The Department of Finance Canada has published a set of proposed rules in the Canada Gazette on Friday that would establish the details of a “bail-in” regime in the event one of the large Canadian banks runs into financial trouble.
Finance Canada’s bank recapitalization regime would allow authorities to recapitalize a failing bank by converting some of its debt into common shares. Legislation to introduce the bail-in regime was passed June 22, 2016 and the accompanying regulations were published for comment on Canada.
The Office of the Superintendent of Financial Institutions (OSFI) will also issue guidance later on Friday on total loss absorbing capacity (TLAC) as part of implementing the bail-in regime, Finance Canada notes.
The regulations set out key features of the regime, including the rules that would apply to the securities that could be used in a bail-in scenario. As part of the consultation, the government is also seeking comment on the scope of liabilities that would be subject to the bank recapitalization regime, the conversion process, disclosure requirements and the process for compensating investors who suffer as a result of a bank’s recapitalization rather than the liquidation.
Finance Canada aims to publish a final version of the regulations this autumn.
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