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Ottawa, June 26, 1996
1996-046

Legislation to Enhance the Safety and Soundness of the Financial System Comes Into Force

Secretary of State (Finance) Doug Peters today announced that Bill C-15, An Act to Amend, Enact and Repeal Certain Laws Relating to Financial Institutions, will come into force on June 28, 1996.

"I am pleased to announce the coming into force of Bill C-15," Mr. Peters said. "This legislation is key to improving the safety and soundness of the Canadian financial system, and to maintaining the high level of public confidence that Canadians have in this system. While the framework is, and remains, fundamentally sound, implementation of this legislation ensures that the regulatory and supervisory system remains up to date and responsive to key developments."

Key measures contained in Bill C-15 include:

• an early intervention policy for problem financial institutions, in order to minimize the scope for losses to depositors, policyholders and creditors of financial institutions;
• a framework for enhanced disclosure to the public of information on the financial condition of financial institutions;
• a stronger prudential framework for the supervision of financial institutions, including enhanced corporate governance structures;
• changes to the deposit insurance system, including the framework to allow the implementation of risk-based deposit insurance premiums; and
• new powers for the Bank of Canada to ensure that the design and operation of Canada's major clearing and settlement systems control systemic risk effectively.

Certain sections of Bill C-15 will come into force separately. Section 166, which repeals the Investment Companies Act will come into force on July 31, 1996. Similarly, the Payment Clearing and Settlement Act will also come into force on July 31, 1996. As a result, Canadian financial institutions will be permitted to net for capital adequacy purposes. Netting will be permitted with counterparties to which the Winding-up Act applies. Financial institutions must ensure that all conditions of the amendments and interpretations to the Basel Capital Accord are met.

Sections 27, 29, and 31 will come into force when the CDIC risk-based premium by-law is finalized. Work on this by-law is proceeding and it will be made available following consultations with CDIC members. Similarly, section 45 of the legislation will come into force, once the deposit insurance information by-law (formerly the consumer information by-law), now in its final stages, is approved by the Board of Directors of CDIC.

The government is currently preparing regulations related to specific provisions of Bill C-15. Once completed, these regulations will be forwarded to the financial services industry for comment.

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