By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Policy By-law: SOR/2020-271

Canada Gazette, Part II, Volume 154, Number 26

Registration

SOR/2020-271 December 13, 2020

CANADA DEPOSIT INSURANCE CORPORATION ACT

The Board of Directors of the Canada Deposit Insurance Corporation, pursuant to paragraph 11(2)(g) footnote a and subsection 18(3) footnote b of the Canada Deposit Insurance Corporation Act footnote c, makes the annexed By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Policy By-law.

Ottawa, December 9, 2020

By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Policy By-law

Amendment

1 Section 24 of the schedule to the Canada Deposit Insurance Corporation Deposit Insurance Policy By-law footnote 1 is replaced by the following:

24 (1) The member institution shall create and maintain records that accurately and fully describe and disclose

(2) The member institution shall retain the records referred to in paragraphs (1)(b) and (g) for a period of six years after the day on which they are created and during that period shall not remove them from Canada except with the prior written consent of the Corporation.

(3) If the member institution amalgamates with another member institution or acquires all or substantially all of the assets of another member institution, the institution that results from the amalgamation or acquisition shall retain the records referred to in paragraphs (1)(b) and (g) of each predecessor member institution for a period of six years after the day on which the amalgamation or acquisition occurs and during that period shall not remove them from Canada except with the prior written consent of the Corporation.

(4) Despite subsections (2) and (3), the member institution may retain the records referred to in paragraphs (1)(b) and (g) outside of Canada if it is a subsidiary of a foreign bank, as defined in section 2 of the Bank Act, that is incorporated or formed otherwise in a country or territory other than Canada in which a trade agreement listed in Schedule IV to that Act is applicable or of a regulated foreign entity, as defined in section 2 of that Act.

Coming into Force

2 This By-law comes into force on the day on which section 21 of the Canada–United States–Mexico Agreement Implementation Act, chapter 1 of the Statutes of Canada, 2020, comes into force, but if it is registered after that day, it comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the By-law.)

Background

Pursuant to paragraph 11(2)(g) and subsection 18(3) of the CDIC Act, the CDIC Board of Directors is authorized to prescribe the policy of deposit insurance through by-laws which clarifies CDIC’s ability to obtain the information it needs directly from its member institutions. The Canada Deposit Insurance Corporation Deposit Insurance Policy By-law (the Policy by-law) requires CDIC member institutions to: (i) comply with all relevant acts, by-laws, and undertakings/agreements with CDIC, (ii) have appropriate, effective, and prudent practices in respect of corporate governance, risk management, liquidity and capital management, and controls in respect of its operations, (iii) pay premiums (plus related interest and surcharges), (iv) keep prescribed information confidential (i.e. premium categorization details, stage ratings, and examiner ratings), (v) provide CDIC with prescribed information (e.g. filings in respect of premium calculations) and certain information upon request by CDIC (e.g. for compliance assessment purposes or in respect of resolution planning), (vi) prepare and maintain prescribed financial records, (vii) submit to annual examinations by the Superintendent of Financial Institutions and to special examinations on behalf of CDIC (and at such time as CDIC may require), and (viii) comply with obligations post-termination/cancellation until no CDIC-insured deposits are held. The CDIC Board of Directors amended the By-law on March 3, 1999, March 7, 2002, April 15, 2005, October 8, 2008, and March 5, 2014.

Issues

Consequential amendments are required to be made to the CDIC Policy By-law in order to achieve compliance with Canada’s commitments under the Canada–United States–Mexico Agreement (CUSMA). When CUSMA entered into force on July 1, 2020, it provided new commitments related to data localization that revises a government’s ability to impose local data storage requirements on foreign-owned financial institutions, with safeguards to ensure that regulators will have immediate, direct, complete and ongoing access to the information they need. Section 18(3.1) was added to the Canada Deposit Insurance Corporation Act (the CDIC Act) to address portions of this commitment, while the localization of records rests with the By-laws made under the Act.

The CDIC Policy By-law currently requires member institutions to prepare and maintain records related to deposit liabilities and to retain these records in Canada for a period of six years. The amendments to the CDIC Policy By-law do two things: (1) consolidate the record retention requirements by migrating the requirement for member institutions to maintain records related to the information provided in the Reporting Form referred to in the Canada Deposit Insurance Corporation Differential Premiums By-law to the Policy By-law; and (2) exempt certain member institutions — subsidiaries of a foreign bank, as defined in section 2 of the Bank Act, that is incorporated or formed otherwise in a country or territory other than Canada in which a trade agreement listed in Schedule IV of that Act is applicable or it is a subsidiary of a regulated foreign entity, as defined in that section — to maintain these records in Canada, conditional on the requirements imposed in section 18(3.1) of the CDIC Act.

The amendments are required for CDIC to be compliant with Canada’s obligations under CUSMA and are therefore consequential in nature.

Objectives

The main objective of the Amending By-law is to address the issues mentioned above.

Description

The table below provides a description of the changes.

Canada Deposit Insurance Corporation Deposit Insurance Policy By-Law

Amending By-law Section

By-law Section

Rationale

1

24 (1), (2) and (3)

The amendments consolidate record retention requirements for member institutions in the Policy By-law. It migrates the requirement for member institutions to maintain records related to information provided in the Reporting Form from the CDIC Differential Premiums By-law to the Policy By-law.

The amendments maintain the requirement that the records of deposit liabilities as well as the information on which the information provided by the member institution in the Reporting Form submitted under the Canada Deposit Insurance Corporation Differential Premiums By-law is based, must be kept in Canada for a period of six years.

1

24 (4)

The amendment provides an exception to certain member institutions — a subsidiary of a foreign bank, as defined in section 2 of the Bank Act, that is incorporated or formed otherwise in a country or territory other than Canada in which a trade agreement listed in Schedule IV of that Act is applicable or it is a subsidiary of a regulated foreign entity, as defined in that section – from the requirement to retain the records mentioned in paragraph (2) and (3) in Canada if certain conditions are met. The amendment is consequential to ensuring CDIC is compliant with Canada’s commitments under CUSMA.

One-for-one rule

The one-for-one rule does not apply to this proposal, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to this proposal, as there are no costs to small business.

Alternatives

There are no available alternatives. The amendments must be done by way of by-law.

Consultation

The amendments are consequential to a government of Canada legal obligation in CUSMA and requires CDIC to implement and comply with the legal requirement. As such, no consultation is necessary.

Rationale

The Amending By-law ensures that CDIC can meet Canada’s commitments under CUSMA and ensure that all record retention requirements for member institutions are captured in the policy of deposit insurance. The Amending By-law achieves the stated objective and addresses the identified issues. The Amending By-law does not impose any additional regulatory costs or administrative burden on industry.

Implementation, compliance and enforcement, and service standards

The amending by-law comes into force on the day on which section 21 of the Canada–United States–Mexico Agreement Implementation Act, chapter 1 of the Statutes of Canada, 2020, comes into force, but if it is registered after that day, it comes into force on the day on which it is registered.

Contact

Mueed Peerbhoy
Senior Legal Counsel
Canada Deposit Insurance Corporation
50 O’Connor Street, 17th Floor
Ottawa, Ontario
K1P 6L2
Telephone: 343‑572‑9516
Email: mpeerbhoy@cdic.ca