Canada: Canadian Government Tables Bail-in Legislation

On April 20, 2016, the Government of Canada tabled Bill C-15 entitled An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures (hereinafter "Bill C-15").

Significantly, Bill C-15 includes provisions that would implement the long awaited bail-in legislation, i.e., the power to convert eligible liabilities of certain banks into common shares.

In addition, among other things, Bill C-15 also proposes to amend the sunset provisions of certain Acts governing federally regulated financial institutions ("FRFIs") to extend by two years, namely, from March 29, 2017 to March 29, 2019, the period during which those institutions may carry on business. This extension will facilitate the next federal review of legislation governing FRFIs. Bill C-15 also proposes to amend the Bank Act to facilitate the continuance of local cooperative credit societies as federal credit unions, and implements several announcements contained in prior budgets with respect to the Taxpayer Protection and Bank Recapitalization Regime.

The focus of this BLG Bulletin will be the proposed bail-in powers. Set out below is some background information followed by a summary of the proposed amendments.


Following the global financial crisis, the Financial Stability Board adopted a document entitled Key Attributes of Effective Resolution Regimes for Financial Institutions ("Key Attributes") in October 2011 (updated in October 2014). The objective of the Key Attributes is to put in place a special resolution regime for systemically important banks in order to reduce the risk of failure for these financial institutions and provide governmental authorities with the means to restore a bank to viability in the event that it should fail, without disrupting the financial system or economy and without using taxpayer money.

The Key Attributes recommended the adoption by its members of several tools to be used by resolution authorities to prevent another bail-out of a failing bank. In Canada, the resolution authority for banks is the Canada Deposit Insurance Corporation ("CDIC").

Several of the powers recommended in the Key Attributes are already held by CDIC. For example, CDIC's toolkit already includes the powers to ask the Cabinet of the Government of Canada (i) to order the transfer of the shares and subordinated debt of a bank to CDIC, (ii) to order the appointment of CDIC as receiver of a bank and (iii) to order the Minister of Finance to incorporate a bridge institution which will assume the failing bank's deposit liabilities.

However, conspicuously missing from CDIC's toolkit was the power to bail-in a domestic systemically important bank, i.e. to convert eligible liabilities of a bank into common shares.

In recent budgets, the Government of Canada announced its intention of implementing a bail-in regime for Canadian banks. In addition, the Government completed a consultation on this issue in the fall of 2014.

Principal Provisions of Bill C-15

Bill C-15 proposes to amend the Canada Deposit Insurance Corporation Act by adding the bail-in powers to CDIC's toolkit. However, the bail-in powers are only applicable to domestic systemically important banks ("D-SIBS"), while the other powers of CDIC noted above are available with respect to all financial institutions that are members of CDIC.

Bill C-15 also proposes to amend the Bank Act to provide that D-SIBS shall be those designated as such by the Superintendent of Financial Institutions.1 On March 26, 2013, the Superintendent of Financial Institutions identified Canada's D-SIBS as Bank of Montréal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and The Toronto-Dominion Bank.

The proposed bail-in powers would be triggered in the event that a report from the Superintendent of Financial Institutions to CDIC provided that a bank has ceased or is about to cease to be viable and that it cannot be restored to viability by the exercise of the Superintendent's powers under the Bank Act, even assuming the full conversion of the bank's non–viability contingent capital, although Bill C-15 is silent on this condition. Upon receipt of such a report, CDIC can request that the Minister of Finance recommend to the Cabinet that a conversion or winding-up order be made.

A conversion order may only be made if the Cabinet has also ordered that the shares and subordinated debt of the bank be vested in CDIC or has appointed CDIC as receiver of the bank.2 From the moment a vesting order is made or a receiver is appointed, all shareholders, subordinated debtholders, secured creditors and contractual counterparties of the bank are prevented from exercising their voting and other rights in any manner that could hinder the rights and powers of CDIC. In addition, a stay of proceedings protects the bank.3

The conversion order made by the Cabinet grants CDIC the power to convert or cause the bank to convert the bank's shares and liabilities into common shares of the bank. Bill C-15 does not mention which liabilities of the bank will be eligible for conversion into common shares. Such eligible liabilities will be detailed in regulations adopted by the Cabinet, together with the conversion formula to be applied for the conversion.4

The 2015 federal budget provided that deposit liabilities should be excluded from the conversion powers, and that such conversion powers should only apply to unsecured debt that is tradable and transferable, with an original term to maturity of 400 days or more. The 2015 federal budget also provided that the conversion power would only apply to liabilities issued or renegotiated after the implementation date set by the Government. Bill C-15 now specifies that the Cabinet of the Government of Canada may subject shares and liabilities to the conversion power if they were issued before the day on which the bail-in power is implemented, if such shares and liabilities are amended or their term is extended in the case of liabilities.5

Shareholders or debtholders that see their interest being converted are entitled to receive compensation.6 The compensation mechanism will be implemented by the Government in regulations. The compensation mechanism will ensure that the "no creditor worse off" principle is respected. In essence, this principle requires that no shareholder or debtholder be in a financial situation worse after conversion than the one they would have been in had the bank been wound-up. CDIC will be responsible for paying the compensation.


1 Sections 156 and 159 Bill C-15 amending Section 2 and adding Section 484.1 of the Bank Act.

2 Section 131(3) Bill C-15 adding subsection 39.13(1.2) to the Canada Deposit Insurance Corporation Act.

3 Section 131(9) Bill C-15 amending subsection 39.13(4.1) of the Canada Deposit Insurance Corporation Act.

4 Section 139(3) Bill C-15 amending subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act.

5 Section 139 (4) Bill C-15 adding subsections 39.2(10) and 39.2(11) to the Canada Deposit Insurance Corporation Act.

6 Section 139(6) Bill C-15 amending subsection 39.2(9) of the Canada Deposit Insurance Corporation Act and Section 142 Bill C-15 amending sections 39.23 to 39.37 of the Canada Deposit Insurance Corporation Act.

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