Canada: The 2014 Canadian Federal Budget And Financial Services

The 2014 Budget of the Government of Canada includes a number of significant financial sector policy initiatives of interest to financial institutions and related stakeholders. The Government has identified three key areas of priority: (i) Implementing measures to increase market discipline in residential lending and reduce taxpayer exposure to the housing sector, (ii) taking action to encourage competitive financial services while preserving the safety and soundness of the financial sector and (iii) modernizing regulation to better protect investors and consumers, enhance Canada's financial services sector, support efficient capital markets and manage systemic risk. Set out below is a summary of the key initiatives.

Residential Lending

The planned measures of the Government include:

  • Canada Mortgage and Housing Corporation (CMHC) will pay guarantee fees to the Receiver General to compensate the Government for mortgage insurance risks.
  • CMHC is reducing its annual issuance of portfolio insurance from $11 billion to $9 billion.
  • The Minister of Finance has reduced the amount of new guarantees that CMHC is authorized to provide under its 2014 securitization programs to $80 billion for market National Housing Act mortgage backed securities and to $40 billion for Canada mortgage bonds.
  • Implementation of the new legislative framework for covered bonds.
  • Measures to implement Economic Action Plan 2013 initiatives to tie portfolio insurance to the use of CMHC securitization vehicles and prohibit the use of government-backed insured mortgages as collateral in securitization vehicles that are not sponsored by CMHC.

Encouraging Competitive Financial Services

The Government proposes to improve the ability of new entrants and smaller banks to compete while preserving the safety and soundness of the sector as follows:

  • The Office of the Superintendent of Financial Institutions (OSFI) has appointed an advisor to reach out to small banks and trusts and will address challenges faced by these institutions where feasible. OSFI will also review the approval process for establishing a new bank with a view towards streamlining it.
  • The Government will improve the ability of smaller banks to access funding from CMHC.
  • The Government will support provincial credit unions that wish to move to the federal credit union framework by streamlining the process for amalgamations.

The Government will study and consult on other measures to encourage competitive financial services. Potential measures include requiring large banks to provide access to deposit products from small federally regulated banks and trusts through dealers.

Property and Casualty (P&C) Demutualization Framework

The Government proposes to introduce legislative and regulatory changes to establish a P&C demutualization framework. The Government will be consulting stakeholders on the framework, which will provide for an orderly and transparent process and ensure that policyholders are treated fairly and equitably.

Modernizing Regulation

Economic Sanctions Regime

The Government will improve the effectiveness of its targeted financial sanctions regime and reduce the compliance burden on the private sector.

Led by Foreign Affairs, Trade and Development Canada, the Government will adopt new administrative measures and propose legislative and/or regulatory amendments as necessary to improve the effectiveness of its targeted financial sanctions regime.

Cooperative Capital Markets Regulator

The Government is committed to improving the regulation of Canada's capital markets, noting that on September 19, 2013, Canada, British Columbia and Ontario agreed to establish a Cooperative Capital Markets Regulator. It is noted that, along with British Columbia and Ontario, the Government continues to invite all other provinces and territories to participate in the implementation of the Cooperative System.

OTC Derivatives and Financial Benchmark Regulation

The Government proposes to amend the Bank Act to create an explicit regulation-making authority for banks regarding over-the-counter derivatives.
The Government also proposes to introduce amendments to the Bank Act to provide a regulation- making authority that would apply to Canadian banks in their submissions to financial benchmarks.

Strengthening the Governance of Canada's Payments Sector

The Government indicates that it is developing a comprehensive framework for the oversight of the Canadian payments system and will consult on the oversight of retail payments systems in the coming months. In addition, the Government indicates that it is developing a comprehensive risk-based approach to the oversight of the Canadian payments system. Further, the Government notes that it intends to consult publicly on the oversight of retail payments systems in the spring of 2014.

The Government proposes to amend the Canadian Payments Act to introduce changes to the governance and accountability structures of the Canadian Payments Association. In addition, the Government proposes to expand and enhance the oversight powers of the Bank of Canada by amending the Payment Clearing and Settlement Act so it can better identify and respond to risks to financial market infrastructure in a proactive and timely manner.

Improving Corporate Transparency

The Government notes that it will consider options to further strengthen corporate transparency in Canada, including an explicit ban on bearer instruments. The Government will also consider options to further improve corporate transparency, taking into account the results of Industry Canada's current consultations on corporate transparency issues in the context of the Canada Business Corporations Act.

