Canada: The Federal Budget: What Financial Institutions Need To Know

Last Updated: May 9 2015
Article by Darcy Ammerman and Sean Brandreth

Co-author: Tayleigh Armstrong, Student-at-Law

On April 21, Finance Minister Joe Oliver tabled the 2015 federal budget (the "Budget"). Two of the major changes include an enhanced consumer protection framework applicable to Canadian banks and further information about the government's intention to introduce a "Bail-In" regime for Canada's six largest banks, both designed to protect consumers in their dealings with financial institutions.

Consumer Protection Framework

One of the major initiatives will amend the Bank Act (the "Act") to implement and/or enhance consumer protection requirements for banks. In addition, a set of overarching principles will be set out in the Act to guide the conduct of banks. Banks will now be obliged as part of their public reporting requirements to report annually on how their business activities meet the spirit of these principles.

Interestingly, the Budget proclaims the federal government's intention that the Act "provide the exclusive set of rules governing consumer protection for banks" in order to achieve one comprehensive, consolidated set of rules to allow banks to efficiently deliver national products and services, and ensure that customers have uniform protection across the country. This change may represent a welcome development for banks that addresses the uncertainty following the September 2014 Supreme Court of Canada ("the SCC") decision Bank of Montreal v Marcotte, in which the SCC found, in addition to the Act, that the Consumer Protection Act (Quebec) could also apply to banks. The SCC held that even though the federal legislature may constitutionally have exclusive power to regulate an area, such as banking, provincial legislation can also apply. If the federal and provincial laws at issue are not found to be in operational conflict, the SCC reinforced the long-followed principle that it could give meaning to both pieces of legislation. While the Budget proposals still lack specifics, it will be important to see which amendments and additions make it into the Act and how these will interact with provincial consumer protection laws.

Some of the consumer protection proposals of note in the Budget include:

Clear and simple disclosure of information: The government proposes additional disclosure requirements for banking services and products, including increased use of summary information boxes. Specific products that will require summary information boxes have not been identified, but banks may have to amend their current documents to comply with the new requirements.

Broader corporate governance requirements: Board of directors' duties will be expanded under the Budget proposals to cover all consumer protection measures. Currently, boards of directors' are limited under the Act to (1) ensuring there are appropriate procedures in place to provide required disclosure to customers and (2) general oversight of regulatory compliance management, including oversight of procedures to resolve conflicts of interest.

Prohibition of high pressure sales tactics: Business practices such as high pressure sales tactics will face increased scrutiny if the Budget proposals are implemented. The government did not, however, provide details by way of specific scenarios or business practices that would be prohibited. The Budget also proposed the addition of mandatory cooling-off periods for additional products, though again details regarding which products will be affected were not given.

Access to banking: Under the Budget proposals, a broader range of personal identification can be used to open a bank account, allowing greater access to banks by consumers. No particulars are provided, but the example of a customer presenting both a birth certificate and an electricity bill together was deemed sufficient identification to open an account.

Improved transparency and accountability: Under the proposed amendments to the Act, banks will be required to take measures to be more transparent with customers. For example, banks may be required to make additional public reporting on complaints, which includes the issuance of annual reports on how they have adhered to the guiding principles on consumer protection that will be set out in the Act.

Clear and accurate advertising: The Budget proposes a requirement that advertising be clear and accurate. As there are already regulations set out under both the Act and the Competition Act that deal with misleading and false advertising, it remains to be seen how such new regulations will co-exist with existing ones.

The "Bail-In" Regime

The federal government also confirmed its intention to implement the Taxpayer Protection and Bank Recapitalization Regime, or the "Bail-In" regime. Bail-In regimes have been considered in a number of jurisdictions since the 2008 financial crisis. The goal of a Bail-In regime is to limit taxpayer exposure in the event of a bank failure, and to instead shift the burden to the creditors and shareholders of the bank. Under the Canadian regime, failing financial institutions that are considered "systematically important" may be restructured by the government. For the most part, this will affect the six largest banks in Canada.

The proposed regime includes a statutory conversion power. This power allows for the permanent conversion of eligible liabilities of a non-viable bank into common shares. Under the regime, eligible liabilities include only unsecured debt that:

  1. is tradable and transferable;

  2. has an original term to maturity of 400 days or more; and

  3. is used or renegotiated after the implementation date set out by the government.

Under the proposed regime, a minimum loss absorbency requirement will be instituted. As well, a comprehensive set of disclosure and reporting requirements will be developed.

The Bail-In regime was first proposed in the 2013 federal budget, and is primarily based on the Taxpayer Protection and Bank Recapitalization Regime consultation paper issued by the Department of Finance in August 2014 (the "2014 Paper").

One major difference between the Canadian Bail-In regime and the regime implemented in the United States is that the adoption of a holding company structure will not be mandatory. In Canada, an operating bank is the top-tier entity in the corporate group, as opposed to a holding company, unlike in other jurisdictions. The 2014 Paper noted that the government was considering whether the holding company structure should be required for Canadian banks; it has now been confirmed that no holding company requirement would be applicable to Canadian banks.

Other Noteworthy Proposals

Other budget proposals that will be of interest to financial services clients include:

  • the expansion of the voluntary mortgage prepayment disclosure commitment for non-bank mortgage lenders to bring disclosure more in line with federally regulated financial institutions' current commitments;

  • legislative amendments to enhance the protection of information gathered by financial sector oversight bodies;

  • continued work with stakeholders on the implementation of the federal credit union framework to encourage growth and competitiveness in the credit union sector;

  • the potential introduction of additional regulations to ensure the safety of retail payment systems for consumers while simultaneously fostering innovation; and

  • amendments to the Canada Business Corporations Act that deal with director elections, shareholder communications, gender diversity and corporate transparency.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2015

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.

Darcy Ammerman
Sean Brandreth
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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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