The Reporter provides a monthly summary of Canadian federal legislative and regulatory developments of relevance to federally regulated financial institutions. It does not address Canadian provincial financial services legislative and regulatory developments, although this information is tracked by BLG and can be provided on request. In addition, purely technical and administrative changes (such as changes to reporting forms) are not covered.
The May 2019 edition follows below.
June 2019
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Institution |
Published |
Title and Brief Summary |
Status |
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Canada Deposit Insurance Corporation |
By-law Amending the Canada Deposit Insurance Corporation Data and System Requirements By-law, SOR/2019-187 The amendment will facilitate the update and implementation of technical specifications that reflect the enhanced coverage framework by delinking the technical specifications from the by-law. The amendments ensure the by-laws remain up to date and reflect the coverage framework that will apply upon the coming into force of select provisions of Bill C-74, Budget Implementation Act, 2018, No. 1, as well as certain technical changes to provide clarity to the by-law. |
Effective June 7, 2019 |
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Office of the Superintendent of Financial Institutions (Banks, Trust and Loan Companies, Insurance Companies) |
Margin Requirements for Non-Centrally Cleared Derivatives Guideline (E-22) In February 2016, OSFI issued the final version of its
Margin Requirements for Non-Centrally Cleared Derivatives Guideline (E-22). Under this guideline, most covered federally regulated financial institutions meeting the definition of a covered entity ("covered FRFIs") are subject to the mandatory exchange of variation margin beginning March 1, 2017. In addition, Guideline E-22 requires covered FRFIs to exchange initial margin. The exchange of initial margin began in September 2016 for the largest derivatives counterparties and is being gradually phased-in to smaller counterparties until September 2020.
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Effective |
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Bank of Canada |
Bank of Canada announces partnership to improve resilience in financial sector Led by the Bank of Canada, this initiative brings together the following organizations:
Should an incident, such as a major cyber-attack, threaten the operations of the financial sector’s critical infrastructure, the CFRG will coordinate the national response. Each member organization’s highest officials will be involved in crisis coordination. |
Effective |
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Financial Stability Board |
Public responses to the call for public feedback on the evaluation of too-big-to-fail reforms |
The final report will be published in late 2020. |
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Financial Action Task Force |
June 26, 2019 |
Risk-based Approach for Legal Professionals The risk-based approach (RBA) is central to the effective implementation of the revised FATF International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation. This guidance aims to support the implementation of the RBA by legal professionals. It highlights the need for a sound assessment of the ML/TF risks that legal professionals face so that the policies, procedures and initial and ongoing client due diligence (CDD) measures can mitigate these risks. |
Effective |
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Financial Action Task Force |
Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers Financial innovation, in the form of new technologies, services and products, offer efficient alternatives to classic financial products and can improve financial inclusion. At the same time, the speed and anonymity of some of these innovative products risk attracting criminals and terrorists. This guidance will help countries and virtual asset service providers understand their anti-money laundering and counter-terrorist financing obligations and effectively implement the FATF’s requirements as they apply to this sector. This guidance follows revisions to the FATF Recommendations in October 2018 and June 2019 in response to the increasing use of virtual assets for money laundering and terrorist financing. |
Effective |
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Finance Canada |
June 21, 2019 |
Budget Implementation Act, 2019, No. 1, S.C. 2019, c. 29 Budget Implementation Act, 2019, No. 1, received Royal Assent on June 21, 2019. It provides for the following:
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Part 4, Division I, Subdivision A effective June 21, 2019 Part 4, Division I, Subdivision B to be proclaimed |
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House of Commons |
Bill C-100, An Act to implement the Agreement between Canada, the United States of America and the United Mexican States, was introduced in the House of Commons on May 29, 2019. It received 2nd Reading and was referred to the Standing Committee on International Trade on June 20. It contains amendments to bring the Canada Deposit Insurance Corporation Act (records held outside Canada), the Trust and Loan Companies Act, the Bank Act, and the Insurance Companies Act into conformity with the Agreement. |
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Office of the Superintendent of Financial Institutions (Banks) |
Proposed changes to Foreign Bank Branch Deposit Requirement (Guideline A-10) OSFI is releasing proposed revisions to Guideline A-10 to be implemented in Q1 2020 for Foreign Bank Branches (FBBs). The guideline addresses OSFI’s expectations regarding the minimum deposit to be held in trust, which authorized foreign banks must maintain in respect of their business in Canada. Revisions include changing the guideline’s title to Foreign Bank Branch Deposit Requirement from Capital Equivalency Deposit, updates and simplifications, and changes to the deposit ratio calculation: off-balance sheet liabilities will no longer be included while accrued expenses will now be included in the calculation. |
Comments should be provided no later than July 30, 2019 |
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Financial Stability Board |
June 4, 2019 |