Federal Regime for Credit Unions

The Government recently announced plans to offer temporary transitional support to eligible credit unions through extended deposit insurance and a short-term funding facility. As noted above, the Government proposes to establish a streamlined process for amalgamating two or more provincial credit unions into one federal credit union. In addition, the Government will enhance clarity of the federal mandate. It indicates that joint supervision of provincial credit union centrals by the Office of the Superintendent of Financial Institutions will cease. Over the coming months, the Government will consult with provinces and industry on a two-year transition plan. In addition, the Government indicates that it will review the powers of federal entities with respect to provincial credit unions', caisses populaires' and centrals' access to direct federal support and will make amendments, as appropriate.

Canada Deposit Insurance Corporation (CDIC)

The Government of Canada proposes to make legislative amendments to permit the Bank of Canada to provide banking and custodial services to CDIC.

Anti-Money Laundering and Anti-Terrorist Financing Regime

The Government indicates that it will introduce legislative amendments to strengthen Canada's anti- money laundering and anti-terrorist financing regime to strengthen Canada's anti-money laundering and anti-terrorist financing regime and improve Canada's compliance with international standards, while minimizing the compliance burden.

The Government proposes to:

  • Introduce anti-money laundering and anti-terrorist financing regulations for virtual currencies, such as Bitcoin.
  • Make online casinos subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
  • Enhance the ability of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to disclose to federal partners threats to the security of Canada, consistent with the Government's response to the Commission of Inquiry into the Investigation of the Bombing of Air India Flight 182.

To implement the above amendments, the Government proposes to provide FINTRAC up to $10.5 million over five years and up to $2.2 million per year ongoing. The Government also proposes to provide up to $12 million on a cash basis over five years to improve FINTRAC's analytics system.

P&C Insurance

The Government indicates that it will consult with the insurance industry, provinces and territories, and other stakeholders to explore options for a national approach to residential flood insurance in Canada and insurance issues arising from natural disasters more generally.

The Government also proposes to provide $11.4 million over five years on a cash basis to Natural Resources Canada to upgrade the earthquake monitoring system to incorporate more advanced technologies that provide timely public alerts in high-risk and urban areas. This is also a topic on which the P&C industry has made a helpful contribution to the development of federal policy.

Consumer Protection

There were a number of important announcements that are part of the Government's agenda to improve financial consumer protection as follows:

  • Launch of a comprehensive review of Canada's deposit insurance framework.
  • Work with stakeholders to promote fair and transparent practices and to help lower credit card acceptance costs for merchants, while encouraging merchants to lower prices to consumers. In addition, the Government notes that it intends to strengthen the Code of Conduct for the Credit and Debit Card Industry in Canada, in consultation with stakeholders.
  • Work with the provinces to maintain the integrity of the payday lending framework and to support provincial efforts to regulate appropriately all payday lending-type high interest rate products. The Financial Literacy Leader will also work with stakeholders to raise public awareness about the costs of and alternatives to these products.
  • Require enhanced disclosure with respect to collateral charge mortgage, better equipping borrowers to understand these impacts.
  • Require enhanced disclosure by banks on the costs and benefits of using powers of attorney or joint accounts and more robust bank processes and staff training.

Further, the Government indicates that it will continue to engage with Canadians on the development of a comprehensive financial consumer code to better protect consumers of financial products and services and ensure they have the necessary tools to make responsible financial decisions. The Minister of State (Finance) will conduct national consultations and the government indicates that Canadians' views will be invaluable in developing the code.

The Government will act to enhance access to basic banking services. Specifically the Government indicates it will work with financial institutions to expand no-cost basic banking services for youths, students and vulnerable groups (e.g. beneficiaries of a Registered Disability Savings Plan and at-risk seniors). The Government will also proactively ensure pay-to-pay policies for monthly printed credit card statements provided by banks are prohibited. Further the Government indicates that it will build Canadians' awareness of their right to cash Government of Canada cheques free of charge at any bank in Canada, following up on the commitment in Economic Action Plan 2013.

Next Steps

A significant number of the initiatives noted above contemplate further consultations with the financial sector and other stakeholders, including consumers. We will report on these consultation processes as they mature. In addition, the Government also announced a number of initiatives that will be reflected in new legislation and/or regulations. We will also provide our analysis in the coming months as these measures are made public.

BLG's analysis of Budget related fiscal measures of importance to financial institutions, including the changes to the foreign accrual property regime requirements for insurance of Canadian risks and use of foreign affiliates that carry on investment activities for their own account, can be accessed at on our website by clicking here.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Blake, Cassels & Graydon LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions