Office of the Superintendent of Financial Institutions
The applicant is generally expected to provide:
a description of the transaction or series of transactions (the “transaction”), including:
a breakdown of each element of the formula set out in the applicable Legislative Authority, demonstrating that the value of the transaction exceeds the 10 per cent threshold set out in the formula;
a description of the impact the transaction will have on the applicant’s current business strategy and, if the transaction will result in a material impact, a revised business strategy; and
an analysis of the effect the transaction will have on the financial position and risk profile of the applicant, including:
Most transactions that federally regulated entities and their subsidiaries (collectively referredto as an “FRE”) enter into involve some form of acquisition or transfer of an asset. However,OSFI is of the view that the words “acquire assets” and “transfer assets” in the provisions setout in the Legislative Authority generally refer to:
Examples of Purchase and Sale Transactions include the acquisition of property by the FRE in return for the issuance of its shares, and the acquisition or transfer by the FRE of:
Examples of Business Transactions include the FRE entering into an assumption reinsurance arrangement and selling part of a branch network to another FRE.
Transactions that are not Purchase and Sale Transactions or Business Transactions, and therefore that do not count toward the 10% threshold under the provisions set out in the Legislative Authorities, include services provided or purchased by an FRE (collectively referred to as “Service Transactions”) and transactions relating to an FRE’s capital (collectively referred to as “Capital Transactions”).
Examples of Service Transactions include the FRE:
Examples of Capital Transactions include the FRE:
The provisions set out in the Legislative Authorities exempt certain assets from the calculation and application of the 10% threshold. The enumerated exempt assets include, among others, assets that are frequently traded and easily valued, such as government securities and money market instruments, and shares of, or ownership interest in, an entity for which approval of the Minister or Superintendent is required under the substantial investment rulesFootnote2. The assets of a segregated fund maintained by an FRE that is an insurance company or a fraternal benefit society are also exempt from the calculation and application of the 10% thresholdFootnote3.
Paragraph 6(1)(c) of the
National Housing Act generally provides that an FRE that is designated as an approved lender by the Canada Mortgage and Housing Corporation (“CMHC”) may, notwithstanding any restrictions on the power of the FRE contained in any other statute, dispose of or acquire loans insured by CMHC together with the security taken in respect of those loans. The effect of this provision is that while the disposal or acquisition of such insured loans by an FRE that is designated as an approved lender counts toward the 10% threshold, the FRE may proceed with such transaction without approval under the provisions set out in the Legislative Authorities.
The provisions set out in the Legislative Authorities apply to acquisitions and transfers between an FRE and any single “person” over a rolling twelve month period. For greater certainty, acquisitions and transfers between a federally regulated entity and any of its subsidiaries, as well as those between the subsidiaries of a federally regulated entity, are subject to these provisions. For example, if a federally regulated entity acquires, for cash, shares issued from treasury by its subsidiary, this would constitute a Purchase and Sale Transaction from the federally regulated entity’s standpoint and a Capital Transaction from the subsidiary’s standpoint.
In making the calculation of the 10% threshold, the FRE should not double count. For example, the acquisition of real estate valued at $400,000 by the FRE in return for a $400,000 cash payment should count as $400,000 towards the calculation and not $800,000.
When assessing an application, OSFI will generally:
Transactions with related parties are also subject to the self-dealing rules. Asset transactions that are subject to the Superintendent’s approval under the self-dealing rules are exempted from the calculation and application of the 10% threshold.Footnote4
Where the FRE’s business plan contemplates a series of transactions with a single person over any 12-month period that would cause the FRE to cross the 10% threshold, the FRE may request a blanket approval from the Superintendent in respect of such transactions.Footnote5
The Superintendent may consider whether the proposed transaction would hinder the effective implementation of corrective measures in the future, and may request information to that effect.
Requests for approval(s) that are addressed in this document are not subject to a service charge.Footnote6
The information requirements and administrative guidance are intended to satisfy typical applications. They have been derived from OSFI’s experience in assessing applications. Applicants who provide all information and material requested can generally expect a more timely assessment of their applications. As appropriate to the circumstances, OSFI may request additional information, take into account other matters, impose terms and conditions, or require undertakings.
Acquisitions of shares of, or ownership interests in, an entity for which approval of the Minister is required under the ownership regime, or for which approval of the Minister or the Superintendent is required under the substantial investment rules, are exempted from the calculation and application of the 10% threshold: see paragraphs 482(2)(h) and 944(3)(a) of the
Bank Act; paragraph 470(2)(d) of the
Trust and Loan Companies Act; paragraphs 512(2)(d), 569(3)(b) and 987(3)(a) of the
Insurance Companies Act; and paragraph 406(3)(d) of the
Cooperative Credit Associations Act.
Return to footnote 1 referrer
See subsections 482(2) and 944(2) and (3) of the
Bank Act, subsection 470(2) of the
Trust and Loan Companies Act, subsections 512(2), 569(2) and (3), and 987(2) and (3) of the
Insurance Companies Act, and subsections 406(2) and (3) of the
Cooperative Credit Associations Act. See also the
Exempt Debt Obligation Transactions (Banks and Bank Holding Companies) Regulations under the
Return to footnote 2 referrer
See paragraphs 490(3)(a) and 550(c) of the
Insurance Companies Act.
Return to footnote 3 referrer
See paragraphs 482(2)(j) and (k) of the
Bank Act, paragraphs 470(2)(f) and (g) of the
Trust and Loan Companies Act, paragraphs 512(2)(f) and (g) of the
Insurance Companies Act, and paragraphs 406(3)(e) and (f) of the
Cooperative Credit Associations Act.
Return to footnote 4 referrer
See subsections 482(1.1) and 944(1.1) of the
Bank Act, subsection 470(1.1) of the
Trust and Loan Companies Act, subsections 512(1.1), 569(1.1) and 987(1.1) of the
Insurance Companies Act, and subsection 406(1.1) of the
Cooperative Credit Associations Act.
Return to footnote 5 referrer
Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002.
Return to footnote 6 referrer