Vol. 136, No. 48 — November 30, 2002

Access to Basic Banking Services Regulations

Statutory Authority

Bank Act

Sponsoring Department

Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

Access to Basic Banking Services Regulations

Foreign Institutions Subject to Canadian Residency Requirements Regulations (Trust and Loan Companies)

Foreign Institutions Subject to Canadian Residency Requirements Regulations (Insurance Companies)

Description

The Canadian financial services sector has been undergoing constant change for the better part of a decade. In 1996, the federal government created the Task Force on the Future of the Canadian Financial Services Sector to review and advise on the nature of the changes taking place in the sector. In 1998, the Task Force issued a report that included numerous conclusions and recommendations. These findings were carefully reviewed by committees of both the House of Commons and the Senate. These committees largely endorsed the findings of the Task Force. Based on the work of the Task Force and the parliamentary committees, in June 1999 the federal government issued a policy paper entitled Reforming Canada's Financial Services Sector: A Framework for the Future. This document served as the policy foundation for Bill C-8, An Act to Establish the Financial Consumer Agency of Canada and to Amend Certain Acts in Relation to Financial Institutions (FCA Act). Bill C-8 received Royal Assent on June 14, 2001.

The FCA Act provides for significant amendments to the laws governing federal financial institutions. As an integrated package, the amendments brought about by the FCA Act promote efficiency and growth in the financial services sector, foster domestic competition, empower and protect consumers of financial services, and improve the regulatory environment for financial institutions.

A key characteristic of the FCA Act is the use of regulations to provide for a more flexible regulatory framework for the financial sector. This allows the Government to make modest policy adjustments to the framework in response to significant changes taking place in the global environment in which financial institutions operate. Many regulations are being proposed or modified in order to achieve this policy objective of creating a more flexible regulatory regime.

The remaining amendments bring existing regulations in line with changes made to the financial institutions statutes under the FCA Act.

This is the ninth package of regulations that has been brought forward to complete the policy intent of the FCA Act. The first eight groups of regulations were published in the Canada Gazette, Part II, on October 24, 2001, November 21, 2001, March 13, 2002, April 10, 2002, July 31, 2002, June 19, 2002, July 31, 2002, and October 9, 2002, respectively.

This document discusses the regulatory impact of the following proposed new Regulations:

Access to Basic Banking Services Regulations

The legislation requires banks that are members of the Canada Deposit Insurance Corporation (CDIC) to open retail deposit accounts and cash government cheques for any person who meets the requirements set out in the Regulations. This is part of the Government's objective in Bill C-8 to improve access to basic banking services.

These Regulations define the conditions that an individual must meet to open a retail account and the conditions that a non-customer of a CDIC member bank must meet to cash certain federal government cheques. Moreover, the Regulations set out the circumstances under which the requirements to open a retail deposit account or cash certain government cheques do not apply. In addition, a CDIC member bank must publicly disclose the conditions for opening a retail deposit account or cashing certain government cheques. The Regulations also require a bank to provide written notice when it refuses to open a retail deposit account or cash certain government cheques.

Foreign Institutions Subject to Canadian Residency Requirements Regulations (Insurance Companies) and Foreign Institutions Subject to Canadian Residency Requirements Regulations (Trust and Loan Companies)

These Regulations allow Canadian insurers and trust and loan companies owned by foreign financial holding companies to meet a requirement that only 50 percent of their board be Canadian residents, putting these institutions on an equal footing with Canadian insurers and trust and loan companies owned by foreign financial institutions.

It is expected that approximately 20 regulations will be brought forward for publication within the next few months. These remaining regulations will complete the policy package envisaged by the June 1999 policy paper and the FCA Act.

Alternatives

The enclosed Regulations are required in order to bring into effect the policy intent underlying the FCA Act. They are required to round out the implementation of the new policy framework, as outlined in the description. As such, no alternatives to the Regulations were considered.

Benefits and Costs

The enclosed Regulations are integral to the overall policy objectives of the FCA Act. As such, their cost-benefit justification cannot be separated from the overall costs and benefits of the legislative package itself.

