Canada: OSFI Issues Updated Incorporation Guidance For Bank And Trust Company Applicants

The Canadian Office of the Superintendent of Financial Institutions (OSFI) assesses applications for incorporation and makes recommendations to the Canadian Minister of Finance (Minister), who has the ultimate responsibility for approving the incorporation of a federally regulated financial institution (FRFI) under the Bank Act (BA) or Trust and Loan Companies Act (TLCA).

The Government of Canada has indicated its interest in promoting the entry and growth of small deposit – taking institutions. In response, OSFI has sought to make regulatory priorities and the application process more transparent. To that end, OSFI has issued updated guidance that sets out the three phases of the application process, along with the information that applicants are generally expected to submit in support of the requisite applications (Revised Guide). The Revised Guide is an excellent source of information for potential applicants and their professional advisers and brings up to date public disclosure of the substantial revisions of the application process that was implemented by OSFI in 2014.


The phased approach is intended to provide applicants with increased guidance and feedback both at the initial stages of the proposed application and throughout the application process. The phased approach outlined in the Revised Guide will help those considering establishing a bank or trust company identify at an early stage whether they have a solid basis on which to proceed, before they incur the significant costs of preparing and filing a full application.


Prior to submitting the formal application, prospective applicants are to contact the Legislation and Approvals Division of OSFI to schedule an initial in-person meeting to discuss the proposed entity and the application process. This discussion provides an opportunity for OSFI to identify those persons who should be considered applicants for the purpose of the Revised Guide and the requisite approvals, as well as to provide preliminary feedback regarding any apparent or potential regulatory, prudential or public policy issues. To facilitate the initial discussion, prospective applicants will generally be expected to provide the following written submissions prior to the meeting: (i) the reason(s) for which they intend to apply to establish an entity; (ii) a brief overview of the proposed bank or trust company's business strategy and target market; (iii) a description of the proposed ownership structure, including details regarding potential impediments to the eligibility of any proposed owners and sources of capital for initial and on-going financial support; and (iv) a description of the proposed management team.

The initial discussion will also provide an opportunity for OSFI to clarify its processes and expectations regarding applications to establish a bank or trust company generally, along with any unique considerations that may be applicable to that particular prospective applicant.


OSFI will request the following information from prospective applicants who, after the initial discussion, wish to proceed with the application. OSFI's primary purpose in reviewing this information is to identify any fundamental issues that should be considered by the prospective applicant, including any: (i) material risks that may impact the core viability of the applicants' business plan; and (ii) significant prudential or policy concerns that may prevent OSFI from making a positive recommendation to the Minister for the issuance of Letters Patent.

The prospective applicant is generally expected to provide: (i) the name of the jurisdiction and date of incorporation or establishment of the prospective applicant; (ii) the current organization chart (with percentages owned) of the prospective applicant's corporate group, including entities in which the prospective applicant (and any of its parents that are not also prospective applicants) beneficially owns 10% or more of the voting rights; (iii) details regarding any voting agreement or other similar arrangements that involve persons exercising direct or indirect control over the prospective applicant; (iv) the names of all persons owning more than 10% of any class of shares or ownership interests in the prospective applicant (and in any of its parents that are not also prospective applicants), and the percentage of shares or ownership interests held; (v) details of any shares or ownership interests of the prospective applicant (and any of its parents that are not also prospective applicants) that are held by a government or a political subdivision, an agent or agency thereof, together with a summary of its involvement in the operation and affairs of the prospective applicant, (vi) a summary of the current and proposed financial services and other key activities carried on by the prospective applicant and its affiliates (other than the proposed bank or trust company), including a list of jurisdictions in which they operate and the nature and degree of regulatory oversight applicable to the financial services activities; (vii) a copy of the most recent annual report of the prospective applicant (and of any of its parents that are not also prospective applicants); (viii) the audited consolidated financial statements of the prospective applicant (and of any of its parents that are not also prospective applicants) for the last three years; and (ix) details of whether the prospective applicant (and any of its affiliates that are not also prospective applicants) has been: (a) denied a request to establish a financial institution or a branch in any jurisdiction; and (b) the subject of any criminal proceedings or administrative sanctions.

