders.

The proposed bill takes into account the concerns of the major interest groups, including consumer groups, stakeholder and policyholder groups, and financial sector industry associations.

Key Legislative Measures

Responding to Changes in the Sector

  • The Government is improving the ability of regulators to share information efficiently with international counterparts.
  • A change in the priority status of segregated fund policies in insolvency situations will facilitate timely transfer, consistent with life and health insurance policies.
  • The Government is increasing the widely held ownership threshold for large banks from $8 billion to $12 billion to help them keep pace with the growingfinancial sector.
  • To ensure financial institutions continue to grow on a sound basis, the Minister will approve substantial foreign acquisitions.
  • Federal financial institutions will be provided with enhanced flexibility to issue shares to foreign banks owned by foreign governments.

Ensuring Access to Banking

  • It will be clarified that Canadians, including bank customers, are able to cash Government cheques under $1,500, free of charge, at any bank in Canada.

Levelling the Playing Field

  • Federal financial institutions will be able to use foreign operations to engage only in permitted activities in Canada.

Promoting Cooperation

  • Federal credit unions will vote with the cooperative class in the governance of the Canadian Payments Association.
  • Competition and innovation will be promoted by enabling cooperative credit associations to provide technology services to a broader market.

Enhancing the Supervisory Powers of the Financial Consumer Agency of Canada

  • The maximum penalty for a violation of a consumer provision will be increased, consistent with penalties for other violations under financial institutions statutes.

Improving Efficiency

  • The Superintendent of Financial Institutions will have the authority to issue a certificate to assist financial institutions in documenting incorporation information.
  • The administrative burden will be reduced for federally regulated insurance companies offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements.
  • Mutual funds controlled by insurance companies through investments made from segregated funds will be permitted to hold market-indexed shares in managing life insurance companies.
  • Flexibility will be provided in adjusting to new terminology under the International Financial Reporting Standards in order to continue to promote prudential objectives.
  • Future adjustments on the limits on transfers to shareholders from participating policy accounts will be facilitated by adding regulatory flexibility.
  • The Canada Deposit Insurance Corporation Act will be fine-tuned to enhance the corporation’s ability to protect insured depositors and manage the resolution of a member institution.
  • Limited testimonial immunity will be provided to the Superintendent of Financial Institutions and the Commissioner of the Financial Consumer Agency of Canada, as well as their employees and agents, to enhance operational efficiencies and protect the confidentiality of information.

Clarifying Intent

The proposed bill:

  • Clarifies the order of priorities where multiple security interests, including those taken under the Bank Act and under provincial legislation, are taken on the same collateral.
  • Clarifies that derivatives can be cleared by a clearing and settlement system.
  • Confirms that banks can have an asset manager who also acts as a trustee of a mutual fund trust.