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Vol. 136, No. 51 — December 21, 2002
Information Technology Activities (Authorized Foreign Banks) Regulations
Statutory Authority
Bank Act
Sponsoring Department
Department of Finance
REGULATORY IMPACT ANALYSIS STATEMENT
Information Technology Activities (Authorized Foreign Banks) Regulations
Information Technology Activities (Banks) Regulations
Information Technology Activities (Bank Holding Companies) Regulations
Information Technology Activities (Canadian Societies) Regulations
Information Technology Activities (Cooperative Credit Associations) Regulations
Information Technology Activities (Foreign Banks) Regulations
Information Technology Activities (Insurance Holding Companies) Regulations
Information Technology Activities (Life Companies) Regulations
Information Technology Activities (Property and Casualty Companies) Regulations
Information Technology Activities (Trust and Loan Companies) Regulations
Description
The Canadian financial services sector has been undergoing rapid 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 change 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 tenth 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. The ninth package was pre-published in the Canada Gazette, Part I, in December 2002.
This document discusses the regulatory impact of the following proposed new regulation:
Information Technology Activities (Authorized Foreign Banks) Regulations; Information Technology Activities (Banks) Regulations; Information Technology Activities (Bank Holding Companies) Regulations; Information Technology Activities (Canadian Societies) Regulations; Information Technology Activities (Cooperative Credit Associations) Regulations; Information Technology Activities (Foreign Banks) Regulations; Information Technology Activities (Insurance Holding Companies) Regulations; Information Technology Activities (Life Companies) Regulations; Information Technology Activities (Property and Casualty Companies) Regulations; Information Technology Activities (Trust and Loan Companies) Regulations
The legislation allows financial institutions to engage in information technology activities in a financial context. Restrictions are imposed, however, on the scope of their non-financial activities. The regulations ease these constraints by reducing the current "primarily financial" standard to a new "materially related" standard. In addition, the regulations also provide financial institutions with added flexibility to make investments in entities that do not necessarily meet the materially-related standard, provided that the size of these investments falls below a certain size threshold.
It is expected that around ten regulations will be brought forward for publication within the next few months. These 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 the policy intent underlying the FCA Act into effect. 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 will 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 will benefit from greater organizational flexibility and broader powers. The Financial Consumer Agency of Canada (FCAC), a newly created organization, 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 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 the cost burden directly borne by financial institutions. On the whole, the OSFI's regulation costs are not expected to 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 either 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.
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.
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).
Notice is hereby given that the Governor in Council, pursuant to section 978 (see footnote a) of the Bank Act (see footnote b) , proposes to make the annexed Information Technology Activities (Authorized Foreign Banks) 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 this notice, and be addressed to Mr. Gerry Salembier, Financial Sector Policy Branch, Department of Finance, L'Esplanade Laurier, 15th floor, East Tower, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
Ottawa, December 12, 2002
EILEEN BOYD
Assistant Clerk of the Privy Council
| Definition | INFORMATION TECHNOLOGY ACTIVITIES (AUTHORIZED FOREIGN BANKS) REGULATIONS |
|---|---|
| INTERPRETATION | |
| Definition of "Act" | 1. In these Regulations, "Act" means the Bank Act. |
| PRESCRIBED PURPOSE OR CIRCUMSTANCE | |
| Prescribed purpose or circumstance | 2. For the purposes of subparagraph 539(1)(b.2)(iii) of the Act and subject to the approval required under paragraph 539(1)(b.2) of the Act, an authorized foreign bank may develop, design, hold, manage, manufacture, sell or otherwise deal with data transmission systems, information sites, communication devices or information platforms or portals that are used for a purpose or in a circumstance that is materially related to the provision of financial products or services by (a) the authorized foreign bank; |
| COMING INTO FORCE | |
| Coming into force | 3. These Regulations come into force on the day on which they are registered. |
| [51-1-o] |
Information Technology Activities (Banks) Regulations
Statutory Authority
Bank Act
Sponsoring Department
Department of Finance
REGULATORY IMPACT ANALYSIS STATEMENT
For the Regulatory Impact Analysis Statement, see the Information Technology Activities (Authorized Foreign Banks) Regulations.
