479. For the purposes of this Part, the Governor in Council may make regulations

(a) defining the interests of a bank in real property;

(b) determining the method of valuing those interests; or

(c) exempting classes of banks from the application of sections 475 to 478.

1991, c. 46, s. 479; 1997, c. 15, s. 64; 2001, c. 9, s. 127.

480. (1) The Superintendent may, by order, direct a bank to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.

(2) If, in the opinion of the Superintendent,

(a) an investment by a bank or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the bank to control the body corporate or the unincorporated entity, or

(b) the bank or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before

(i) the board of directors of a body corporate, or

(ii) a similar group or committee of an unincorporated entity,

or whereby no proposal may be approved except with the consent of the bank, the entity it controls or the nominee,

the Superintendent may, by order, require the bank, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the bank no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).

(3) If

(a) a bank

(i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 470(1), (2) or (4), or

(ii) is in default of an undertaking referred to in subsection 470(1) or (2) and the default is not remedied within ninety days after the day of receipt by the bank of a notice from the Superintendent of the default, or

(b) a permitted entity referred to in subsection 470(4) is in default of an undertaking referred to in that subsection and the default is not remedied within ninety days after the day of receipt by the bank of a notice from the Superintendent of the default,

the Superintendent may, by order, require the bank, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the bank no longer has a substantial investment in the entity to which the undertaking relates.

(4) Subsection (2) does not apply in respect of an entity in which a bank has a substantial investment permitted by this Part.

1991, c. 46, s. 480; 2001, c. 9, s. 127.

481. If a bank controls or has a substantial investment in an entity as permitted by this Part and the bank becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 468(5) or (6), the bank is deemed to have acquired, on the day the bank becomes aware of the change, a temporary investment in respect of which section 471 applies.

1991, c. 46, s. 481; 1997, c. 15, s. 65; 2001, c. 9, s. 127.

482. (1) A bank shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if

A + B > C

where

A is the value of the assets;

B is the total value of all assets that the bank and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and

C is ten per cent of the total value of the assets of the bank, as shown in the last annual statement of the bank prepared before the acquisition or transfer.

(2) The prohibition in subsection (1) does not apply in respect of

(a) assets that are debt obligations that are

(i) guaranteed by any financial institution other than the bank,

(ii) fully secured by deposits with any financial institution, including the bank, or

(iii) fully secured by debt obligations that are guaranteed by any financial institution other than the bank;

(b) assets that are debt obligations issued

(i) by, or by any agency of,

(A) the Government of Canada,

(B) the government of a province,

(C) a municipality, or

(D) the government of a foreign country or any political subdivision of a foreign country, or

(ii) by a prescribed international agency;

(c) assets that are debt obligations that are guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in paragraph (b);

(d) assets that are debt obligations that are widely distributed, as that expression is defined by the regulations;

(e) assets that are debt obligations of an entity controlled by the bank; or

(f) a transaction or series of transactions by the bank with another financial institution as a result of the bank’s participation in one or more syndicated loans with that financial institution.

(3) The approval of the Superintendent is not required if

(a) the bank sells assets under a sale agreement that is approved by the Minister under section 236;

(b) the bank or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 468(5) is required or the approval of the Superintendent under subsection 468(6) is required; or

(c) the transaction has been approved by the Minister under subsection 678(1) of this Act or subsection 715(1) of the Insurance Companies Act.

(4) For the purposes of “A” in subsection (1), the value of the assets is

(a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the bank after the acquisition, the fair market value of the assets; and

(b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the bank prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the bank before the transfer, the value of the assets as stated in the annual statement.

(5) For the purposes of subsection (1), the total value of all assets that the bank or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the bank, the fair market value of the assets of the entity at the date of the acquisition.

(6) For the purposes of subsection (1), the total value of all assets that the bank or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the bank prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the bank before the transfer, the value of the assets of the entity as stated in the annual statement.

1991, c. 46, s. 482; 1997, c. 15, s. 66; 2001, c. 9, s. 127.