FSB Report on Market Fragmentation This report, which was delivered to G20 Finance Ministers and Central Bank Governors ahead of their meetings in Fukuoka on 8-9 June, sets out the conclusions from the FSB’s work on market fragmentation and identifies several areas for further work to address it. The report looks at some examples of financial activities where supervisory practices and regulatory policies may give rise to market fragmentation. It discusses potential trade-offs that authorities have considered between the benefits of increased cross-border activity and a need to tailor domestic regulatory frameworks to local conditions and mandates. The areas the report examines are the trading and clearing of over-the-counter (OTC) derivatives across borders; banks’ cross-border management of capital and liquidity; and the sharing of data and other information internationally. The report lays out approaches and mechanisms that may enhance the effectiveness and efficiency of international cooperation, and helps to mitigate any negative effects of market fragmentation on financial stability. |
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Office of the Superintendent of Financial Institutions (Insurance) |
Sound Reinsurance Practices and Procedures Reinsurance is an important risk management tool that can be used by an insurer to reduce insurance risks and the volatility of financial results, stabilize solvency, make more efficient use of capital, better withstand catastrophic events, increase underwriting capacity, and to draw on reinsurers’ expertise. However, reinsurance exposes an insurer to operational, legal, counterparty, and liquidity risks, among other risks. The combination of these risks can make reinsurance complex and challenging to implement effectively. Inadequate reinsurance risk management practices and procedures can materially affect an insurer’s financial soundness and reputation, and can ultimately contribute to its failure. This guideline sets out OSFI’s expectations for effective reinsurance practices and procedures. It applies to all federally regulated insurers (FRIs) that are party to reinsurance cessions, retrocessions and, where applicable, to assumption reinsurance transactions. |
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May 2019
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Institution |
Published |
Title and Brief Summary |
Status |
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Financial Stability Board |
Crypto-assets: Work underway, regulatory approaches and potential gaps This report on crypto-assets considers work underway, regulatory approaches and potential gaps. The report was delivered to G20 Finance Ministers and Central Bank Governors ahead of their meetings in Fukuoka on 8-9 June. The report gives an update on work by international organizations addressing issues arising from crypto-assets on a number of fronts. They are mainly focused on investor protection, market integrity, anti-money laundering, bank exposures and financial stability monitoring. They are monitoring and analysing developments in these markets; setting supervisory expectations for firms; and clarifying how international standards apply to crypto-assets. |
Effective |
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Office of the Superintendent of Financial Institutions (Banks, Trust and Loan Companies) |
Revised Guideline B-12: Interest Rate Risk Management The Office of the Superintendent of Financial Institutions (OSFI) has released a revised version of its Guideline B-12: Interest Rate Risk Management. The guideline provides a risk control framework for deposit-taking institutions to follow in identifying, assessing and managing their interest rate risk. The updated guideline reflects international sound practices, as outlined in the 2016 Basel Committee on Banking Supervision (BCBS) framework for Interest Rate Risk in the Banking Book (IRRBB). Key updates to OSFI Guideline B-12 include:
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Effective January 1, 2020 for Domestic Systemically Important Banks; Effective January 1, 2021 for other deposit-taking institutions |
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Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) |
May 30, 2019 |
FINTRAC reinforces its partnership with the Investment Industry Regulatory Organization of Canada Under a revised Memorandum of Understanding, FINTRAC and IIROC will be able to share compliance-related information, including the results of compliance examinations, in order to strengthen the compliance of securities dealers with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This sharing of information will also help increase the knowledge and expertise of each organization in relation to new and evolving trends and money laundering and terrorist activity financing risks in the investment sector and broader Canadian financial system. |
Effective |
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Payments Canada |
May 24, 2019 |
Proposed new rule to enhance digital payments: Payments Canada seeks feedback on increase debit card acceptance The proposed rule, Rule E5 Exchange of Point-of-Service Delayed Authorization Debit Payment Items for the Purpose of Clearing and Settlement, is written to accommodate debit card payments for point-of-service use cases where it may not be possible to have immediate authorization by a user’s (payor) financial institution. |
Consultation paper open until June 23 |
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Office of the Superintendent of Financial Institutions (All Deposit-Taking Institutions (DTIs) Issuing Covered Bonds) |
Revised Covered Bond Limit Calculation |
Revised calculation effective August 1, 2019. |
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Financial Stability Board |
Evaluation of too-big-to-fail reforms: Summary Terms of Reference This summary terms of reference provides details about the objectives, scope and process of the FSB’s evaluation of too-big-to-fail (TBTF) reforms. The evaluation will assess whether the implemented reforms are reducing the systemic and moral hazard risks associated with systemically important banks (SIBs). It will also examine the broader effects of the reforms to address TBTF for SIBs on the overall functioning of the financial system. |
The final report will be published in late 2020. |
Disclaimer
This Reporter is prepared as a service for our clients. It is not intended to be a complete statement of the law or an opinion on any subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered.
To view the Reporter for previous months, please visit our Banking and Financial Services publications page.