Notice is hereby given that the Governor in Council, pursuant to sections 474 (see footnote c) and 978 (see footnote d) of the Bank Act (see footnote e) , proposes to make the annexed Information Technology Activities (Banks) 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, L'Esplanade Laurier, 15th Floor, East Tower, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
Ottawa, December 12, 2002
EILEEN BOYD
Assistant Clerk of the Privy Council
| Definitions | INFORMATION TECHNOLOGY ACTIVITIES (BANKS) REGULATIONS |
|---|---|
| INTERPRETATION | |
| Definitions | 1. The following definitions apply in these Regulations. |
| "Act" | "Act" means the Bank Act. |
| "book value" | "book value", in respect of the shares and ownership interests held by an entity, means the book value reported on the entity's balance sheet on an unconsolidated basis. |
| "member of a bank's group" | "member of a bank's group" has the same meaning as in subsection 464(2) of the Act. |
| PRESCRIBED PURPOSE OR CIRCUMSTANCE | |
| Prescribed purpose or circumstance | 2. For the purposes of subparagraph 410(1)(c.1)(iii) of the Act and subject to the approval required under paragraph 410(1)(c.1) of the Act, a bank may develop, design, hold, manage, manufacture, sell or otherwise deal with data transmission systems, information sites, communication devices or information platforms or portals that are used for a purpose or in a circumstance that is materially related to the provision of financial products or services by the bank or a member of the bank's group. |
| INVESTMENTS | |
| Prescribed activity | 3. (1) For the purposes of paragraph 468(2)(f) of the Act and subject to subsections (2) and (3), a prescribed activity in relation to an entity is developing, designing, holding, managing, manufacturing, selling or otherwise dealing with any data transmission system, information site, communication device or information platform or portal that is used to provide information services. |
| Limit on size of investment | (2) A bank may not acquire control of, or hold, acquire or increase a substantial investment in, an entity engaging in an activity described in subsection (1) if the sum of the following exceeds 5% of the bank's regulatory capital: (a) the aggregate book value of the shares and ownership interests that the bank and its subsidiaries,
whether individually or jointly, would acquire in the entity under paragraph 468(2)(f) of the Act, |
| Restricted activities | (3) A bank may not acquire control of, or hold, acquire or increase a substantial investment in, an entity engaging in an activity described in subsection (1) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include (a) activities that a bank is not permitted to engage in under any of sections 412, 417 and 418 of
the Act; (i) in the case of an entity that is controlled by the bank, the bank itself would be permitted under Part IX of
the Act to acquire a substantial investment in the other entity, or |
| EXEMPTION FROM RESTRICTIONS ON INVESTMENTS | |
| Exemption from restrictions | 4. For the purposes of subparagraph 3(3)(e)(ii), subsections 468(4) to (6) of the Act do not apply in determining whether a bank would be permitted to acquire a substantial investment in an entity under subsection 466(2), paragraph 466(3)(b) or (c) or subsection 466(4) or 468(1) or (2) of the Act. |
| NON-APPLICATION OF SUBSECTION 468(5) OF THE ACT | |
| Non-application | 5. Subsection 468(5) of the Act does not apply where, under paragraph 468(2)(f) of the Act, a bank acquires control of, or acquires or increases a substantial investment in, an entity whose business is limited to activities described in subsection 3(1). Nothing in this section limits the operation of subsections 3(2) and (3). |
| COMING INTO FORCE | |
| Coming into force | 6. These Regulations come into force on the day on which they are registered. |
| [51-1-o] |
Information Technology Activities (Bank Holding Companies) Regulations
Statutory Authority
Bank Act
Sponsoring Department
Department of Finance
REGULATORY IMPACT ANALYSIS STATEMENT
For the Regulatory Impact Analysis Statement, see the Information Technology Activities (Authorized Foreign Banks) Regulations.
Notice is hereby given that the Governor in Council, pursuant to sections 936 and 978 (see footnote f) of the Bank Act (see footnote g) , proposes to make the annexed Information Technology Activities (Bank Holding Companies) 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, L'Esplanade Laurier, 15th Floor, East Tower, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
Ottawa, December 12, 2002
EILEEN BOYD
Assistant Clerk of the Privy Council
| Definitions | INFORMATION TECHNOLOGY ACTIVITIES (BANK HOLDING COMPANIES) REGULATIONS |
|---|---|
| INTERPRETATION | |
| Definitions | 1. The following definitions apply in these Regulations. |
| "Act" | "Act" means the Bank Act. |
| "book value" | "book value", in respect of the shares and ownership interests held by an entity, means the book value reported on the entity's balance sheet on an unconsolidated basis. |
| INVESTMENTS | |
| Prescribed activity | 2. (1) For the purposes of paragraph 930(2)(f) of the Act and subject to subsections (2) and (3), a prescribed activity in relation to an entity is developing, designing, holding, managing, manufacturing, selling or otherwise dealing with any data transmission system, information site, communication device or information platform or portal that is used to provide information services. |