483. Nothing in this Part requires

(a) the termination of a loan made before February 7, 2001;

(b) the termination of a loan made after that date as a result of a commitment made before that date;

(c) the disposal of an investment made before that date; or

(d) the disposal of an investment made after that date as a result of a commitment made before that date.

But if the loan or investment would be precluded or limited by this Part, the amount of the loan or investment may not, except as provided in subsections 471(2), 472(3) and 473(3), be increased after that date.

1991, c. 46, s. 483; 2001, c. 9, s. 127.

484. A loan or investment referred to in section 483 is deemed not to be prohibited by the provisions of this Part.

1991, c. 46, s. 484; 2001, c. 9, s. 127.

485. (1) A bank shall, in relation to its operations, maintain

(a) adequate capital, and

(b) adequate and appropriate forms of liquidity,

and shall comply with any regulations in relation thereto.

(2) The Governor in Council may make regulations and the Superintendent may make guidelines respecting the maintenance by banks of adequate capital and adequate and appropriate forms of liquidity.

(3) Notwithstanding that a bank is complying with regulations or guidelines made under subsection (2), the Superintendent may, by order, direct the bank

(a) to increase its capital; or

(b) to provide additional liquidity in such forms and amounts as the Superintendent may require.

(4) A bank shall comply with an order made under subsection (3) within such time as the Superintendent specifies therein.

(5) Where an appraisal of any asset held by a bank or any of its subsidiaries has been made by the Superintendent and the value determined by the Superintendent to be the appropriate value of the asset varies materially from the value placed by the bank or subsidiary on the asset, the Superintendent shall send to the bank, the auditor or auditors of the bank and the audit committee of the bank a written notice of the appropriate value of the asset as determined by the Superintendent.

1991, c. 46, s. 485; 1996, c. 6, s. 7.

485.1 For the purposes of this Part, a “senior officer” of a body corporate is a person who is

(a) a director of the body corporate who is a full-time employee of the body corporate;

(b) the chief executive officer, chief operating officer, president, secretary, treasurer, controller, chief financial officer, chief accountant, chief auditor or chief actuary of the body corporate;

(c) a natural person who performs functions for the body corporate similar to those performed by a person referred to in paragraph (b);

(d) the head of the strategic planning unit of the body corporate;

(e) the head of the unit of the body corporate that provides legal services or human resources services to the body corporate; or

(f) any other officer reporting directly to the body corporate’s board of directors, chief executive officer or chief operating officer.

1997, c. 15, s. 67.

486. (1) For the purposes of this Part, a person is a related party of a bank where the person

(a) is a person who has a significant interest in a class of shares of the bank;

(b) is a director or senior officer of the bank or of a body corporate that controls the bank or is acting in a similar capacity in respect of an unincorporated entity that controls the bank;

(c) is the spouse or common-law partner, or a child who is less than eighteen years of age, of a person described in paragraph (a) or (b);

(d) is an entity that is controlled by a person referred to in any of paragraphs (a) to (c);

(e) is an entity in which a person who controls the bank has a substantial investment;

(f) is an entity in which the spouse or common-law partner, or a child who is less than eighteen years of age, of a person who controls the bank has a substantial investment; or

(g) is a person, or a member of a class of persons, designated under subsection (3) or (4) as, or deemed under subsection (5) to be, a related party of the bank.

(h) [Repealed, 1997, c. 15, s. 68]

(2) Where an entity in which a bank has a substantial investment would, but for this subsection, be a related party of the bank only because a person who controls the bank controls the entity or has a substantial investment in the entity, and the person does not control the entity or have a substantial investment in the entity otherwise than through the person’s controlling interest in the bank, the entity is not a related party of the bank.

(3) For the purposes of this Part, the Superintendent may, with respect to a particular bank, designate as a related party of the bank

(a) any person or class of persons whose direct or indirect interest in or relationship with the bank or a related party of the bank might reasonably be expected to affect the exercise of the best judgment of the bank in respect of a transaction; or

(b) any person who is a party to any agreement, commitment or understanding referred to in section 9 if the bank referred to in that section is the particular bank.

