Bill C-38

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First Reading

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Exception	(7) If, under subsection (1), a bank acquires control of, or acquires or increases a substantial investment in, an entity that it would otherwise be permitted to acquire or increase under section 468, the bank may retain control of the entity or continue to hold the substantial investment for an indeterminate period, if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (2) or (3), including any extension of it granted under subsection (4).
Realizations	473. (1) Despite anything in this Act, a bank may acquire
	(a) an investment in a body corporate,
	(b) an interest in an unincorporated entity, or
	(c) an interest in real property
	if the investment or interest is acquired through the realization of a security interest held by the bank or any of its subsidiaries.
Disposition	(2) Subject to subsection 73(2), if a bank acquires control of, or acquires a substantial investment in, an entity by way of the realization of a security interest held by the bank or any of its subsidiaries, the bank shall, within five years after the day on which control or the substantial investment is acquired, do all things necessary, or cause its subsidiary to do all things necessary, as the case may be, to ensure that the bank no longer controls the entity or has a substantial investment in the entity.
Transitional	(3) Despite subsection (2), if a bank that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 10 and the bank later increases that substantial investment by way of a realization of a security interest under subsection (1), the bank shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.
Extension	(4) The Superintendent may, in the case of any particular bank that makes an application under this subsection, extend the period referred to in subsection (2) or (3) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.
Exception	(5) If, under subsection (1), a bank acquires control of, or acquires or increases a substantial investment in, an entity that it would otherwise be permitted to acquire or increase under section 468, the bank may retain control of the entity or continue to hold the substantial investment for an indeterminate period if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (2) or (3), including any extension of it granted under subsection (4).
Regulations restricting ownership	474. The Governor in Council may make regulations
	(a) permitting the acquisition of control or the acquisition or increase of substantial investments for the purposes of subsection 468(4);
	(b) prescribing the circumstances under which subsection 468(5) or (6) does not apply, or the entities in respect of which those subsections, or either of them, do not apply, including prescribing entities on the basis of the activities they engage in;
	(c) for the purposes of subsection 468(11), permitting a bank to give up control of an entity; and
	(d) restricting the ownership by a bank of shares of a body corporate or of ownership interests in an unincorporated entity under sections 468 to 473 and imposing terms and conditions applicable to banks that own such shares or interests.
	Portfolio Limits
Exclusion from portfolio limits	475. (1) Subject to subsection (3), the value of all loans, investments and interests acquired by a bank and any of its prescribed subsidiaries under section 472 or as a result of a realization of a security interest is not to be included in calculating the value of loans, investments and interests of the bank and its prescribed subsidiaries under sections 476 to 478
	(a) for a period of twelve years following the day on which the interest was acquired, in the case of an interest in real property; and
	(b) for a period of five years after the day on which the loan, investment or interest was acquired, in the case of a loan, investment or interest, other than an interest in real property.
Extension	(2) The Superintendent may, in the case of any particular bank, extend any period referred to in subsection (1) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.
Exception	(3) Subsection (1) does not apply to an investment or interest described in that subsection if the investment or interest is defined by a regulation made under section 479 to be an interest in real property and
	(a) the bank or the subsidiary acquired the investment or interest as a result of the realization of a security interest securing a loan that was defined by a regulation made under section 479 to be an interest in real property; or
	(b) the bank or the subsidiary acquired the investment or interest under section 472 as a result of a default referred to in that section in respect of a loan that was defined by a regulation made under section 479 to be an interest in real property.
	Real Property
Limit on total property interest	476. A bank shall not, and shall not permit its prescribed subsidiaries to, purchase or otherwise acquire an interest in real property or make an improvement to any real property in which the bank or any of its prescribed subsidiaries has an interest if the aggregate value of all interests of the bank in real property exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the bank.
	Equities
Limits on equity acquisitions	477. A bank shall not, and shall not permit its prescribed subsidiaries to,
	(a) purchase or otherwise acquire any participating shares of any body corporate or any ownership interests in any unincorporated entity, other than those of a permitted entity in which the bank has, or by virtue of the acquisition would have, a substantial investment, or
	(b) acquire control of an entity that holds shares or ownership interests referred to in paragraph (a),
	if the aggregate value of
	(c) all participating shares, excluding participating shares of permitted entities in which the bank has a substantial investment, and
	(d) all ownership interests in unincorporated entities, other than ownership interests in permitted entities in which the bank has a substantial investment,
