Specialized Financing (Banks) Regulations (SOR/2001-428)

Interpretation

Marginal note:Definitions

• 1 (1) The following definitions apply in these Regulations.

  Act

  Act means the Bank Act. (Loi)

  balance sheet value

  balance sheet value, in respect of the shares and ownership interests held by an entity, means the value reported on its balance sheet on an unconsolidated basis. (valeur au bilan)

  book value

  book value[Repealed, SOR/2008-168, s. 1]

  specialized financing entity of the bank

  specialized financing entity of the bank means a specialized financing entity that is controlled by the bank or in which the bank holds a substantial investment. (entité de la banque s’occupant de financement spécial)

  subsidiary

  subsidiary, in respect of a bank, does not include a subsidiary that is a specialized financing entity of the bank. (filiale)

• Definition of specialized financing entity

  (2) In these Regulations and for the purpose of the definition specialized financing entity in subsection 464(1) of the Act, specialized financing entity means an entity that acquires or holds shares of, or ownership interests in, entities that a bank may acquire control of, or hold, acquire or increase a substantial investment in, under subsection 466(4) of the Act.

General

Marginal note:Application

2 These Regulations apply to specialized financing activities under subsection 466(4) of the Act and to the ownership by a bank of shares of, or ownership interests in, a specialized financing entity under paragraph 468(2)(b) of the Act.

Conditions

Marginal note:Limits on investments

3 A bank shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in,

• (a) an entity referred to in any of paragraphs 468(1)(a) to (j) of the Act;

• (b) an entity that is primarily engaged in the leasing of motor vehicles in Canada for the purpose of extending credit to a customer or financing a customer’s acquisition of a motor vehicle;

• (c) an entity that is primarily engaged in providing temporary possession of personal property, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property; or

• (d) an entity that acts as an insurance broker or agent in Canada.

Marginal note:Length of investment

4 A bank shall not, by way of specialized financing activities, hold control of, or hold a substantial investment in, an entity for more than 13 consecutive years.

Marginal note:Maximum authorized investment

5 A bank shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity if the aggregate balance sheet value of the shares and ownership interests that the bank, any subsidiary of the bank and any specialized financing entity of the bank hold or would hold in the entity is more than $250 million.

Marginal note:Limit of 10% of regulatory capital

6 A bank shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity if the sum of the following exceeds 10% of the bank’s regulatory capital:

• (a) the aggregate balance sheet value of the shares and ownership interests that the bank and its subsidiaries, whether individually or jointly, would acquire in the entity,

• (b) the aggregate value of outstanding loans made by the bank and its subsidiaries, whether individually or jointly, to the specialized financing entities of the bank, and

• (c) the aggregate balance sheet value of the shares and ownership interests held by the bank and its subsidiaries, whether individually or jointly, in the specialized financing entities of the bank, in the entities controlled by the bank by way of specialized financing activities, and in the entities in which the bank holds a substantial investment by way of specialized financing activities.

Marginal note:Limit of 25% of regulatory capital — investment in a specialized financing entity

• 7 (1) A bank shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity controlled by a specialized financing entity of the bank or an entity in which the specialized financing entity of the bank holds a substantial investment, if the sum of the following exceeds or would exceed 25% of the bank’s regulatory capital:

  • (a) the aggregate balance sheet value of the shares and ownership interests held by the bank and its subsidiaries, whether individually or jointly, in the specialized financing entity of the bank, in the entities controlled by the specialized financing entity of the bank and in the entities in which that specialized financing entity holds a substantial investment, and

  • (b) the aggregate value of outstanding loans that the bank and its subsidiaries, whether individually or jointly, have made to the specialized financing entity of the bank, to the entities controlled by the specialized financing entity of the bank and to the entities in which that specialized financing entity holds a substantial investment.