(4) Where a person is designated as a related party of a bank pursuant to subsection (3), the Superintendent may also designate any entity in which the person has a substantial investment and any entity controlled by such an entity to be a related party of the bank.

(5) Where, in contemplation of a person becoming a related party of a bank, the bank enters into a transaction with the person, the person is deemed for the purposes of this Part to be a related party of the bank in respect of that transaction.

(6) The Superintendent may, by order, designate a class of non-voting shares of a bank for the purpose of this subsection. If a class of non-voting shares of a bank is so designated, a person is deemed, notwithstanding paragraph (1)(a), not to be a related party of the bank if the person would otherwise be a related party of the bank only because the person has a significant interest in that class.

(7) For the purpose of determining whether an entity or a person has a substantial investment for the purposes of paragraph (1)(e) or (f), the references to “control” and “controlled” in section 10 shall be construed as references to “control, within the meaning of section 3, determined without regard to paragraph 3(1)(d)” “and controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(d)”, respectively.

(8) For the purposes of paragraph (1)(d), “controlled” means “controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(d)”.

1991, c. 46, s. 486; 1997, c. 15, s. 68; 2000, c. 12, s. 7.

487. (1) This Part does not apply in respect of any transaction entered into prior to the coming into force of this Part but, after the coming into force of this Part, any modification of, addition to, or renewal or extension of a prior transaction is subject to this Part.

(2) This Part does not apply in respect of

(a) the issue of shares of any class of shares of a bank when fully paid for in money or when issued

(i) in accordance with any provisions for the conversion of other issued and outstanding securities of the bank into shares of that class of shares,

(ii) as a share dividend,

(iii) in exchange for shares of a body corporate that has been continued as a bank under Part III,

(iv) in accordance with the terms of an amalgamation under Part VI,

(v) by way of consideration in accordance with the terms of a sale agreement under Part VI, or

(vi) with the approval in writing of the Superintendent, in exchange for shares of another body corporate;

(b) the payment of dividends by a bank;

(c) transactions that consist of the payment or provision by a bank to persons who are related parties of the bank of salaries, fees, stock options, pension benefits, incentive benefits or other benefits or remuneration in their capacity as directors, officers or employees of the bank;

(d) transactions approved by the Minister under subsection 678(1) of this Act or subsection 715(1) of the Insurance Companies Act; or

(e) if a bank is controlled by a widely held bank holding company or a widely held insurance holding company, transactions approved by the Superintendent that are entered as part of, or in the course of, a restructuring of the holding company or of any entity controlled by it.

(3) Nothing in paragraph (2)(c) exempts from the application of this Part the payment by a bank of fees or other remuneration to a person for

(a) the provision of services referred to in paragraph 495(1)(a); or

(b) duties outside the ordinary course of business of the bank.

(4) A holding body corporate of a bank is not a related party of the bank if the holding body corporate is a Canadian financial institution that is referred to in any of paragraphs (a) to (d) of the definition “financial institution” in section 2.

(5) Where a holding body corporate of a bank is, because of subsection (4), not a related party of the bank, any entity in which the holding body corporate has a substantial investment is not a related party of the bank if no related party of the bank has a substantial investment in the entity otherwise than through the control of the holding body corporate.

1991, c. 46, s. 487, c. 48, s. 494; 1997, c. 15, s. 69; 2001, c. 9, s. 128.

488. (1) For the purposes of this Part, entering into a transaction with a related party of a bank includes

(a) making a guarantee on behalf of the related party;

(b) making an investment in any securities of the related party;

(c) taking an assignment of or otherwise acquiring a loan made by a third party to the related party; and

(d) taking a security interest in the securities of the related party.

(2) For the purposes of this Part, the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit, is part of the transaction, and not a separate transaction.

(3) For the purposes of this Part, “loan” includes a deposit, a financial lease, a conditional sales contract, a repurchase agreement and any other similar arrangement for obtaining funds or credit, but does not include investments in securities or the making of an acceptance, endorsement or other guarantee.

489. (1) Except as provided in this Part, a bank shall not, directly or indirectly, enter into any transaction with a related party of the bank.

(2) Without limiting the generality of subsection (1), a bank is deemed to have indirectly entered into a transaction in respect of which this Part applies where the transaction is entered into by an entity that is controlled by the bank.

(3) Subsection (2) does not apply where an entity that is controlled by a bank is a financial institution incorporated or formed under the laws of a province and is subject to regulation and supervision, satisfactory to the Minister, regarding transactions with related parties of the bank.

(4) Subsection (2) does not apply in respect of transactions entered into by an entity that is controlled by a bank if the transaction is a prescribed transaction or is one of a class of prescribed transactions.

490. Notwithstanding anything in this Part, a bank may enter into a transaction with a related party of the bank if the value of the transaction is nominal or immaterial to the bank when measured by criteria that have been established by the conduct review committee of the bank and approved in writing by the Superintendent.

491. A bank may make a loan to or a guarantee on behalf of a related party of the bank or take an assignment of or otherwise acquire a loan to a related party of the bank if

(a) the loan or guarantee is fully secured by securities of or guaranteed by the Government of Canada or the government of a province; or

(b) the loan is a loan permitted by section 418 made to a related party who is a natural person on the security of a mortgage of the principal residence of that related party.

492. A bank may enter into a transaction with a related party of the bank if the transaction consists of a deposit by the bank with a financial institution that is a direct clearer or a member of a clearing group under the by-laws of the Canadian Payments Association and the deposit is made for clearing purposes.

493. A bank may borrow money from, take deposits from, or issue debt obligations to, a related party of the bank.

494. (1) A bank may purchase or otherwise acquire from a related party of the bank

(a) securities of, or securities guaranteed by, the Government of Canada or the government of a province;

(b) assets fully secured by securities of, or securities guaranteed by, the Government of Canada or the government of a province; or

(c) goods for use in the ordinary course of business.

(2) Subject to section 482, a bank may sell any assets of the bank to a related party of the bank if

(a) the consideration for the assets is fully paid in money; and

(b) there is an active market for those assets.

(3) Notwithstanding any of the provisions of subsections (1) and (2), a bank may, in the normal course of business and pursuant to arrangements that have been approved by the Superintendent in writing, acquire or dispose of any assets, other than real property, from or to a related party of the bank that is a financial institution.

(4) Notwithstanding any of the provisions of subsections (1) and (2), a bank may acquire any assets from, or dispose of any assets to, a related party of the bank as part of, or in the course of, a restructuring, if the acquisition or disposition has been approved in writing by the Superintendent.

(5) A bank may lease assets

(a) from a related party of the bank for use in the ordinary course of business of the bank, or

(b) to a related party of the bank

if the lease payments are made in money.

495. (1) A bank may enter into a transaction with a related party of the bank if the transaction

(a) subject to subsection (2), consists of a written contract for the purchase by the bank of services used in the ordinary course of business;

(b) subject to subsection (4), involves the provision of services normally offered to the public by the bank in the ordinary course of business;

(c) consists of a written contract with a financial institution or an entity in which the bank is permitted to have a substantial investment pursuant to section 468 that is a related party of the bank

(i) for the networking of any services provided by the bank or the financial institution or entity, or

(ii) for the referral of any person by the bank to the financial institution or entity, or for the referral of any person by the financial institution or entity to the bank;

(d) consists of a written contract for such pension or benefit plans or their management or administration as are incidental to directorships or to the employment of officers or employees of the bank or its subsidiaries; or

(e) involves the provision by the bank of management, advisory, accounting, information processing or other services in relation to any business of the related party.

(2) Where a bank has entered into a contract pursuant to paragraph (1)(a) and the contract, when taken together with all other such contracts entered into by the bank, results in all or substantially all of the management functions of the bank being exercised by persons who are not employees of the bank, the Superintendent may, by order, if the Superintendent considers that result to be inappropriate, require the bank, within such time as may be specified in the order, to take all steps necessary to ensure that management functions that are integral to the carrying on of business by the bank are exercised by employees of the bank to the extent specified in the order.

