Vol. 143, No. 43 — October 24, 2009

By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law

Statutory authority

Canada Deposit Insurance Corporation Act

Sponsoring agency

Canada Deposit Insurance Corporation

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the By-law.)

Description

The Board of Directors of the Canada Deposit Insurance Corporation (“CDIC”) made the Canada Deposit Insurance CorporationDifferential Premiums By-law (the “By-law”) on March 3, 1999, pursuant to subsection 21(2) and paragraph 11(2)(g) of the Canada Deposit Insurance Corporation Act (CDIC Act). Subsection 21(2) of the CDIC Act authorizes the CDIC Board of Directors to make by-laws establishing a system of classifying member institutions into different categories, setting out the criteria or factors CDIC will consider in classifying members into categories, establishing the procedures CDIC will follow in classifying members, and fixing the amount of, or providing a manner of determining the amount of, the annual premium applicable to each category. The CDIC Board of Directors has amended the By-law on January 12 and December 6, 2000, July 26, 2001, March 7, 2002, March 3, 2004, February 9 and April 15, 2005, February 8 and December 6, 2006, and December 3, 2008.

The CDIC annually reviews this By-law to ensure that it remains up-to-date. As a result of the review, it was noted that technical amendments need to be made to the Reporting Form in Schedule 2, Part 2 (Reporting Form), to reflect changes to regulatory forms. In addition to amendments to items 1, 2, 5, 7 and 8 of the Reporting Form, section 15 of the By-law needs to be amended to clarify applicable fiscal years. The changes are reflected in the proposed By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law (Amending By-law).

In addition, recent amendments to the CDIC Act introduced bridge institutions. An institution designated as a bridge institution will be a member institution wholly owned by CDIC. Such institutions need to be classified under the By-law. Sections 1, 2, 4 and 5 of the proposed Amending By-law classify bridge institutions in category 1 for premium purposes.

The following table provides more detail about the amendments, which are technical in nature:

AMENDING BY-LAW SECTION(S)	EXPLANATION
	By-law
1	Adds subsection 7(2.1) whereby a bridge institution is classified in premium category 1. [When the designation as bridge institution terminates, the member institution will then be classified in the same manner as any other member of CDIC.]
2	Adds subsection 12(3) to confirm that a bridge institution is not required to file any forms or declarations.
3	Subparagraphs 15(1)(c)(i) and 15(1)(d)(i) are amended to specify the years 2006 and 2007 rather than referring to the two previous years. These subparagraphs refer to information from old Capital Adequacy Reports which, as of 2008, were no longer in use.
4	Paragraph 17(a) is amended to include bridge banks among the members that need not file documentation under section 15 of the By-law.
5	Paragraph 18(a) is amended to include bridge banks among the members that need not file documentation under section 16 of the By-law.
	Schedule 2, Part 2, REPORTING FORM
6	Elements 1.1.1 and 1.1.2 of item 1 — Capital Adequacy Measures Line references in the Basel II Capital Adequacy Reporting — Credit, Market and Operational Risk (BCAR form) for net on- and off-balance sheet assets, and for total adjusted net tier 1 and adjusted tier 2 capital for purposes of ACM in Schedule 1, have changed.
7	Element 2.1 of item 2 — Return on Risk-Weighted Assets (%) Line reference in the Consolidated Statement of Income, Retained Earnings and AOCI (Income Statement) to net income or loss changed.
8	Elements 5.1 to 5.3 of item 5 — Efficiency Ratio (%) Line references in the Income Statement to total non-interest expenses, net interest income and non-interest income changed.
9	Elements of item 7 — Three-Year Moving Average Asset Growth (%) References to the CAR forms are maintained for this element but are only applicable to the years 2006 and 2007. Since this element uses four years of asset data, the measure has been modified such that for years prior to 2007, the data is taken from the CAR forms whereas for the years 2007 and later, the data is taken from the BCAR forms in effect for the specific year. In order to accommodate 2009, a new description needed to be introduced.
10	Element 8.1 to 8.4 of item 8 — Real Estate Asset Concentration and “Real Estate Under Power of Sale or Foreclosed Properties” Line references in the Consolidated Monthly Balance Sheet (Balance Sheet) for total mortgages, less allowance for impairment; non-mortgage loans, less allowance for impairment; securities issued or guaranteed by Canada/Canadian province/Canadian municipal or school corporation; customers liability under acceptances, less allowance for impairment; foreclosed long-lived assets acquired in the liquidation of a loan — held for sale; and power of sale loans related to real estate, have all changed.

Alternatives

There are no available alternatives. The CDIC Act specifically provides that the criteria or factors to be taken into account in determining the category in which a member institution is classified and fixing or establishing the method of determining the amount of the annual premium applicable to each category may only be made by by-law.

Benefits and costs

No additional costs should be attributed directly to these changes.

Consultation

As the changes are technical in nature, only consultation through notification to members and pre-publication in Part I of the Canada Gazette is necessary.

Compliance and enforcement

There are no compliance or enforcement issues.

Contact

Sandra Chisholm
Director, Insurance
Canada Deposit Insurance Corporation
50 O’Connor Street, 17th Floor
Ottawa, Ontario
K1P 5W5
Telephone: 613-943-1976
Fax: 613-992-8219
Email: schisholm@cdic.ca

PROPOSED REGULATORY TEXT

Notice is hereby given that the Board of Directors of the Canada Deposit Insurance Corporation, pursuant to paragraph 11(2)(g) (see footnote a) and subsection 21(2) (see footnote b) of the Canada Deposit Insurance Corporation Act (see footnote c), proposes to make the annexed By-law Amending the Canada Deposit Insurance Corporation Differential Premiums By-law.

