Canada: Budget 2015: Financial Institutions Update

The 2015 federal budget announces a number of measures directed to financial institutions. These include a new federal financial consumer code, a bail-in regime for domestic systemically important banks, a national securities regulator initiative (which our securities group will address separately on the Canadian Securities Regulatory Monitor blog), increased financial sector oversight, credit union regulation and retail payment systems oversight. While these initiatives are significant, for the most part the budget provides little in the way of details.

Consumer Protection Framework for Banks

The Government confirmed that it intends to amend the Bank Act to put in place a comprehensive federal financial consumer protection framework applicable to banks only, as first promised in the 2013 budget. In December 2013, the Government followed up with a Consultation Paper, which set out a number of underlying principles for the federal consumer protection framework. Many of these principles have been reiterated in the budget.

The budget is short on details but indicates that the code will include the following:

  • Additional disclosure requirements for banking products and services, including requiring additional use of information boxes;
  • Prohibitions of specified business practices (such as high pressure sale tactics);
  • Cooling-off periods applying to a greater range of financial products and services. Currently, a cooling-off period is only available for deposit accounts, although the two-day disclosure requirement for mortgages provides consumers with a type of cooling-off period;
  • Broader corporate governance requirements, resulting in an expansion of the board's duties to all consumer protection measures. Currently those duties are limited under the Bank Act to the establishment of procedures for meeting disclosure requirements and handling customer complaints and, under OSFI Guideline E-13, to the general oversight of regulatory compliance management;
  • Additional requirements relating to "transparency and accountability", which could include additional public reporting requirements on complaints and on measures taken to assist vulnerable consumers; and
  • A requirement that advertising be "clear and accurate". Regulations under the Bank Act already address disclosure in advertising of specific aspects of loans and revolving credit, and there is, of course, the prohibition against materially false and misleading advertising in the Competition Act. It will be interesting to see how the proposed positive obligation will be framed, and how this duty will evolve in a competitive environment.

The 2015 budget proclaims the Government's intention that "the Bank Act provide the exclusive set of rules governing consumer protection for banks." This statement of exclusivity appears to be in response to the recent Supreme Court of Canada decision in Bank of Montreal v. Marcotte, in which the Court held that certain provisions of Quebec's Consumer Protection Act applied to federally regulated banks (see Marcotte – the banks and provincial laws). Until the proposed text of the legislation to achieve this exclusivity is available, one can only speculate on its potential effect on the current state of the law as set out in the Marcotte decision.

As the Government has previously indicated, the Financial Consumer Agency of Canada will monitor compliance with the code.

Taxpayer Protection and Bank Recapitalization Regime (Bail-In Regime)

Consistent with Canada's commitments with respect to G-20 post-financial crisis reforms, the Government has confirmed its intention to expand resolution powers relating to Canadian systemically important banks (namely the six largest Canadian banks), including by implementing the Taxpayer Protection and Bank Recapitalization Regime (the "bail-in" regime).

The key features of this regime were outlined in the proposal released in August 2014, which we described in further detail in a prior legal update " Department of Finance Releases Proposal for Canadian Bail-In Regime". Consistent with the August proposal, the proposed regime contemplates statutory conversion of "eligible liabilities" (which consist of unsecured debt that is tradable and transferable and has an original term to maturity that is 400 days or more, issued after a certain date) and does not contemplate conversion of deposits. The proposed new capital requirement referenced in the August proposal, the minimum loss absorbency requirement, will also be instituted. There will be a transition period before the bail-in regime becomes effective.

Importantly, the budget confirms for the first time that adoption of a holding company structure will not be required. The August proposal queried whether such a structure (which is typical in other jurisdictions such as the U.S.) should be mandated in Canada for systemically important banks, given that the structure of resolution regimes in such other jurisdictions (such as the "single point of entry" regime in the U.S.) is fundamentally based on such structure. Requiring financial institutions to convert to such a structure would have been very disruptive and costly to any affected financial institution.

Housing Finance

The Government announced that it will put in place regulatory measures intended to limit portfolio insurance extended through the substitution of mortgages in insured pools, tie the use of portfolio insurance to CMHC securitization vehicles, and prohibit the use of government-backed insured mortgages as collateral in securitization vehicles that are not sponsored by CMHC.

Financial Sector Oversight

The Government will propose legislative amendments to "modernize, clarify and enhance the protection of prescribed supervisory information that relates to federally regulated financial institutions", in order to increase confidence in the supervisory process and the stability of the financial system. This is an important initiative because the prescribed supervisory information has been central to relations between the federal regulator and each regulated entity.

The Government will also review Part IV of the Financial Administration Act, which relates to public debt, with the aim of ensuring the legislation reflects "modern market practices for the prudent management of Canada's finances", and statutes relating to federal financial sector oversight and to Crown corporations to ensure their "effective governance and operations."

Retail Payment Systems

The budget references a number of recent changes affecting retail payment systems: the commitment obtained from Visa and Mastercard in November 2014 with respect to interchange fees, the recent release of the updated Code of Conduct for the Credit and Debit Card Industry in Canada (which we described in further detail in a recent legal update, Updated Code of Conduct for the Credit and Debit Card Industry in Canada) and the release of a consultation paper on the oversight of Canada's national payment systems, Balancing Oversight and Innovation in the Ways We Pay: A Consultation Paper.

The Government also signalled that it is closely monitoring payment innovation and is prepared to introduce additional regulation to ensure the safety of the payment system while continuing to foster innovation. As was stated in the budget: "[p]ayment innovations offer benefits to consumers, such as greater convenience and speed, but they must be operated in a responsible manner so that Canadians continue to have confidence in the payment system. The Government is currently consulting on the oversight of retail payment systems to support competitive and innovative ways to meet the payment needs of Canadians while ensuring that the payment system remains safe." It will be very interesting to see how the Government deals with a payment landscape that continues to evolve at a rapid rate.

Voluntary Mortgage Disclosure Requirement

The Government announced that it intends to work with non-bank mortgage lenders to expand disclosure in respect of mortgage prepayment, similar to federally regulated financial institutions' voluntary commitments under the Code of Conduct for Federally Regulated Financial Institutions—Mortgage Prepayment Information. Consumers would be well served by consistent disclosure requirements, but it is unclear what levers the Government intends to use to achieve this result.

Credit Union Regulation

The Government announced that it intends to continue engaging with stakeholders to ensure that the necessary measures are in place to support the growth of the credit union sector in Canada, following its earlier enactment of the federal credit union framework.


Cybersecurity initiatives were announced in the budget that will be of interest to financial institutions. For more detail on these, please see McCarthy Tétrault's blog: " New Cybersecurity Legislation in Federal Budget".

White Collar Crime

The Government also announced its intent to pass legislative amendments relating to white-collar crime to allow the Financial Transactions and Reports Analysis Centre of Canada to disclose relevant information to provincial securities regulators.

Other Commitments

The budget also includes financial industry-related commitments that are not legal or regulatory in nature, relating to financial literacy and the national counterfeit enforcement strategy.


Financial institutions can expect a number of important regulatory and legislative changes to follow in the near future (depending of course on the outcome of any federal election), as the Government takes steps to implement the various initiatives outlined in this budget.

To view the original article please click here.

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.