(3) Notwithstanding subsection 489(2), a bank is deemed not to have indirectly entered into a transaction in respect of which this Part applies if the transaction is entered into by a service corporation, as defined in subsection 464(1), that is controlled by the bank and the transaction is on terms and conditions at least as favourable to the bank as market terms and conditions, as defined in subsection 501(2).

(4) The provision of services, for the purposes of paragraph (1)(b), does not include the making of loans or guarantees.

1991, c. 46, s. 495; 1997, c. 15, s. 70.

495.1 (1) Subject to subsection (2) and sections 495.2 and 495.3, if a widely held bank holding company or a widely held insurance holding company has a significant interest in any class of shares of a bank, the bank may enter into any transaction with the holding company or with any other related party of the bank that is an entity in which the holding company has a substantial investment.

(2) The bank shall adhere to policies and procedures established under subsection 195(3) when entering into the transaction.

2001, c. 9, s. 129.

495.2 (1) If a bank enters into a transaction with a related party of the bank with whom the bank may enter into transactions under subsection 495.1(1) and that is not a federal financial institution, the bank shall not directly or indirectly make, take an assignment of or otherwise acquire a loan to the related party, make an acceptance, endorsement or other guarantee on behalf of the related party or make an investment in the securities of the related party if, immediately following the transaction, the aggregate financial exposure, as that expression is defined by the regulations, of the bank would exceed

(a) in respect of all transactions of the bank with the related party, the prescribed percentage of the bank’s regulatory capital or, if no percentage is prescribed, five per cent of the bank’s regulatory capital; or

(b) in respect of all transactions of the bank with such related parties of the bank, the prescribed percentage of the bank’s regulatory capital or, if no percentage is prescribed, ten per cent of the bank’s regulatory capital.

(2) If the Superintendent is of the opinion that it is necessary for the protection of the interests of the depositors and creditors of a bank, the Superintendent may, by order,

(a) reduce the limit in paragraph (1)(a) or (b) that would otherwise apply to the bank; and

(b) impose limits on transactions by the bank with related parties with whom the bank may enter into transactions under subsection 495.1(1) that are federal financial institutions.

(3) The Superintendent may, by order, increase the limit in paragraph (1)(a) or (b) that would otherwise apply to a bank on transactions by the bank with related parties that are financial institutions that are regulated in a manner acceptable to the Superintendent.

2001, c. 9, s. 129.

495.3 (1) Despite subsection 494(3), a bank shall not, without the approval of the Superintendent and its conduct review committee, directly or indirectly acquire assets from a related party of the bank with whom the bank may enter into transactions under subsection 495.1(1) that is not a federal financial institution, or directly or indirectly transfer assets to such a related party if

A + B > C

where

A is the value of the assets;

B is the total value of all assets that the bank directly or indirectly acquired from, or directly or indirectly transferred to, that related party in the twelve months ending immediately before the acquisition or transfer; and

C is five per cent, or the percentage that may be prescribed, of the total value of the assets of the bank, as shown in the last annual statement of the bank prepared before the acquisition or transfer.

(2) The prohibition in subsection (1) does not apply in respect of assets purchased or otherwise acquired under subsection 494(1), assets sold under subsection 494(2) or any other assets as may be prescribed.

(3) The approval of the Superintendent is not required if

(a) the bank sells assets under a sale agreement that is approved by the Minister under section 236; or

(b) the bank or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 468(5) is required or the approval of the Superintendent under subsection 468(6) is required.

(4) For the purposes of “A” in subsection (1), the value of the assets is

(a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the bank after the acquisition, the fair market value of the assets; and

(b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the bank prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the bank before the transfer, the value of the assets as stated in the annual statement.

(5) For the purposes of subsection (1), the total value of all assets that the bank or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the bank, the fair market value of the assets of the entity at the date of the acquisition.

(6) For the purposes of subsection (1), the total value of all assets that the bank or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the bank prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the bank before the transfer, the value of the assets of the entity as stated in the annual statement.

