Bank Act (S.C. 1991, c. 46)

Marginal note:Exemption by order of the Minister

• 388 (1) On application by a bank, the Minister may, if the Minister considers it appropriate to do so, by order exempt the bank from the requirements of section 385, subject to any terms and conditions that the Minister considers appropriate.

• Marginal note:Compliance with section 385

  (2) If an exemption order granted under this section in respect of a bank expires, the bank shall comply with section 385 as of the day the exemption order expires.

• Marginal note:Limit on assets

  (3) If a bank fails to comply with section 385 on the day referred to in subsection (2), the bank shall not, until it complies with that section, have average total assets in any three month period ending on the last day of a subsequent month exceeding the bank’s average total assets in the three month period ending on the last day of the month immediately before the day referred to in subsection (2) or any later day that the Minister may, by order, specify.

• Marginal note:Application of ss. 386(2) and (3)

  (4) Subsections 386(2) and (3) apply for the purposes of subsection (3).

Marginal note:Exception

• 389 (1) If a bank fails to comply with section 385 as the result of any of the following, section 386 does not apply in respect of the bank until the expiration of six months after the day it failed to comply with section 385:

  • (a) a distribution to the public of voting shares of the bank;

  • (b) a redemption or purchase of voting shares of the bank;

  • (c) the exercise of any option to acquire voting shares of the bank; or

  • (d) the conversion of any convertible securities into voting shares of the bank.

• Marginal note:Shares acquiring voting rights

  (2) If, as the result of an event that has occurred and is continuing, shares of a bank acquire voting rights in such number as to cause the bank to no longer be in compliance with section 385, section 386 does not apply in respect of that bank until the expiration of six months after the day the bank ceased to be in compliance with section 385 or any later day that the Minister may, by order, specify.

Marginal note:Acquisition of control permitted

• 390 (1) Subject to subsection (2) and sections 379 and 391, section 385 does not apply in respect of a bank if a person acquires control of the bank through the purchase or other acquisition of all or any number of the shares of the bank by the person or by any entity controlled by the person.

• Marginal note:Undertaking required

  (2) Subsection (1) applies only if the person referred to in that subsection provides the Minister with an undertaking satisfactory to the Minister to do all things necessary so that, within three years after the acquisition, or any other period that the Minister may specify, the bank has voting shares that carry at least 35 per cent of the voting rights attached to all of the outstanding voting shares of the bank and that are

  • (a) shares of one or more classes of shares that are listed and posted for trading on a recognized stock exchange in Canada; and

  • (b) shares none of which is beneficially owned by a person who is a major shareholder of the bank in respect of the voting shares of the bank or by any entity that is controlled by a person who is a major shareholder of the bank in respect of such shares.

Marginal note:Application of section 385

391 At the expiration of the period for compliance with an undertaking referred to in subsection 390(2), section 385 shall apply in respect of the bank to which the undertaking relates.

Marginal note:Restriction on voting rights

• 392 (1) If, with respect to any bank, a particular person contravenes section 372, subsection 373(1), 374(1) or 375(1), section 376.1 or 376.2, subsection 377(1) or section 377.1 or 377.2 or fails to comply with an undertaking referred to in subsection 390(2) or with any term or condition imposed under section 397, no person, and no entity controlled by the particular person, shall, in person, by proxy or by delegate, exercise any voting rights

  • (a) that are attached to shares of the bank beneficially owned by the particular person or any entity controlled by the particular person;

  • (a.1) that may be exercised by a member of a federal credit union if the bank is a federal credit union; or

  • (b) that are subject to an agreement entered into by the particular person, or any entity controlled by the particular person, pertaining to the exercise of the voting rights.

• Marginal note:Subsection (1) ceases to apply

  (2) Subsection (1) ceases to apply in respect of a person when, as the case may be,

  • (a) the shares or membership shares to which the contravention relates have been disposed of;

  • (b) the person ceases to control the bank within the meaning of paragraph 3(1)(d);

  • (c) if the person failed to comply with an undertaking referred to in subsection 390(2), the bank complies with section 385; or

  • (d) if the person failed to comply with a term or condition imposed under section 397, the person complies with the term or condition.

