Office of the Superintendent of Financial Institutions
The purpose of this return is to provide information on the interest rates charged and funds advanced vis-à-vis new loans, booked in Canada, in Canadian dollars only, to Canadian households and business sectors by institutions. The pricing/ matching information will allow for analysis of the cost of borrowing as a result of an adjustment in monetary policy, improve individuals' and business credit information, and facilitate the calculation of the debt service ratio. The return also provides information on the interest rates charged and balances outstanding on existing loans, as well as detailed information on variable rate lending, allowing for analysis of the size and growth of specific areas of financial institution's lending portfolios to monitor potential financial stability issues.
Sections 628 and 600 of the Bank Act and Section 24 of the Bank of Canada Act.
This return applies to all banks and foreign bank branches, trust, and loan companies.
Statistical aggregates derived from the information on a total-for-all-institutions basis may be published on the Bank of Canada's web site in various publications (e.g., the Banking and Financial Statistics tables, the Financial System Review) and/or in Statistics Canada's key socioeconomic database (CANSIM).
Monthly, on a weighted average basis for interest rates, and on a cumulative total basis for funds advanced. Existing lending should be reported as outstanding loan balances at the end of the month, with the exception of credit card lending which should be reported based on the closest billing cycle period.
Provide name and phone number of person to contact regarding any questions about this return.
The return is to be completed monthly and submitted within 30 days of the last day of each month to the Head Office of the Bank of Canada.
Bank of Canada.
The definition of each loan category in the "New Lending" section corresponds to the definitions/ instructions on the Monthly Average Return of Assets and Liabilities - L4 Highlighted text *and should be reported gross of allowance for expected credit losses*.The definition of each loan category in the 'Existing Lending' section is the same as the 'New Lending' section, with the addition of credit card loans. These values should be reported gross of allowance for expected credit losses, with those to be reported separately.
Only new and existing lending booked in Canada, in Canadian dollars, to Canadian individuals and business sectors by institutions is to be reported in the A4. New and existing lending to non-residents and foreign currency lending should not be reported in this return.
The term, new lending, refers to all new funds advanced during the reporting month, while the term, existing lending, refers to outstanding loan balances at the end of the reporting month.
New funds advanced refer to funds extended, new draws on existing credit facilities, mortgage renewals and refinancing, and as well as renewal and refinancing of term loans.
Mortgage renewals are defined as contractual agreements subsequent to the initial mortgage that maintain or shorten the amortization period and do not increase the principal amount (irrespective whether done at term expiration or prior to it, i.e. as full prepayment).
Mortgage refinancing is defined as a contractual agreement subsequent to the initial mortgage that does not qualify as a renewal using the above definition.
A straight mortgage port with no change in principal is to be considered a collateral substitution and is not to be reported as an increase in mortgage lending. However, the porting of a mortgage that is accompanied with an increased principal amount is to be considered a form of refinancing and the entire amount is to be reported as such.
In cases where there are both primary and secondary borrower with different residency status, report according to the residency status of the primary borrower, which is determined by their mailing address unless the bank has other information regarding residency.
Information from accounts that were opened and subsequently became delinquent and closed during the month should be included in the data.
Credit card lending is not to be reported in the new lending section of the return. Some institutions may have nothing to report, however, it is still necessary to submit a nil return in that case.
Highlighted text *Information across time bands are allocated based on the loan term as of origination for both the new and existing lending sections. Based on a term as of origination classification; as loans mature, amounts are not recategorized across time bands. Mortgage renewals and refinancings trigger a reclassification across time bands.*
Multi unit residential properties should be Highlighted text *reported consistently with the M4 and L4*.
Existing mortgage and loans portfolios purchased for investments from other entities should be excluded from the 'New Lending' section, but should be included in the 'Existing Lending' section.
Margin accounts lending and short-term call loans to brokers/dealers should be excluded.
Transactional based computation of the data for overdraft accounts is a challenge for many banks, especially in situations of unanticipated or courtesy overdrafts on individuals and business accounts. Of greater importance for this return is the information on contractual overdrafts as agreed between the bank and customers. For reporting purposes, please include information on contracted overdrafts on individuals and business accounts. To facilitate the compilation of the data, overdrafts may be included on a net end of day balance with the corresponding end of day interest rate. Unanticipated or courtesy overdrafts may be excluded from the data.
Repurchase agreement should be excluded.
Customers' liability under acceptances should be excluded.
Highlighted text *The return has undergone a clarification whereby mortgage loans are to be reported on a counterparty basis while non-mortgage loans are to continue to be reported by purpose.*
EXAMPLE CALCULATION OF WEIGHTED AVERAGE INTEREST RATES
A simple example calculation for the rate for Total selected business loans, All is:
Business loan to Acme Toys on Aug 5/08 $500,000 @ 4.75
Non-residential mortgage to XYZ Shoes on Aug 28/08 $51,000 @ 5.85
Amount to be reported in Section I 1. (b) (v) for August 2008
((500,000 x 4.75) + (51,000 x 5.85)) / 551,000 = 4.85
In each time band report the weighted average interest rate charged on the total amount of each type of new lending granted in each month.
For loans where the rate changes over time, report the rate that was being paid at the end of the month.
Include interest rates charged on new draws on existing credit facilities, mortgage renewals and refinancing, and as well as renewal and refinancing of term loans.
Hybrid loans with variable interest rate components should be reported as variable rate loans.
The All category captures the weighted average interest rate of total new lending granted during the month by appropriate asset class.
In the Total line, report the weighted average interest rate charged by time band.
Interest rates should be reported to two decimal places.
Loans to individuals for non-business purposes are those used to finance the acquisition of consumer goods and services, including the acquisition of securities.
Highlighted text *The definition of individual is provided in appendix 2. *
Highlighted text *Interest rates charged on new funds advanced to individuals for mortgage loans in the reporting month*
Highlighted text *The definition of individual is provided in appendix 2.*
Highlighted text *Total Personal Loans and Mortgage Loans *
Highlighted text *Interest Rates Charged on new funds advanced to corporations for mortgage loans in the reporting month*
Highlighted text *The definition of corporation is provided in appendix 2.*
Highlighted text * Non-residential Mortgages
Refer to Appendix 1 below for definition of Non-Residential Mortgage.*
In each time band report the total amount of new lending granted in each month.
Include new draws on existing credit facilities, mortgage renewals and refinancing, and as well as renewal and refinancing of term loans.
The All category is the total amount of total new lending granted during the month.
All amounts are to be expressed in thousands of Canadian dollars.
Highlighted text *New funds advanced to individuals for mortgages loans in the reporting month*
Residential Mortgages, Insured
Highlighted text *Refer to Appendix 1 below for definition of Residential Mortgage.*
Residential Mortgages, Uninsured
The total mortgage amounts recorded in these fields should include the following characteristics:
The total amounts should exclude the following characteristics:
The total amounts for Residential Mortgages, Insured and Residential Mortgages, Uninsured require the above characteristics to balance with the E2 cross return validation rule (A4E201). The A4 return is designed to report on new and existing lending for mortgages booked in Canada and in Canadian currency. In addition, Section II of the A4 return refers to new funds to individuals for Residential Mortgages, Insured and Residential Mortgages, Uninsured.
Highlighted text *Total Personal loans and mortgage loans *
Highlighted text *New Funds advanced to Corporations for Mortgage loans in the reporting month*
Highlighted text * Residential Mortgages
Refer to Appendix 1 below for definition of Residential Mortgage.
Include both insured and uninsured residential mortgages.*
Highlighted text *Total Selected Business Loans*
In each time band report the weighted average interest rate charged on the total amount of each type of outstanding loans Highlighted text *by term as of origination* using the same definitions as Section I.
Include interest rates charged on total outstanding balances from existing credit facilities or lines of credit.
Interest rates should be reported to two decimal places.
In the 'Total' line, report the weighted average interest rate charged by time band.
For credit card loans, only the 'All' category should be used to report the weighted average interest rate charged for credit card balances outstanding at the end of the billing cycle period (the periodic rate in effect at cycle, excluding fees). These should not include any balances not incurring any interest charges. Credit card loans in this section refers ONLY to retail credit cards loans.
In each time band report the total amount of gross outstanding loans Highlighted text *by term as of origination*. Allowance for Highlighted text *expected credit losses* are included separately.
Include allowance for Highlighted text *expected credit losses* separately in specified column.
Include total gross outstanding balances from existing credit facilities, credit cards or lines of credit.
