Flowchart – How OSFI Generally Assesses the Application of Part XII

  • Is the entity a Part XII Entity? In other words, is the entity:
    • a Real FB or a subsidiary of a Real FB – 508(1)(a) or 508(1)(b)(ii);
    • a member of a Material Banking Group - 508(1)(b)(i) and 508(2); or
    • associated with a Real FB that is, directly or through a subsidiary,
      • engaging in or carrying on business in Canada - 508(1)(b)(iii)(A),
      • maintaining a branch in Canada - 508(1)(b)(iii)(B),
      • involved in certain automated banking machine-related activities in Canada - 508(1)(b)(iii)(C),
      • on its own or in conjunction with one or more entities in the FB Conglomerate, acquiring or holding control of, or a substantial investment in, a Canadian entity - 508(1)(b)(iii)(D) and (E)? (See Section 1 of the Advisory)
    • If no,
      • The entity is outside the scope of Part XII.
    • If yes,
      • Does the entity or a member of its FB Conglomerate have, or will the entity have, a financial establishment in Canada? (See Sections 2 and 3 of the Advisory)
      • If yes,
        • The entity may:
          • with an approval, maintain any of the following branches in Canada:
            • a representative office or head office - 522;
            • a foreign bank branch –522.16 and Part XII.1;
            • an insurance branch – 522.17 and Part XIII of the Insurance Companies Act;
            • a securities dealer, cooperative credit society or investment counselling services and portfolio management branch – 522.18;
            • a limited commercial branch – 522.19;
          • without any approval, except for a foreign securities dealer in the case of (iii)
            below, engage in or carry on any of the following activities:
            • provide certain customers with access to their accounts outside Canada through automated banking machines in Canada – 511;
            • establish or use facilities in Canada to provide quotes to Canadian customers – 512;
            • make use of automated banking services in Canada if the entity is a foreign securities dealer or a cooperative credit society – 513;
            • deal with real property in Canada (no financing) – 510.1;
          • without any approval, continue to carry on any activity for a 6-month period
            after becoming a Part XII Entity – 516 and 517.1;
          • with an approval in certain cases, acquire or hold control of, or a
            substantial investment in:
            • a CRE – 522.07;
            • any Canadian entity through a CRE – 522.1 to 522.13;
            • a permitted Canadian entity (e.g., a finance entity) – 522.08;
            • limited commercial entities – 522.09;
            • any Canadian entity, as a temporary investment, or as a result of a loan workout or realization of a security interest – 522.1, 522.14, 522.15;
            • a Canadian entity, as a specialized investment – 522.1 and Specialized Financing (Foreign Banks) Regulations; and
          • without any approval, continue to hold control of, or a substantial investment in, a Canadian entity for a 6-month period after becoming a Part XII Entity – 517 and 517.1.
        • (See Section 4 of the Advisory)
      • If no,
        • The entity may:
          • without any approval:
            • acquire an interest in a CRE or an FSE that would not cause the FB Conglomerate to control or be a major owner of the entity – 522.04;
            • acquire or hold control of, or a substantial investment in, any Canadian entity other than a CRE or an FSE – 522.04;
            • engage in a commercial business in Canada – 522.05;
            • engage in the business in Canada of leasing – 522.06;
            • provide certain customers with access to their accounts outside Canada through automated banking machines in Canada – 511;
            • establish or use facilities in Canada to provide quotes to Canadian customers – 512;
            • deal with real property in Canada (no financing) – 510.1;
            • continue to carry on any activity in Canada, or continue to hold control of or a substantial investment in any Canadian entity, for a 6-month period after becoming a Part XII Entity – 516, 517 and 517.1; and
          • with an approval, establish a representative office or head office in Canada – 522.
        • (See Section 5 of the Advisory)

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