Related Party Transactions (Banks) Regulations

SOR/92-309

Registration 21 May, 1992

BANK ACT

Related Party Transactions (Banks) Regulations

P.C. 1992-1084 21 May, 1992

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections 500 and 559 of the Bank Act*, is pleased hereby to make the annexed Regulations prescribing certain transactions and classes of transactions that a bank may enter into with related parties of the bank, effective June 1, 1992.

* S.C. 1991, c. 46

REGULATIONS PRESCRIBING CERTAIN TRANSACTIONS AND CLASSES OF TRANSACTIONS THAT A BANK MAY ENTER INTO WITH RELATED PARTIES OF THE BANK

SHORT TITLE

1. These Regulations may be cited as the Related Party Transactions (Banks) Regulations. SOR/96-274, s. 1.

INTERPRETATION

2. In these Regulations, "Act" means the Bank Act. (Loi)

PRESCRIBED RELATED PARTY TRANSACTIONS

3. (1) For the purposes of section 500 of the Act, a bank that is a foreign bank subsidiary may enter into the following transactions with the foreign bank that controls it, or with a financial institution controlled by that foreign bank:

(a) a transaction that forms an integral part of banking services provided to customers of the foreign bank subsidiary, of the foreign bank or of the financial institution; and

(b) a deposit by the foreign bank subsidiary with the foreign bank or the financial institution

(i) for a term not longer than 30 days,

(ii) for short-term liquidity management purposes, and

(iii) in an amount that, added to the aggregate of the amounts of all other deposits of the foreign bank subsidiary with its related parties, does not exceed 50 per cent of the regulatory capital of the foreign bank subsidiary.

(2) Without limiting the generality of subsection (1), the class of transactions referred to in paragraph (1)(a) includes

(a) interest rate, currency, equity and commodity swaps;

(b) foreign exchange forwards, options and spot transactions;

(c) forward rate agreements;

(d) options on interest rates, futures, commodities, equity indices, shares and ownership interests;

(e) futures on interest rates, currencies and commodities;

(f) transactions involving money market instruments;

(g) loan syndications and asset sales;

(h) transactions involving commodity forwards;

(i) repurchase agreements and other transactions in respect of securities; and

(j) derivative transactions of transactions referred to in any of paragraphs (a) to (i).

4. For the purposes of section 500 of the Act, a bank may, directly or indirectly, enter into any of the following transactions with a related party of the bank:

(a) an allocation of an amount by or to the bank pursuant to subsection 18(2.3), 125(3), 127(10.3), 181.5(2), 190.15(2), or 191.1(3) of the Income Tax Act;

(b) an agreement or amended agreement described in subsection 191.3(1) of the Income Tax Act under which

(i) the bank agrees to pay all or a portion of the tax of the related party, and

(ii) the related party agrees to pay the bank an amount at least equal to the additional costs incurred by the bank, including additional taxes payable under the Income Tax Act, as a result of the bank entering into the agreement or amended agreement;

(c) an agreement or amended agreement described in subsection 191.3(1) of the Income Tax Act under which the related party agrees to pay all or a portion of the tax of the bank;

(d) the issue by or to the bank of conversion privileges, options or rights to acquire securities the issuance of which is not otherwise provided for in the terms and conditions pursuant to which a security is being or has been issued;

(e) the purchase, for the purpose of cancellation, of any shares or debt obligations issued by or to the bank the purchase of which is not otherwise provided for in the terms and conditions pursuant to which the shares or debt obligations were issued;

(f) the redemption of any redeemable shares or any debt obligations issued by or to the bank the redemption of which is not otherwise provided for in the terms and conditions pursuant to which the shares or debt obligations were issued; or

(g) the payment or delivery of money or property by or to the bank as a consequence of a reduction of the stated capital of the bank or related party. SOR/96-274, s. 2.