The FCA Act provides an improved regulatory structure that balances the competing interests of stakeholders. While individual legislative measures may impose some burden on a particular stakeholder group, there are overall net benefits for all stakeholders. For example,

— consumers benefit from strengthened consumer protection measures, a more transparent complaints handling process, and the advantages brought about by increased competition.

— financial institutions may face modestly increased regulation through enhanced regulatory rules and a strengthened consumer protection regime. However, they benefit from greater organizational flexibility and broader powers. The creation of the Financial Consumer Agency of Canada (FCAC) is expected to have an annual budget of about $7 million, the cost of which will be passed on to financial institutions in the form of allocated assessment.

— The Office of the Superintendent of Financial Institutions (OSFI) may face moderately increased regulatory challenges as a result of provisions intended to encourage new entrants, but the potential additional cost is offset by improved prudential regulatory powers and increased competition. The exact cost implications of the legislative package for OSFI are not easily calculable. The transfer of responsibility to the FCAC for administering the consumer provisions of the financial institutions legislation will reduce OSFI's costs. The relaxed new entrant requirements may increase OSFI's workload and costs, some of which will be borne by the new entrants. However, the streamlined approval process will reduce the cost of regulation and cost burden directly borne by financial institutions. In all, it is expected that OSFI's cost of regulation will not increase substantially.

Each of the regulations included in this and subsequent packages is intended to implement a specific aspect of the overall policy structure introduced by the FCA Act. The regulations may be beneficial, cost/benefit neutral, or impose a burden on one or more relevant stakeholder groups. Since the weighing of costs and benefits has been done at the legislative level, the regulations must be examined in light of their contribution to the balance of the overall policy framework that was approved in the FCA Act.

While most regulations merely round out the policy intention of a provision in the legislation, in a few cases the scope of the burden borne by a stakeholder group is at least partially determined by the regulations. In this regard, we note the Access to Basic Banking Services Regulations. These Regulations implement part of the stated public policy objective of Bill C-8 with respect to improving access to basic banking services. The Regulations are not expected to impose significant additional costs on institutions, since many of them comply substantially with the modalities of the regulations based on previous commitments made by the banking sector in 1997. There are also basic requirements imposed on consumers in the form of basic identification requirements, which are necessary to combat fraud, money laundering, and terrorist financing.

Consultation

The FCA Act and its related regulations are part of a policy development process dating back to 1996. At every stage of the process, stakeholders have been consulted. More recently, working drafts of the enclosed regulation were shared with stakeholders and, wherever feasible, their comments have been reflected in revisions. The following organizations were consulted:

— Action Réseau Consommateur (Fédération nationale des Associations de Consommateurs du Québec)

— Bourse de Montréal

— Canadian Bankers Association

— Canadian Community Reinvestment Coalition

— Canadian Life and Health Insurance Association

— Canadian Securities Administrators

— ComTel (TelPay)

— Consumers' Association of Canada

— CPA Stakeholders Advisory Council

— Credit Union Central of Canada

— Democracy Watch

— Fédération des caisses Desjardins

— Insurance Bureau of Canada

— Insurance Consumer's Group

— Interac Association

— Investment Dealers Association of Canada

— Investment Funds Institute of Canada

— Mutual Fund Dealers Association

— National Anti-Poverty Organization

— Option Consommateurs

— Public Interest Advocacy Centre

— Service d'aide aux consommateurs/Consumer Aid Services

Compliance and Enforcement

The Office of the Superintendent of Financial Institutions will be responsible for ensuring compliance with prudential aspects of the Regulations. The Financial Consumer Agency of Canada will be responsible for ensuring compliance with consumer-related regulations.

Contact

Gerry Salembier, Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance, L'Esplanade Laurier, East Tower, 15th Floor, 140 O'Connor Street, Ottawa, Ontario K1A 0G5, (613) 992-1631 (Telephone), (613) 943-1334 (Facsimile).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to subsections 448.1(3) (see footnote a)  and 458.1(2) (see footnote b)  and section 459.4 (see footnote c)  of the Bank Act (see footnote d) , proposes to make the annexed Access to Basic Banking Services Regulations.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Mr. Gerry Salembier, Financial Sector Policy Branch, Department of Finance, 15th Floor, East Tower, L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario K1A 0G5.