	beneficially owned by the bank and its prescribed subsidiaries, exceeds, or the purchase or acquisition would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the bank.
	Aggregate Limit
Aggregate limit	478. A bank shall not, and shall not permit its prescribed subsidiaries to,
	(a) purchase or otherwise acquire
	(i) participating shares of a body corporate, other than those of a permitted entity in which the bank has, or by virtue of the acquisition would have, a substantial investment,
	(ii) ownership interests in an unincorporated entity, other than ownership interests in a permitted entity in which the bank has a substantial investment, or
	(iii) interests in real property, or
	(b) make an improvement to real property in which the bank or any of its prescribed subsidiaries has an interest
	if the aggregate value of
	(c) all participating shares and ownership interests referred to in subparagraphs (a)(i) and (ii) that are beneficially owned by the bank and its prescribed subsidiaries, and
	(d) all interests of the bank in real property referred to in subparagraph (a)(iii)
	exceeds, or the acquisition or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the bank.
	Miscellaneous
Regulations	479. For the purposes of this Part, the Governor in Council may make regulations
	(a) defining the interests of a bank in real property;
	(b) determining the method of valuing those interests; or
	(c) exempting classes of banks from the application of sections 475 to 478.
Divestment order	480. (1) The Superintendent may, by order, direct a bank to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.
Divestment order	(2) If, in the opinion of the Superintendent,
	(a) an investment by a bank or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the bank to control the body corporate or the unincorporated entity, or
	(b) the bank or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before
	(i) the board of directors of a body corporate, or
	(ii) a similar group or committee of an unincorporated entity,
	or whereby no proposal may be approved except with the consent of the bank, the entity it controls or the nominee,
	the Superintendent may, by order, require the bank, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the bank no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).
Divestment order	(3) If
	(a) a bank
	(i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 470(1), (2) or (4), or
	(ii) is in default of an undertaking referred to in subsection 470(1) or (2) and the default is not remedied within ninety days after the day of receipt by the bank of a notice from the Superintendent of the default, or
	(b) a permitted entity referred to in subsection 470(4) is in default of an undertaking referred to in that subsection and the default is not remedied within ninety days after the day of receipt by the bank of a notice from the Superintendent of the default,
	the Superintendent may, by order, require the bank, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the bank no longer has a substantial investment in the entity to which the undertaking relates.
Exception	(4) Subsection (2) does not apply in respect of an entity in which a bank has a substantial investment permitted by this Part.
Deemed temporary investment	481. If a bank controls or has a substantial investment in an entity as permitted by this Part and the bank becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 468(5) or (6), the bank is deemed to have acquired, on the day the bank becomes aware of the change, a temporary investment in respect of which section 471 applies.
Asset transactions	482. (1) A bank shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if
	A + B > C
	where
	A is the value of the assets;
	B is the total value of all assets that the bank and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and
	C is ten per cent of the value of the total assets of the bank, as shown in the last annual statement of the bank prepared before the acquisition or transfer.
Exception	(2) The prohibition in subsection (1) does not apply in respect of
	(a) assets that are debt obligations that are
	(i) guaranteed by any financial institution other than the bank,
	(ii) fully secured by deposits with any financial institution, including the bank, or
	(iii) fully secured by debt obligations that are guaranteed by any financial institution other than the bank;
	(b) assets that are debt obligations issued
	(i) by, or by any agency of,
	(A) the Government of Canada,
	(B) the government of a province,
	(C) a municipality, or
	(D) the government of a foreign country or any political subdivision of a foreign country, or
	(ii) by a prescribed international agency;
	(c) assets that are debt obligations that are guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in paragraph (b);
	(d) assets that are debt obligations that are widely distributed, as that expression is defined by the regulations;
	(e) assets that are debt obligations of an entity controlled by the bank; or
	(f) a transaction or series of transactions by the bank with another financial institution as a result of the bank's participation in one or more syndicated loans with that financial institution.
Exception	(3) The approval of the Superintendent is not required if
	(a) the bank sells assets under a sale agreement that is approved by the Minister under section 236;
	(b) the bank or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 468(5) is required or the approval of the Superintendent under subsection 468(6) is required; or
	(c) the transaction has been approved by the Minister under subsection 678(1) of this Act or subsection 715(1) of the Insurance Companies Act.
Value of assets	(4) For the purposes of ``A'' in subsection (1), the value of the assets is
	(a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the bank after the acquisition, the fair market value of the assets; and
	(b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the bank prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the bank before the transfer, the value of the assets as stated in the annual statement.

Bill C-38

Portfolio Limits

Real Property

Equities

Aggregate Limit

Miscellaneous