• Marginal note:Saving

  (3) Despite subsection (1), if a person contravenes subsection 374(1) by reason only that, as a result of an event that has occurred and is continuing and is not within the control of the person, shares of the bank beneficially owned by the person or by any entity controlled by the person acquire voting rights in such number so as to cause the person to be a major shareholder of the bank, the Minister may, after consideration of the circumstances, permit the person and any entity controlled by the person to exercise voting rights, in person or by proxy, in respect of any class of voting shares of the bank beneficially owned by them that do not in aggregate exceed 20 per cent of the voting rights attached to that class of voting shares.

Marginal note:Loss of control — banks and bank holding companies

• 393 (1) Despite sections 374 and 377, a widely held bank or a widely held bank holding company may be a major shareholder of a bank with equity of twelve billion dollars or more and cease to control, within the meaning of paragraphs 3(1)(a) and (d), the bank if it has entered into an agreement with the Minister to do all things necessary to ensure that it is not a major shareholder of the bank on the expiration of the day specified in the agreement.

• Marginal note:Extension

  (2) If general market conditions so warrant and the Minister is satisfied that the bank or the bank holding company has used its best efforts to be in compliance with subsection (1) on the required day, the Minister may specify a later day as the day from and after which it must comply with that subsection.

Marginal note:Loss of control — other entities

• 393.1 (1) Despite sections 374 and 377, an eligible foreign institution, an eligible Canadian financial institution, other than a bank, or a widely held insurance holding company may be a major shareholder of a bank with equity of twelve billion dollars or more and cease to control, within the meaning of paragraph 3(1)(d), the bank if it has entered into an agreement with the Minister to do all things necessary to ensure that it is not a major shareholder of the bank on the expiration of the day specified in the agreement.

• Marginal note:Extension

  (2) If general market conditions so warrant and the Minister is satisfied that the institution or insurance holding company has used its best efforts to be in compliance with subsection (1) on the required day, the Minister may specify a later day as the day from and after which it must comply with that subsection.

Marginal note:Change in status

• 394 (1) If a body corporate that is an eligible financial institution other than a bank controls, within the meaning of paragraph 3(1)(d), a bank with equity of twelve billion dollars or more and the body corporate subsequently ceases to be an eligible financial institution, the body corporate must do all things necessary to ensure that, on the day that is one year after the day it ceased to be an eligible financial institution,

  • (a) it does not control, within the meaning of paragraph 3(1)(d), the bank; and

  • (b) it is not a major shareholder of the bank.

• Marginal note:Extension

  (2) If general market conditions so warrant and the Minister is satisfied that the body corporate has used its best efforts to be in compliance with subsection (1) on the required day, the Minister may specify a later day as the day from and after which it must comply with that subsection.

Approval Process

Marginal note:Application for approval

• 395 (1) An application for an approval of the Minister required under this Part must be filed with the Superintendent and contain the information, material and evidence that the Superintendent may require.

• Marginal note:Applicant

  (2) If, with respect to any particular transaction, this Part applies to more than one person, any one of those persons may make the application to the Minister for approval on behalf of all of those persons.

Marginal note:Matters for consideration

• 396 (1) Subject to subsection (2), if an application for an approval under section 373 is made, the Minister, in determining whether or not to approve the transaction, shall take into account all matters that the Minister considers relevant to the application, including

  • (a) the nature and sufficiency of the financial resources of the applicant or applicants as a source of continuing financial support for the bank;

  • (b) the soundness and feasibility of the plans of the applicant or applicants for the future conduct and development of the business of the bank;

  • (c) the business record and experience of the applicant or applicants;

  • (d) the character and integrity of the applicant or applicants or, if the applicant or any of the applicants is a body corporate, its reputation for being operated in a manner that is consistent with the standards of good character and integrity;

  • (e) whether the bank will be operated responsibly by persons with the competence and experience suitable for involvement in the operation of a financial institution;

  • (f) the impact of any integration of the businesses and operations of the applicant or applicants with those of the bank on the conduct of those businesses and operations;

  • (g) the opinion of the Superintendent regarding the extent to which the proposed corporate structure of the applicant or applicants and their affiliates may affect the supervision and regulation of the bank, having regard to

    • (i) the nature and extent of the proposed financial services activities to be carried out by the bank and its affiliates, and

    • (ii) the nature and degree of supervision and regulation applying to the proposed financial services activities to be carried out by the affiliates of the bank; and

  • (h) the best interests of the financial system in Canada, including, if the bank is a federal credit union, the best interests of the cooperative financial system in Canada.

• Marginal note:Exception

  (2) Except for an application by an eligible agent for an approval under section 373, and subject to subsection 377(1), the Minister shall take into account only paragraph (1)(d) if the application is in respect of a transaction that would result in the applicant or applicants holding

  • (a) more than 10 per cent but no more than 20 per cent of any class of the outstanding voting shares of a widely held bank with equity of twelve billion dollars or more that is not a federal credit union; or

  • (b) more than 10 per cent but no more than 30 per cent of any class of the outstanding non-voting shares of such a bank.

• Marginal note:Exception

  (2.1) Subject to subsection 377.2(1), the Minister is to take into account only paragraph (1)(d) if the application is in respect of a transaction that would result in the applicant or applicants holding more than 10 per cent but no more than 30 per cent of any class of the outstanding shares, or of membership shares, of a federal credit union.

• Marginal note:Favourable treatment

  (3) The Minister shall not approve a transaction that would cause a bank to become a subsidiary of a foreign bank within the meaning of any of paragraphs (a) to (f) of the definition foreign bank in section 2 that is a non-WTO Member foreign bank unless the Minister is satisfied that treatment as favourable for banks to which this Act applies exists or will be provided in the jurisdiction in which the foreign bank principally carries on business, either directly or through a subsidiary.

396.1 [Repealed, 1994, c. 47, s. 19]

Marginal note:Terms and conditions

397 The Minister may impose any terms and conditions in respect of an approval given under this Part that the Minister considers necessary to ensure compliance with any provision of this Act.

Marginal note:Certifying receipt of application

• 398 (1) If, in the opinion of the Superintendent, an application filed under this Part contains all the required information, the Superintendent shall without delay refer the application to the Minister and send a receipt to the applicant certifying the date on which the completed application was received by the Superintendent.

• Marginal note:Incomplete application

  (2) If, in the opinion of the Superintendent, an application filed under this Part is incomplete, the Superintendent shall send a notice to the applicant specifying the information required by the Superintendent to complete the application.

Marginal note:Notice of decision

• 399 (1) Subject to subsections (2) and (3) and 400(1), the Minister shall, within a period of thirty days after the certified date referred to in subsection 398(1), send to the applicant

  • (a) a notice approving the transaction to which the application relates; or

  • (b) if the Minister is not satisfied that the transaction to which the application relates should be approved, a notice to that effect, advising the applicant of the right to make representations to the Minister in respect of the matter.

• Marginal note:Notice of decision

  (2) Subject to subsections (4) and 400(2), the notice referred to in paragraph (1)(a) or (b) shall be sent by the Minister within a period of 45 days after the certified date referred to in subsection 398(1) in the following cases:

  • (a) the application involves the acquisition of control of a bank;

  • (b) the application is made by an eligible agent or an entity controlled by an eligible agent; or

  • (c) an application is made for the approval referred to in subsection 401.2(3).

• Marginal note:Extension of period for notice

  (3) If the Minister is unable to complete the consideration of an application within the period referred to in subsection (1), the Minister shall

  • (a) within that period, send a notice to that effect to the applicant; and

  • (b) within a further period of thirty days after the date of the sending of the notice referred to in paragraph (a) or within any other further period that may be agreed on by the applicant and the Minister, send a notice referred to in paragraph (1)(a) or (b) to the applicant.

• Marginal note:Further extensions

  (4) If the Minister considers it appropriate to do so, the Minister may extend the period referred to in subsection (2) for one or more periods of forty-five days.