2001, c. 9, s. 129.

496. (1) Subject to subsection (2) and sections 497 and 498, a bank may enter into any transaction with a related party of the bank if the related party is

(a) a natural person who is a related party of the bank only because the person is

(i) a director or a senior officer of the bank or of an entity that controls the bank, or

(ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer of the bank or of an entity that controls the bank; or

(b) an entity that is a related party of the bank only because the entity is controlled by

(i) a director or senior officer of the bank or of an entity that controls the bank, or

(ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer referred to in subparagraph (i).

(2) A bank may, with respect to a related party of the bank referred to in subsection (1) who is a full-time senior officer of the bank, make, take an assignment of or otherwise acquire a loan to the related party only if the aggregate principal amount of all outstanding loans to the related party that are held by the bank and its subsidiaries, together with the principal amount of the proposed loan, does not exceed the greater of twice the annual salary of the related party and $100,000.

(3) Subsection (2) does not apply in respect of

(a) loans referred to in paragraph 491(b), and

(b) margin loans referred to in section 498,

and the amount of any such loans to a related party of a bank shall not be included in determining, for the purposes of subsection (2), the aggregate principal amount of all outstanding loans made by the bank to the related party.

(4) Notwithstanding section 501, a bank may make a loan, other than a margin loan, to a senior officer of the bank on terms and conditions more favourable to the officer than those offered to the public by the bank if those terms and conditions have been approved by the conduct review committee of the bank.

(5) Notwithstanding section 501, a bank may make a loan referred to in paragraph 491(b) to the spouse or common-law partner of a senior officer of the bank on terms and conditions more favourable than those offered to the public by the bank if those terms and conditions have been approved by the conduct review committee of the bank.

(6) Notwithstanding section 501, a bank may offer financial services, other than loans or guarantees, to a senior officer of the bank, or to the spouse or common-law partner, or a child who is less than eighteen years of age, of a senior officer of the bank, on terms and conditions more favourable than those offered to the public by the bank if

(a) the financial services are offered by the bank to employees of the bank on those favourable terms and conditions; and

(b) the conduct review committee of the bank has approved the practice of making those financial services available on those favourable terms and conditions to senior officers of the bank or to the spouses or common-law partners, or the children under eighteen years of age, of senior officers of the bank.

1991, c. 46, s. 496; 1997, c. 15, s. 71; 2000, c. 12, ss. 5, 7.

497. (1) Except with the concurrence of at least two thirds of the directors present at a meeting of the board of directors of the bank, a bank shall not, with respect to a related party of the bank referred to in subsection 496(1),

(a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 498,

(b) make a guarantee on behalf of the related party, or

(c) make an investment in the securities of the related party

if, immediately following the transaction, the aggregate of

(d) the principal amount of all outstanding loans to the related party that are held by the bank and its subsidiaries, other than

(i) loans referred to in paragraph 491(b), and

(ii) where the related party is a full-time senior officer of the bank, loans to the related party that are permitted by subsection 496(2),

(e) the sum of all outstanding amounts guaranteed by the bank and its subsidiaries on behalf of the related party, and

(f) where the related party is an entity, the book value of all investments by the bank and its subsidiaries in the securities of the entity

would exceed 2 per cent of the regulatory capital of the bank.

(2) A bank shall not, with respect to a related party of the bank referred to in subsection 496(1),

(a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 498,

(b) make a guarantee on behalf of the related party, or

(c) make an investment in the securities of the related party

if, immediately following the transaction, the aggregate of

(d) the principal amount of all outstanding loans to all related parties of the bank referred to in subsection 496(1) that are held by the bank and its subsidiaries, other than

(i) loans referred to in section 491, and

(ii) loans permitted by subsection 496(2),

(e) the sum of all outstanding amounts guaranteed by the bank and its subsidiaries on behalf of all related parties of the bank referred to in subsection 496(1), and

(f) the book value of all investments by the bank and its subsidiaries in the securities of all entities that are related parties of the bank referred to in subsection 496(1)

would exceed 50 per cent of the regulatory capital of the bank.