Ottawa, November 28, 2002

EILEEN BOYD
Assistant Clerk of the Privy Council

Definition	ACCESS TO BASIC BANKING SERVICES REGULATIONS
	INTERPRETATION
Definition of "Act"	1. In these Regulations, "Act" means the Bank Act.
	OPENING OF RETAIL DEPOSIT ACCOUNTS
Definition of "point of service"	2. (1) For the purpose of subsection 448.1(1) of the Act, "point of service" means a physical location in Canada, other than a branch, where a member bank carries on business and at which an individual may open or initiate the opening of a retail deposit account through a natural person.
Prescribed "points of service"	(2) Every point of service is a prescribed point of service for the purpose of subsection 448.1(1) of the Act.
Refusal to open account	3. (1) Subject to subsection (2), subsection 448.1(1) of the Act does not apply in the following circumstances: (a) if the member bank has reasonable grounds to believe that the account will be used for illegal or fraudulent purposes; (b) if the individual has a history of illegal or fraudulent activity in relation to providers of financial services; (c) if the member bank has reasonable grounds to believe that the individual, for the purpose of opening the account, knowingly made a material misrepresentation in the information provided to the member bank; or (d) if the member bank has reasonable grounds to believe that it is necessary to refuse to open a retail deposit account in order to protect the customers or employees of the member bank from physical harm, harassment or other abuse.
Bankruptcy	(2) For greater certainty and for the purpose of paragraph (1)(a), the fact that the individual is or has been a bankrupt does not, by itself without any evidence of fraud or any other illegal activity in relation to the bankruptcy, constitute reasonable grounds for a member bank to believe that an account for the individual will be used for illegal or fraudulent purposes.
Conditions to be met	4. (1) Subject to subsection (2) and for the purpose of subsection 448.1(1) of the Act, an individual who is requesting that a member bank open a retail deposit account for the individual shall (a) present to the member bank, (i) two pieces of identification from among those set out in Part A or B of the schedule at least one of which is from among those set out in Part A of the schedule, or (ii) one piece of identification from among those set out in Part A of the schedule, if the identity of the individual is also confirmed by a client in good standing with the member bank or by an individual of good standing in the community where the member bank is situated; (b) disclose, orally or in writing, the information listed in Part C of the schedule if the information is not available on the pieces of identification presented by the individual; and (c) if the bank requests, consent to the bank's verifying whether any of the circumstances set out in subsection 3(1) apply to the individual, and to the bank's verifying the pieces of identification presented by the individual.
Where bank suspects misrepresentation	(2) If the bank, based on its verification of the circumstances set out in subsection 3(1) or the pieces of identification, or based on information, if any, provided by the individual that is related to the request, has reasonable grounds to suspect that the individual is misrepresenting their identity, the individual shall present to the bank one piece of identification from among those set out in Part A of the Schedule that bears the individual's photograph and signature.
Written notice	5. If the member bank refuses to open a retail deposit account due to the existence of any of the circumstances set out in subsection 3(1) or due to the individual's not meeting the conditions prescribed under section 4, the member bank shall provide, in writing, the individual with (a) notice of its refusal to open the account; and (b) a statement indicating that the individual may contact the Agency if they have a complaint and how the individual can contact the Agency.
	CASHING OF CERTAIN GOVERNMENT OF CANADA CHEQUES AND OTHER INSTRUMENTS
Refusal to cash cheque or instrument	6. (1) Subsection 458.1(1) of the Act does not apply in the following circumstances: (a) if there is evidence that the cheque or other instrument has been altered in any way or is counterfeit; (b) if the cheque or other instrument is not an item to be accepted under Rule G8 of the Canadian Payments Association, as amended from time to time; or (c) if the member bank has reasonable grounds to believe illegal or fraudulent activity in relation to the cheque or other instrument.
Prescribed maximum amount	7. The maximum amount of a cheque or other instrument referred to in subsection 458.1(1) of the Act that a member bank is required by that subsection to cash is $1500.
Conditions to be met	8. For the purpose of subsection 458.1(1) of the Act, an individual who requests that a member bank cash a cheque or other instrument shall present to the member bank (a) two pieces of identification from among those set out in Part A or B of the schedule; (b) one piece of identification from among those set out in Part A or B of the schedule, if the identity of the individual is also confirmed by a client in good standing with the member bank or by an individual of good standing in the community where the member bank is situated; or (c) one piece of identification from among those set out in Part A or B of the schedule that bears the individual's photograph and signature.
Individual considered not to be a customer	9. For the purpose of subsection 458.1(1) of the Act, an individual is considered not to be a customer of a member bank if the individual does not have a personal deposit account with any branch of the member bank and does not hold a credit card issued by the member bank.
Written notice	10. If the member bank refuses to cash a cheque or other instrument due to the existence of any of the circumstances set out in section 6 or due to the individual's not meeting the conditions prescribed under section 8, the member bank shall provide the individual, in writing, with (a) notice of the refusal to cash the cheque or other instrument; and (b) a statement indicating that the individual may contact the Agency if they have a complaint and how the individual can contact the Agency.
	PIECES OF IDENTIFICATION
Identification requirements	11. For greater certainty, the pieces of identification required to be presented by the individual under these regulations must be original, valid and not substantially defaced.
Different names on identifications	12. If the name on one of the pieces of identification presented by the individual differs from the name shown on any other identification presented by the individual, the individual shall provide a certificate evidencing the change of name that has occurred or a certified copy thereof.
	DISCLOSURE OF INFORMATION
Public disclosure relating to opening of accounts	13. A member bank shall display and make available to the public at all of its branches and points of service copies of a written statement disclosing (a) the conditions to be met under these regulations by an individual who requests the opening of a retail deposit account; and (b) the fact that the individual may contact the Agency if they have a complaint and how the individual can contact the Agency.
Public disclosure relating to cashing of cheques and other instruments	14. A member bank shall display and make available to the public at all of its branches copies of a written statement disclosing (a) the personal identification requirements to be met under these regulations by an individual, for the purpose of cashing certain government of Canada cheques and other instruments under subsection 458.1 of the Act, who is considered not to be a customer of the member bank; and (b) the fact that the individual may contact the Agency if they have a complaint and how the individual can contact the Agency.
	COMING INTO FORCE
Coming into force	15. These Regulations come into force four months after the day on which they are registered.