The prospective applicant is generally expected to provide a minimum five-year business plan for the proposed FRFI, including: (i) the reasons why the prospective applicant is seeking to establish the proposed FRFI; (ii) an analysis of target markets and opportunities that the proposed FRFI will pursue and the plans to address them; (iii) an analysis of competitors, showing both challenges and opportunities, and plans to address them; (iv) the reasons why the prospective applicant believes that the proposed FRFI will be successful, and the overall strategy for achieving this success, including a discussion of key assumptions; (v) the location(s) of the proposed branch(es) and head office of the proposed FRFI in Canada; (vi) a detailed description of each line of business to be conducted by the proposed FRFI and the products and services to be offered, including how the lines of business interrelate; (vii) for each year in the five-year business plan, details regarding the implementation of the Liquidity Adequacy Requirements, including on-going reporting on the Net Cumulative Cash Flow and Liquidity Coverage Ratio; (viii) the risk-based capital and leverage ratios for each year of the five-year business plan, including a breakdown of key elements used to calculate those ratios on a Basel III basis; (ix) five-year pro forma financial statements (base case) for the proposed FRFI, including balance sheet, income statement, details regarding key assumptions and an identification of major asset, liability, income and expense categories; (x) contingency plans resulting from variations associated with key assumptions used in developing the base case business plan, including a sensitivity analysis showing the results of changes in key assumptions on the base case business plan under a worst case scenario and a discussion of the changes in assumptions; (xi) details regarding the proposed organizational structure including senior management reporting lines key responsibilities within the organization; (xii) details regarding the proposed composition of the board of directors and senior management, and details regarding any persons selected or sought for those positions; (xiii) a description of any proposed material outsourcing arrangements involving the proposed FRFI, how these arrangements would be managed, and copies of any material outsourcing arrangement contracts; and (xiv) a copy of any proposed shareholders' agreement.

In addition, the prospective applicant is generally expected to provide: (i) details regarding the proposed FRFI's (a) credit products and the underwriting criteria for those products, (b) trading and investment strategy, (c) information technology environment, and (d) exit-strategy in the event that it is unable to execute its business plan; and (ii) in the case of a continuance from another Act (e.g., Canada Business Corporations Act), details regarding the incremental costs associated with being regulated as a FRFI for each year in the five-year business plan.


A second in-person meeting with the prospective applicant will be scheduled once OSFI has had an opportunity to consider the information described above. The purpose of this second meeting is for the prospective applicant to demonstrate an understanding of the material risks associated with its business plan and the methods by which it intends to mitigate those risks. Prior to the meeting, OSFI will provide the prospective applicant with an agenda and specific issues that the prospective applicant will be expected to address at the meeting.

Following the second in-person meeting with OSFI, the prospective applicant will receive a letter setting out OSFI's views and expectations regarding: (i) any material risks or concerns with the proposed business plan and whether OSFI will expect those risks or concerns to be resolved in the application process; and (ii) additional information requirements, in addition to those already set out in the Revised Guide, that the prospective applicant will be required to submit as part of its formal application. OSFI will also request that the prospective applicant provide a written timeline for its submission of a formal application.


Assuming the application has merit in the eyes of OSFI and the applicant is comfortable that it can satisfy OSFI's requirements, the applicant is required to publish a notice of intention to apply for Letters Patent. After publishing the notice, the applicant submits its formal application for Letters Patent for review and consideration. The Revised Guide, in the same manner as earlier versions, sets out the detailed information requirements of the formal application. The Revised Guide has been updated to reflect various new regulatory requirements that have been adopted over the past several years including the requirements of Basle III, the Internal Capital Adequacy Assessment Process, risk appetite statement requirements, and current regulatory compliance management expectations.

OSFI notes that it will generally request further information or details from the applicant and will meet with the applicant during the course of its review of the application.


Upon completion of the review of the application, OSFI submits its recommendation to the Minister regarding the issuance of Letters Patent. If Letters Patent are issued by the Minister, OSFI continues its review and consideration of the application with respect to the issuance of an Order to Commence and Carry on Business (Commencement Order). Prior to the issuance of the Commencement Order, OSFI will generally make additional requests for information or details and will have further meetings with the applicant.

If OSFI is satisfied that any material issues or concerns identified have been adequately addressed, the Superintendent of Financial Institutions issues the Commencement Order.


While there is no specific time limit on the assessment of applications, OSFI indicates that it endeavours to complete all application assessments as quickly as possible. The assessment of each application will depend on the specific facts and circumstances, and OSFI indicates that it will communicate regularly with the applicant throughout this process. The Revised Guide reminds applicants that a newly incorporated bank or trust company may require several months to prepare for the on-site review prior to receiving its Order. Both the BA and the TLCA specify that the Superintendent shall not make an Order more than one year after the issuance of Letters Patent.


While many new FRFIs have been formed successfully in the past number of years, many parties seeking to establish FRFIs have been unsuccessful. OSFI indicates in the Guide that it may terminate its review of an application where, in OSFI's view, based on the quality of the applicant's submissions, and despite significant feedback from OSFI, the applicant is unable to satisfy the information requirements in support of the application. In this regard, OSFI notes that applicants should note that they bear the onus of satisfying OSFI's information requirements in a timely, clear and complete manner.


The application process outlined in the Revised Guide will ensure that applicants receive important guidance and feedback at the initial stages and that material risks are identified prior to submission of a formal application. In addition, the application process reflects a more structured internal OSFI review process. These are important enhancements to the application process and will hopefully lead to better utilization of resources by both applicants and OSFI.

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

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

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
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 (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

To Use 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.


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.


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