Canada: Canadian Government Tables Bail-in Legislation

Last Updated: May 3 2016
Article by Jeffrey S. Graham, Stephen J. Redican and Olivier Tardif

Most Read Contributor in Canada, September 2016

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.

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.