Minority Investment (Bank Holding Companies) Regulations

SOR/2001-401

Registration 4 October, 2001

BANK ACT

Minority Investment (Bank Holding Companies) Regulations

P.C. 2001-1772 4 October, 2001

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 936^a of the Bank Act^b, hereby makes the annexed Minority Investment (Bank Holding Companies) Regulations.

^a S.C. 2001, c. 9, s. 183^b S.C. 1991, c. 46

MINORITY INVESTMENT (BANK HOLDING COMPANIES) REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

"Act" « Loi »

"Act" means the Bank Act. (Loi)

"designated entity" « entité désignée »

"designated entity" means

(a) an entity referred to in any of paragraphs 930(1)(a) to (j) of the Act;

(b) an entity whose business includes one or more of the activities referred to in paragraph 930(2)(a) of the Act and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a factoring entity, a finance entity or a financial leasing entity; or

(c) an entity whose business includes an activity referred to in paragraph 930(2)(b) of the Act or a specialized financing entity, other than an entity in which a bank holding company is permitted to acquire or increase a substantial investment under subparagraph 930(4)(d)(iii) of the Act. (entité désignée)

"regulatory capital" « capital réglementaire »

"regulatory capital" has the same meaning as in section 2 of the Regulatory Capital (Bank Holding Companies) Regulations. (capital réglementaire)

"value" « valeur »

"value" means

(a) in respect of a share, ownership interest or loan held by a bank holding company at a particular time, the book value of the share, ownership interest or loan that would be reported on the balance sheet of the bank holding company prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 840(4) of the Act; and

(b) in respect of a guarantee, the face value of the guarantee. (valeur)

GENERAL

Permitted substantial investments

2. Subject to section 3,

(a) for the purposes of subparagraphs 930(4)(a)(ii), (b)(ii), (c)(ii) and (d)(ii) of the Act, a bank holding company may acquire or increase a substantial investment in a designated entity; and

(b) for the purpose of paragraph 930(11)(a) of the Act, if a bank holding company controls a designated entity, the bank holding company may give up control of the designated entity while keeping a substantial investment in it.

Restriction concerning investments

3. Subject to sections 5 and 6, a bank holding company must not acquire or increase a substantial investment in a designated entity under paragraph 2(a) or give up control of a designated entity while keeping a substantial investment in it under paragraph 2(b) if, after the acquisition, increase or giving up of control, the total value of the following would exceed 50% of the bank holding company's regulatory capital:

(a) all shares and ownership interests beneficially owned by the bank holding company, and all shares and ownership interests beneficially owned by entities controlled by the bank holding company, in designated entities in which the bank holding company has a substantial investment but over which it does not exercise control,

(b) all loans held by the bank holding company, and all loans held by entities controlled by the bank holding company, that were made to designated entities in which the bank holding company has a substantial investment but over which it does not exercise control, and

(c) all outstanding guarantees given by the bank holding company, and all outstanding guarantees given by entities controlled by the bank holding company, on behalf of designated entities in which the bank holding company has a substantial investment but over which it does not exercise control.

Restriction concerning loans

4. Subject to sections 5 and 6, a bank holding company that has a substantial investment in a designated entity over which it does not exercise control must not make a loan to, or give a guarantee on behalf of, the designated entity, or permit entities controlled by it to do so, if, after the making of the loan or the giving of the guarantee, the total value of the shares, ownership interests, loans and guarantees referred to in paragraphs 3(a) to (c) would exceed 50% of the bank holding company's regulatory capital.

Limitation

5. In paragraphs 3(a) to (c) and section 4, any reference to a substantial investment that a bank holding company has does not include a substantial investment acquired by the bank holding company under regulations made under paragraph 936(a) of the Act other than these Regulations.

Calculation of "total value" in section 3 or 4

6. For the purpose of calculating the total value referred to in section 3 or 4 in respect of a bank holding company, no amount may be included in respect of shares or ownership interests acquired under sections 933 to 935 of the Act or acquired by a bank controlled by the bank holding company under subsection 193(12) or (13) of the Bank Act, chapter B-1 of the Revised Statutes of Canada, 1985.

COMING INTO FORCE

Coming into force

7.* These Regulations come into force on the day on which section 936 of the Bank Act, as enacted by section 183 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, comes into force.

*[Note: Regulations in force October 24, 2001, see SI/2001-102.]