On November 23, 2011, the Government of Canada introduced a bill known as the Financial System Review Act1. The related announcement of the Department of Finance stated that this proposed legislation is designed to help ensure the continued strength and stability of Canada’s financial system. Key highlights of the Financial System Review Act include:
- medium and large financial institutions would require the approval of the Minister of Finance for any foreign control acquisition that would, in the aggregate with its other foreign control acquisitions over the preceding 12-month period, exceed 10% of the institution’s total consolidated assets as reported prior to such 12-month period (under the current legislation only a prudential review by the Office of the Superintendent of Financial Institutions is required);
- relaxation of certain capital-raising restrictions on Canadian federal financial institutions by allowing such institutions to issue shares to foreign government-owned banks and institutions;
- the widely held ownership threshold for large banks would be increased from C$8 billion to C$12 billion; and
- facilitation of the ability of Canadian regulators to share information with regulators in foreign jurisdictions.
A copy of the Minister of Finance announcement and “Backgrounder Paper” can be accessed here: http://www.fin.gc.ca/n11/data/11-120_1-eng.asp. The Financial System Review Act is a product of the Government of Canada’s required periodic review of the statutes regulating Canadian federally-regulated financial institutions (which includes Canadian banks and bank holding companies, foreign banks, loan and trust companies, insurance companies and cooperative credit associations). The current review must be completed by April 2012.