(3) Loans, guarantees and investments that are referred to in section 490 shall not be included in calculating the aggregate of loans, guarantees and investments referred to in subsections (1) and (2).

1991, c. 46, s. 497; 1997, c. 15, s. 72.

498. The Superintendent may establish terms and conditions with respect to the making by a bank of margin loans to a director or senior officer of the bank.

1991, c. 46, s. 498; 1997, c. 15, s. 73.

499. (1) A bank may enter into a transaction with a related party of the bank if the Superintendent, by order, has exempted the transaction from the provisions of section 489.

(2) The Superintendent shall not make an order referred to in subsection (1) unless the Superintendent is satisfied that the decision of the bank to enter into the transaction has not been and is not likely to be influenced in any significant way by a related party of the bank and does not involve in any significant way the interests of a related party of the bank.

1991, c. 46, s. 499; 1996, c. 6, s. 8.

500. A bank may enter into a transaction with a related party of the bank if the transaction is a prescribed transaction or one of a class of prescribed transactions.

501. (1) Except as provided in subsections 496(4) to (6), any transaction entered into with a related party of the bank shall be on terms and conditions that are at least as favourable to the bank as market terms and conditions.

(2) For the purposes of subsection (1), “market terms and conditions” means

(a) in respect of a service or a loan facility or a deposit facility offered to the public by the bank in the ordinary course of business, terms and conditions that are no more or less favourable than those offered to the public by the bank in the ordinary course of business; and

(b) in respect of any other transaction,

(i) terms and conditions, including those relating to price, rent or interest rate, that might reasonably be expected to apply in a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm’s length and who are acting prudently, knowledgeably and willingly, or

(ii) if the transaction is one that would not reasonably be expected to occur in an open market between parties who are at arm’s length, terms and conditions, including those relating to price, rent or interest rate, that would reasonably be expected to provide the bank with fair value, having regard to all the circumstances of the transaction, and that would be consistent with the parties to the transaction acting prudently, knowledgeably and willingly.

1991, c. 46, s. 501; 2001, c. 9, s. 130.

502. and 503. [Repealed, 1997, c. 15, s. 74]

504. (1) Where, in respect of any proposed transaction permitted by this Part, other than those referred to in section 490, a bank has reason to believe that the other party to the transaction is a related party of the bank, the bank shall take all reasonable steps to obtain from the other party full disclosure, in writing, of any interest or relationship, direct or indirect, that would make the other party a related party of the bank.

(2) A bank and any person who is a director or an officer, employee or agent of the bank may rely on any information contained in any disclosure received by the bank pursuant to subsection (1) or any information otherwise acquired in respect of any matter that might be the subject of such a disclosure and no action lies against the bank or any such person for anything done or omitted in good faith in reliance on any such information.

505. Where a bank has entered into a transaction that the bank is prohibited by this Part from entering into or where a bank has entered into a transaction for which approval is required under subsection 497(1) without having obtained the approval, the bank shall, on becoming aware of that fact, notify the Superintendent without delay.

1991, c. 46, s. 505; 1997, c. 15, s. 75.

506. (1) If a bank enters into a transaction that it is prohibited from entering into by this Part, the bank or the Superintendent may apply to a court for an order setting aside the transaction or for any other appropriate remedy, including an order directing that the related party of the bank involved in the transaction account to the bank for any profit or gain realized or that any director or senior officer of the bank who authorized the transaction compensate the bank for any loss or damage incurred by the bank.

(2) An application under subsection (1) in respect of a particular transaction may only be made within the period of three months following the day the notice referred to in section 505 in respect of the transaction is given to the Superintendent or, if no such notice is given, the day the Superintendent becomes aware of the transaction.

(3) For the purposes of subsection (2), a document purporting to have been issued by the Superintendent, certifying the day on which the Superintendent became aware of the transaction, shall, in the absence of evidence to the contrary, be received in evidence as conclusive proof of that fact without proof of the signature or of the official character of the person appearing to have signed the document and without further proof.

1991, c. 46, s. 506; 2001, c. 9, s. 131.