Minority Investment (Banks) Regulations

SOR/2001-402

Registration 4 October, 2001

BANK ACT

Minority Investment (Banks) Regulations

P.C. 2001-1773 4 October, 2001

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 474^a of the Bank Act^b, hereby makes the annexed Minority Investment (Banks) Regulations.

^a S.C. 2001, c. 9, s. 127^b S.C. 1991, c. 46

MINORITY INVESTMENT (BANKS) 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 468(1)(a) to (j) of the Act;

(b) an entity whose business includes one or more of the activities referred to in paragraph 468(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 468(2)(b) of the Act, including a specialized financing entity, other than an entity in which a bank is permitted to acquire or increase a substantial investment under subparagraph 468(4)(d)(iii) of the Act. (entité désignée)

"regulatory capital" « capital réglementaire »

"regulatory capital" has the same meaning as in section 3 of the Regulatory Capital (Banks) Regulations. (capital réglementaire)

"value" « valeur »

"value" means

(a) in respect of a share, ownership interest or loan held by a bank 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 prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 308(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 468(4)(a)(ii), (b)(ii), (c)(ii) and (d)(ii) of the Act, a bank may acquire or increase a substantial investment in a designated entity; and

(b) for the purpose of paragraph 468(11)(a) of the Act, if a bank controls a designated entity, the bank 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 must not acquire or increase a substantial investment in a designated entity under paragraph 2(a) or give up control of the 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's regulatory capital:

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

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

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

Restriction concerning loans

4. Subject to sections 5 and 6, a bank 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's regulatory capital.

Limitation

5. In paragraphs 3(a) to (c) and section 4, any reference to a substantial investment that a bank has does not include a substantial investment acquired by the bank

(a) under regulations made under paragraph 474(a) of the Act, other than these Regulations;

(b) under subsection 466(3.1) of the Act, as that subsection read before the coming into force of section 127 of the Financial Consumer Agency of Canada Act, S.C. 2001, c. 9; or

(c) by way of an investment of a specialized financing entity controlled by the bank.

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, no amount may be included in respect of shares or ownership interests acquired under sections 471 to 473 of the Act or subsection 193(12) or (13) of the Bank Act, chapter B-1 of the Revised Statutes of Canada, 1985.

REPEAL

Repeal

7. The Minority Investment (Banks) Regulations¹ are repealed.

¹ SOR/97-371

COMING INTO FORCE

Coming into force

8.* These Regulations come into force on the day on which section 474 of the Bank Act, as enacted by section 127 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.]