| Limit on size of investment | (2) A bank holding company may not acquire control of, or hold, acquire or increase a substantial investment in, an entity engaging in an activity described in subsection (1) if the sum of the following exceeds 5% of the bank holding company's regulatory capital: (a) the aggregate book value of the shares and ownership interests that the bank holding company and
its subsidiaries, whether individually or jointly, would acquire in the entity under paragraph 930(2)(f) of
the Act, |
| Restricted activities | (3) A bank holding company may not acquire control of, or hold, acquire or increase a substantial investment in, an entity engaging in an activity described in subsection (1) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include (a) activities that a bank is not permitted to engage in under any of sections 412, 417 and 418 of
the Act; (i) in the case of an entity that is controlled by the bank holding company, a bank would be permitted under
Part IX of the Act to acquire a substantial investment in the other entity, or |
| EXEMPTION FROM RESTRICTIONS ON INVESTMENTS | |
| Exemption from restrictions | 3. For the purposes of subparagraph 2(3)(e)(ii), subsections 468(4) to (6) of the Act do not apply in determining whether a bank would be permitted to acquire a substantial investment in an entity under subsection 466(2), paragraph 466(3)(b) or (c) or subsection 466(4) or 468(1) or (2) of the Act. |
| NON-APPLICATION OF SUBSECTION 930(5) OF THE ACT | |
| Non-application | 4. Subsection 930(5) of the Act does not apply where, under paragraph 930(2)(f) of the Act, the bank holding company acquires control of, or acquires or increases a substantial investment in, an entity whose business is limited to activities described in subsection 2(1). Nothing in this section limits the operation of subsections 2(2) and (3). |
| COMING INTO FORCE | |
| Coming into force | 5. These Regulations come into force on the day on which they are registered. |
| [51-1-o] |
Information Technology Activities (Canadian Societies) Regulations
Statutory Authority
Insurance Companies Act
Sponsoring Department
Department of Finance
REGULATORY IMPACT ANALYSIS STATEMENT
For the Regulatory Impact Analysis Statement, see the Information Technology Activities (Authorized Foreign Banks) Regulations.
Notice is hereby given that the Governor in Council, pursuant to sections 560 (see footnote h) and 1021 (see footnote i) of the Insurance Companies Act (see footnote j) , proposes to make the annexed Information Technology Activities (Canadian Societies) 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, L'Esplanade Laurier, 15th Floor, East Tower, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
Ottawa, December 12, 2002
EILEEN BOYD
Assistant Clerk of the Privy Council
| Definitions | INFORMATION TECHNOLOGY ACTIVITIES (CANADIAN SOCIETIES) REGULATIONS |
|---|---|
| INTERPRETATION | |
| Definitions | 1. The following definitions apply in these Regulations. |
| "Act" | "Act" means the Insurance Companies Act. |
| "book value" | "book value", in respect of the shares and ownership interests held by an entity, means the book value reported on the entity's balance sheet on an unconsolidated basis. |
| INVESTMENTS | |
| Prescribed activity | 2. (1) For the purposes of paragraph 554(2)(f) of the Act and subject to subsections (2) and (3), a prescribed activity in relation to an entity is developing, designing, holding, managing, manufacturing, selling or otherwise dealing with any data transmission system, information site, communication device or information platform or portal that is used to provide information services. |
| Limit on size of investment | (2) A society may not acquire control of, or hold, acquire or increase a substantial investment in, an entity engaging in an activity described in subsection (1) if the sum of the following exceeds 5% of the society's regulatory capital: (a) the aggregate book value of the shares and ownership interests that the society and its subsidiaries,
whether individually or jointly, would acquire in the entity under paragraph 554(2)(f) of the Act, |
| Restricted activities | (3) A society may not acquire control of, or hold, acquire or increase a substantial investment in, an entity engaging in an activity described in subsection (1) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include (a) activities that a company is not permitted to engage in under any of sections 466 and 469 of the Act
or that a property and casualty company is not permitted to engage in under section 478 of the Act; (i) in the case of an entity that is controlled by the society, the society itself would be permitted under
Part XII of the Act to acquire a substantial investment in the other entity, or |
| EXEMPTION FROM RESTRICTIONS ON INVESTMENTS | |
| Exemption from restrictions | 3. For the purposes of subparagraph 2(3)(f)(ii), subsections 554(4) and (5) of the Act do not apply in determining whether a society would be permitted to acquire a substantial investment in an entity under subsection 552(2), paragraph 552(3)(b) or (c) or subsection 554(1) or (2) of the Act. |
| COMING INTO FORCE | |
| Coming into force | 4. These Regulations come into force on the day on which they are registered. |
| [51-1-o] |
S.C. 2001, c. 9, s. 183
S.C. 1991, c. 46
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 183
S.C. 1991, c. 46
S.C. 2001, c. 9, s. 183
S.C. 1991, c. 46
S.C. 2001, c. 9, s. 437
S.C. 2001, c. 9, s. 465
S.C. 1991, c. 47
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