Interested persons may make representations concerning the proposed By-law 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 Sandra Chisholm, Director, Insurance, Canada Deposit Insurance Corporation, 50 O’Connor Street, 17th Floor, Ottawa, Ontario K1P 5W5 (e-mail: schisholm@cdic.ca).

Ottawa, October 7, 2009

GUY L. SAINT-PIERRE
President and Chief Executive Officer
Canada Deposit Insurance Corporation

BY-LAW AMENDING THE CANADA DEPOSIT INSURANCE CORPORATION DIFFERENTIAL PREMIUMS BY-LAW

AMENDMENTS

1. Section 7 of the Canada Deposit Insurance Corporation Differential Premiums By-law (see footnote 1) is amended by adding the following after subsection (2):

(2.1) A member institution that is a bridge institution shall be classified in premium category 1 as set out in column 1 of Schedule 1.

2. Section 12 of the By-law is amended by adding the following after subsection (2):

(3) Subsection (1) does not apply to a member institution referred to in subsection 7(2.1).

3. (1) Subparagraph 15(1)(c)(i) of the By-law is replaced by the following:

(i) the Capital Adequacy Returns, collectively entitled “Capital Adequacy Report”, set out in the Guidelines for Banks, Volume 1, or the Guidelines for Trust and Loan Companies, Volume 1, as the case may be, completed in accordance with the applicable Guidelines, as of the end of its 2006 and 2007 fiscal years, that is, the end of the fiscal year ending in 2006 and the end of the fiscal year ending in 2007, and

(2) Subparagraph 15(1)(d)(i) of the By-law is replaced by the following:

(i) the Capital Adequacy Returns, collectively entitled “Capital Adequacy Report”, set out in the Guidelines for Trust and Loan Companies, Volume 1, completed in accordance with the Guidelines, as of the end of its 2006 and 2007 fiscal years, that is, the end of the fiscal year ending in 2006 and the end of the fiscal year ending in 2007, and

4. Paragraph 17(a) of the By-law is replaced by the following:

(a) that is a member institution classified in accordance with subsection 7(1) or (2.1);

5. Paragraph 18(a) of the By-law is replaced by the following:

(a) is a member institution classified in accordance with subsection 7(1) or (2.1); or

6. Elements 1.1.1 and 1.1.2 of item 1 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law are replaced by the following:

7. Element 2.1 of item 2 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law is replaced by the following:

8. Elements 5.1 to 5.3 of item 5 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law are replaced by the following:

9. (1) The portion of item 7 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law under the heading “Assets for Years 1 to 4” is amended by replacing the expression “For fiscal years ending in 2008 or later, the total of” before the second paragraph (a) with the following:

For fiscal years ending in 2008, the total of

(2) The portion of item 7 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law under the heading “Assets for Years 1 to 4” is amended by adding the following before the reference to “Year 1:”:

For fiscal years ending in 2009 or later, the total of

(a) the amount of net on- and off-balance sheet assets set out for item “O” of Schedule 1 – Ratio and Assets to Capital Multiple Calculations of the BCAR form;

(b) the total of the amounts set out in the column “Total” for items 2(a)(i)(A)(I) to (IX) (Securitized Assets – Unrecognized – Institution’s own assets – Traditional securitizations) of Section I – Memo Items of the Consolidated Monthly Balance Sheet; and

(c) if applicable, the value of assets, acquired by the member institution in the fiscal year ending in the year preceding the filing year as a result of a merger or acquisition referred to in the fourth paragraph under the heading “THREE-YEAR MOVING AVERAGE ASSET GROWTH (%)”, for years 1, 2 and 3 below, where the value of those assets on the date of their acquisition exceeds 10% of the value of the consolidated assets of the member institution immediately before that merger or acquisition.

10. (1) Elements 8.1 to 8.4 of item 8 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law are replaced by the following:

8.1 Total Mortgage Loans

The total mortgage loans is the total of the amounts set out in the column “Total” for item 3(b) (Mortgages, less allowance for impairment) of Section I of the Consolidated Monthly Balance Sheet, before deducting any allowance for impairment.

8.2 Total Non-Mortgage Loans

The total non-mortgage loans is the total of the amounts set out in the column “Total” for items 3(a)(i) to (v), (vii) and (viii) (Non-Mortgage Loans, less allowance for impairment) of Section I of the Consolidated Monthly Balance Sheet.

8.3 Total Securities

The total securities is the total of the amounts set out in the column “Total” for item 2(a) (Securities issued or guaranteed by Canada/Canadian Province/Canadian Municipal or School Corporation) and item 2(b) (Other securities, less allowance for impairment) of Section I of the Consolidated Monthly Balance Sheet.

8.4 Total Acceptances

The total acceptances is the total of the amounts set out in the column “Total” for item 4 (Customers liability under acceptances, less allowance for impairment) of Section I of the Consolidated Monthly Balance Sheet.

(2) Paragraphs (a) and (b) under the heading “Real Estate Under Power of Sale or Foreclosed Properties” in item 8 of the Reporting Form set out in Part 2 of Schedule 2 to the By-law are replaced by the following:

(a) for foreclosed properties located in Canada, the amount set out in the column “Total” for item 4(a) (Foreclosed long-lived assets acquired in the liquidation of a loan — held for sale) of Section I — Memo Items of the Consolidated Monthly Balance Sheet; and

(b) for real estate under power of sale, the amount set out in the column “Total” for item 5 (Power of Sale Loans related to Real Estate) of Section I — Memo Items of the Consolidated Monthly Balance Sheet.

COMING INTO FORCE

11. This By-law comes into force on the day on which it is registered.

[43-1-o]

Footnote a
R.S., c. 18 (3rd Supp.), s. 51

Footnote b
S.C. 1996, c. 6, s. 27

Footnote c
R.S., c. C-3

Footnote 1
 SOR/99-120 

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