• Marginal note:Limit of 25% of regulatory capital — investment in an entity

  (2) A bank shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity, other than by way of an investment of a specialized financing entity controlled by the bank, if the sum of the following exceeds 25% of the bank’s regulatory capital:

  • (a) the aggregate balance sheet value of the shares and ownership interests that the bank and its subsidiaries, whether individually or jointly, would acquire in the entity,

  • (b) the aggregate balance sheet value of the shares and ownership interests held by the bank and its subsidiaries, whether individually or jointly, in the entities controlled by the bank by way of specialized financing activities and in the entities in which the bank holds a substantial investment by way of specialized financing activities, other than entities that the bank has acquired control of, or a substantial investment in, by way of an investment of a specialized financing entity of the bank, and

  • (c) the aggregate value of outstanding loans that the bank and its subsidiaries, whether individually or jointly, have made to the entities controlled by the bank by way of specialized financing activities and to the entities in which the bank holds a substantial investment by way of specialized financing activities, other than entities that the bank has acquired control of, or a substantial investment in, by way of an investment of a specialized financing entity of the bank.

Acquisition of Specialized Financing Entities

Definition of non-controlling interest

• 8 (1) In this section, non-controlling interest means an equity interest, in a specialized financing entity of the bank controlled by a specialized financing entity, that is held by a person other than the bank or an entity controlled by the bank.

• Marginal note:Ownership restrictions

  (2) A bank shall not acquire or hold control of, or hold, acquire or increase a substantial investment in, a specialized financing entity if

  • (a) the value of the outstanding debt obligations, other than those payable to the bank or to entities controlled by the bank, of the specialized financing entity and any specialized financing entity of the bank controlled by the specialized financing entity, as reported on their respective balance sheets on an unconsolidated basis, exceeds twice the value of the sum of the following, namely,

    • (i) the value of the excess of assets over liabilities of the specialized financing entity as reported on its balance sheet on an unconsolidated basis, and

    • (ii) the value of the non-controlling interests as reported on the balance sheet of the specialized financing entity on a consolidated basis;

  • (b) the specialized financing entity controls or holds shares of, or ownership interests in, any of the entities referred to in paragraphs 3(a) to (d);

  • (c) the aggregate balance sheet value of the shares and ownership interests, other than shares or ownership interests held by the specialized financing entity in a specialized financing entity of the bank that it controls, that the bank, the specialized financing entity, the subsidiaries of the bank and the other specialized financing entities of the bank hold, or would hold, in an entity that the specialized financing entity holds control of, or a substantial investment in, is more than $250 million;

  • (d) the sum of the values under paragraphs 6(a) to (c) exceeds or would exceed 10% of the bank’s regulatory capital; or

  • (e) the sum of the values under paragraphs 7(1)(a) and (b) exceeds or would exceed 25% of the bank’s regulatory capital.

• Marginal note:13 year limit

  (3) A bank shall not hold control of, or a substantial investment in, a specialized financing entity of the bank if either the specialized financing entity of the bank or the specialized financing entity of the bank and one or more of the following entities, one after another, have held control of, or a substantial investment in, an entity, other than an entity described in subsection (4), for more than 13 consecutive years:

  • (a) the bank; or

  • (b) any other specialized financing entity of the bank.

• Marginal note:Exception

  (4) A specialized financing entity of the bank controlled by the specialized financing entity of the bank shall not be considered for the purpose of subsection (3).

• Marginal note:Prior periods not included

  (5) If a specialized financing entity of the bank held control of, or a substantial investment in, an entity for a period before becoming the specialized financing entity of the bank, that period shall not be considered for the purpose of subsection (3).

Marginal note:Control not required

9 Subsection 468(4) of the Act does not apply to a bank’s acquisition or increase of a substantial investment in an entity by way of specialized financing activities in accordance with these Regulations.

Marginal note:Approvals not required

10 Subsections 468(5) and (6) of the Act do not apply to a bank’s acquisition of control of, or its acquisition or increase of a substantial investment in, an entity by way of specialized financing activities in accordance with these Regulations.

Repeal

Marginal note:Repeal

11 [Repeal]

Coming into Force

Marginal note:Coming into force

Footnote ^*12 These Regulations come into force on the day on which sections 467, 474 and 978 of the Bank Act, as enacted by sections 127 and 183 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, come into force.

• Return to footnote ^*[Note: Regulations in force October 24, 2001, see SI/2001-102.]