SCHEDULE
(Sections 4 and 8)

IDENTIFICATION

PART A

1. A drivers' licence issued in Canada, as permitted to be used for identification purposes under provincial law

2. A Canadian passport

3. A Certificate of Canadian Citizenship or a Certification of Naturalization, in the form of a paper document or card but not a commemorative issue

4. A Permanent Resident card or Citizenship and Immigration Canada Form IMM 1000 or IMM 1442

5. A birth certificate issued in Canada

6. A Social Insurance Number card issued by the Government of Canada

7. An Old Age Security card issued by the Government of Canada

8. A Certificate of Indian Status issued by the Government of Canada

9. A provincial health insurance card, as permitted to be used for identification purposes under provincial law

10. A personal identification card, issued by a provincial government authority or agent for purposes of identification, bearing the individual's photograph and signature

PART B

1. An employee identity card, issued by a well-known employer, bearing the individual's photograph

2. A bank or automated banking machine or client card, issued by a member of the Canadian Payments Association in the name of, or bearing the name of, the individual and bearing the individual's signature,

3. A credit card, issued by a member of the Canadian Payments Association in the name of, or bearing the name of, the individual and bearing the individual's signature,

4. A Canadian National Institute for the Blind (CNIB) client card bearing the individual's photograph and signature

5. A foreign passport

PART C

The individual's:

1. Name;

2. Date of birth;

3. Address, if any; and

4. Occupation, if any.

[48-1-o]

Footnote a 

S.C. 2001, c. 9, s. 117

Footnote b 

S.C. 2001, c. 9, s. 123

Footnote c 

S.C. 2001, c. 9, s. 125

Footnote d 

S.C. 1991, c. 46

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