The Highlighted text *Accounting* Adjustment for Balance Sheet Purposes' reports the amount which allows each loan category Highlighted text *to maintain consistency with external financial reporting.*
The 'Amount Reported on Balance Sheet' is Highlighted text *to maintain consistency with external financial reporting. This* amount Highlighted text *is equal to the* reported Highlighted text *value* in the Report on New Lending - A4 minus any adjustment for balance sheet purposes.
For credit card loans, only the 'All' category should be used to report credit card balances outstanding at the end of the billing cycle period.
MEMO ITEMS - SECTION A - ADDITIONAL INFORMATION ON NEW LENDING OF VARIABLE RATE RESIDENTIAL MORTGAGES (GROSS OF ALLOWANCES)
This memo section provides additional information on the variable rate mortgages reported above. The amounts reported in this section should include only those amounts consistent with the variable rate residential mortgage values reported in sections I and II (i.e. the total variable rate mortgage values reported in this section should correspond to the variable rate residential mortgages reported in Sections I and II).
Closed non-convertible variable rate mortgages: variable rate mortgages with a specified term length and no option to change to a fixed rate mortgage without a penalty.
Closed convertible variable rate mortgage: variable rate mortgages with a specified term length and the option to change to a fixed rate mortgage without a penalty.
Open variable rate mortgages: variable rate mortgages with pre-payment flexibility and the ability to convert to a different term at any time without penalty.
MEMO ITEMS - SECTION B - ADDITIONAL INFORMATION ON VARIABLE RATE RESIDENTIAL MORTGAGES WITH FIXED REGULAR PAYMENTS (GROSS OF ALLOWANCES)
This memo section provides additional information on variable rate mortgages with fixed regular mortgage payments. In these mortgages the principal and interest portions of a payment are determined by a variable interest rate; however, the payment amount is fixed and interest rate fluctuations only impact the amortization period within the term (as the payments would be reset at renewal to satisfy the contractual amortization period), by changing the proportions of the payment attributed to interest and principal repayment. It is understood that under this type of contract the amount of the total payment can be reset to a higher level, if due to an increase in interest rates it no longer covers the amount of interest due.
Highlighted text *The reference table below classifies common property types residential or non-residential. The general principle is that residential properties are non-institutional facilities for the long term lodging of individuals.*
Highlighted text *Notes*
Highlighted text *(1) The intention with the term 'retirement home' is to refer to institutional establishments. Mortgages on institutional retirement homes are to be classified as non-residential, whereas mortgages on individual condo units within buildings marketed to the elderly are to be classified as residential. The agencies acknowledge that this distinction may not always be simple to identify. As a result the agencies will accept retirement home being classified as either residential or non-residential for the time being; however, filing institutions are encouraged to move towards the intended classification.*
Highlighted text *(2) Construction financing can include a wide range of products that have historically been classified inconsistently and recorded under three categories (business loans, residential mortgages, and non-residential mortgages). The agencies do not require this reporting practice to be changed. As a result it will be considered acceptable to record construction financing under any of the three categories; provided that the categorization is re-examined once the construction activity is complete.*
Highlighted text *(3) The preferred reporting practice for mortgages on multi-unit residential properties is to include them under residential. However, it is acknowledged that some institution's legacy systems have included these mortgages under the non-residential category. Both approaches will be accepted for the time being; however, filing institutions are encouraged to move towards the intended classification.*
Highlighted text *(4) Mortgages on mixed office residential condo buildings are to be classified as non-residential. This is because individual condo units have separate ownership from the office portion of the building and therefore a mortgage on the office portion of the building should be classifies as non-residential.*
Highlighted text *The reference table below classifies various counterparty entities as individuals or corporations, where corporate is defined to include 'not for profit' organizations and quasi-corporations. The general principle is that counterparties are classified using a credit counterparty perspective. In the case of a default of the ultimate guarantor is an individual the loan should be classified as have an individual as the counterparty; however; if the ultimate guarantor is a non-individual (e.g. corporation, trust, co-operative) the loan should be classified as having a "corporation as the counterparty.*
Highlighted text *** Using the credit counterparty principle, partnerships where the ultimate guarantor is an individual should be classified under the individual category; however, partnerships with a corporation as the ultimate guarantor should be classified as corporations.*