Document Properties
- Type of Publication: Advisory
- Category: Regulatory & Legislative
- Issued: February 2003
- No: 2003 - 01
Introduction:
This advisory provides an overview of how the
Office of the Superintendent of Financial Institutions (OSFI)
administers and interprets the provisions of the federal
financial institutions legislation regarding the granting of a
commercial lending limit in excess of the limit of 5 per cent of
total assets. The issue is whether that higher commercial
lending limit that the Superintendent may grant to a federally
regulated insurance, trust or loan company, cooperative credit
association, or insurance holding company (hereinafter referred
to as a federally regulated entity or FRE), could be determined
on a basis other than a percentage of total assets.
Legislative References:
- Section 462 of the Trust and Loan Companies Act
- Sections 504 and 980 of the Insurance Companies Act
- Section 399 of the Cooperative Credit Associations Act
Interpretation:
These provisions require a FRE to obtain the
approval of Superintendent in the event the FRE wishes to have a
commercial lending limit in excess of the 5 per cent of total
assets prescribed by legislation. The legislative provisions do
not require that the higher limit be based on a percentage of
assets. In fact, there is no indication in the legislation on
what basis a higher limit should be granted, thereby providing
the Superintendent with a discretionary authority to set out the
basis under which the higher limit would be applied.
OSFI’s past practice has been to set higher commercial loan
limits on the basis of a percentage of total assets. OSFI will
continue this practice unless otherwise requested by the FRE.
Requests for higher commercial loan limits on a basis other than
the total percentage of assets would be considered on a
case-by-case basis, taking into account the following:
-
whether the element that would be used to calculate the
higher limit could be easily calculated and monitored, e.g.,
regulatory capital; and
-
whether the use of that element would set a higher limit that
is acceptable to OSFI, having regard to the FRE’s capacity and
experience to make commercial loans and to control and monitor
such loan portfolio.
When making an application for the Superintendent’s approval of a
higher commercial loan limit, a FRE should refer to OSFI’s
Guideline No. E-2, Commercial Lending Criteria, for guidance on the
nature of information to be provided in support of its
application.