Office of the Superintendent of Financial Institutions
Part XII.1 of the
Bank Act (BA) governs the establishment of a branch by a foreign bank as well as the on-going operation and supervision of such a branch. The Office of the Superintendent of Financial Institutions (OSFI) is responsible for assessing applications by foreign banks seeking to establish a branch in Canada, and makes recommendations to the Minister of Finance (the Minister), who has the authority to approve the establishment of a foreign bank branch (FBB). A foreign bank that is the subject of an order permitting it to establish a branch in Canada is referred to as an Authorized Foreign Bank (AFB).
A foreign bank may apply to establish either a "full-service branch" or a "lending branch"Footnote 1. The BA permits full-service branches and lending branches to carry on the same activities except in relation to deposit taking. Lending branches may only take deposits or otherwise borrow from other financial institutions. Subject to certain exceptionsFootnote 2, full-service branches may only hold deposits that are above $150,000.
This Guide outlines the process to establish an FBB under the BA along with the information that a foreign bank applicant ("Applicant") is expected to submit in support of the application to:
This Guide also sets out the various prudential, regulatory and legislative criteria and information requirements relative to applications for the establishment, and commencement of business, of an FBB.
The primary objective of this Guide is to promote awareness and enhance the transparency of the assessment criteria and processes for the establishment of an FBB.
OSFI officers from the Regulatory Affairs Division and Deposit-Taking Supervision Sector jointly review and assess each application for the establishment of an FBB. OSFI will generally evaluate a proposal to establish an FBB against the criteria in this Guide; however, as the particular circumstances and facts of each application are different, this Guide should not be viewed as an exhaustive set of criteria and information requirementsFootnote 5.
An Applicant wishing to incorporate or continue as a bank, bank holding company, federal credit union or federally regulated trust or loan company should refer to the appropriate guide or contact OSFI for more informationFootnote 6.
There are two approvals related to an application to establish an FBB in Canada:
Prior to submitting a formal application, the Applicant should contact OSFI's Regulatory Affairs Division to schedule an in-person meeting to discuss the establishment of an FBB and the application processFootnote 8. This meeting is an opportunity for OSFI to provide preliminary feedback regarding any apparent or potential regulatory, prudential or policy issues.
The initial meeting also provides an opportunity for OSFI to clarify its processes and expectations regarding applications to establish an FBB, along with any unique considerations that may be applicable to that particular foreign bank.
The application process to establish an FBB in Canada is comprised of two steps related to each of the Orders noted above. The approach is intended to provide applicants with guidance and feedback at the initial stage of the proposed application and throughout the application process.
While there is no specific time limit on the assessment of applications, OSFI endeavours to complete all application assessments as quickly as possible. The assessment of each application will depend on the specific facts and circumstances, and OSFI will communicate regularly with the Applicant throughout this process.
In OSFI's experience, delays in receiving the Orders most often result from the complexities presented in the application, the provision of incomplete information by the Applicant in support of the application, and/or a failure on the part of the Applicant to sufficiently address additional information requests from OSFI in a timely manner.
Applicants should also note that an AFB may require several months to prepare for the on-site review, and the timing related to the making of the Superintendent Order will largely depend on the operational readiness of the AFB. It is important to note that the Superintendent cannot issue a Superintendent Order
more than one year after the Ministerial Order is madeFootnote 9.
OSFI may terminate its review of an application where, in OSFI's view, based on the quality of the Applicant's submissions, and despite significant feedback from OSFI, the Applicant is unable to satisfy the information requirements in support of the application. In this regard, Applicants should note that they bear the onus of satisfying OSFI's information requirements in a timely, clear and complete manner.
Prior to the initial meeting with OSFI, an Applicant will be expected to provide the following written submissions:
For the purpose of this Guide, any reference to "owner" generally includes:
OSFI will also request that the Applicant provide an expected date for its submission of a formal application.
Prior to submitting the formal application, the Applicant must give notice of its intention to apply for the establishment of an FBB (Notice). The purpose of the Notice is to inform the public of the identity of the Applicant making the application and to allow for public comment. The BA states that the Notice must be published once a week for four consecutive weeks in the
Canada Gazette and in a newspaper in general circulation at or near the place where the principal office of the FBB is to be situated. The BA also specifies that the Notice must be in a form satisfactory to the Superintendent. As such, a draft copy of the Notice should be provided to OSFI for review prior to publication to avoid the possibility of having to republish the NoticeFootnote 11. In this regard, OSFI's expectation is that the Notice sets out:
The BA provides that a person may formally object to the proposed establishment of an FBB by submitting an objection, in writing, to the Superintendent within 30-days of the last publication of the Notice. Where an objection is submitted, the Superintendent will assess its merits and determine whether a public inquiry into the objection is warranted. The Superintendent must also inform the Minister of the objection and the findings of any such inquiry.
Following the publication of the Notice, the Applicant may submit its formal application to OSFI for the establishment of an FBB. The information that OSFI expects to be submitted in respect of this application is set out below.
OSFI will review the application and will contact the Applicant to discuss its completeness, status, and outstanding issues. This will typically be done through one or more written communications, discussions and/or meetings. Where necessary, OSFI may also request additional information to complete the assessment of the application, which may include additional corroborating information or analysis from third parties. OSFI's assessment will also be informed by its experience of the actual performance of FBBs in similar business lines.
OSFI's primary purpose in reviewing this information is to identify any fundamental issues that should be considered by the Applicant, including any:
In certain circumstances, it may not be feasible for an Applicant to provide all the information set out below at the time of the application. Where this is the case, Applicants should explain to OSFI which information items will be provided at a later date, and provide an estimate of when they will be provided.
Formal Application General Information Requirements
The Minister and the Superintendent have broad authority to take into account all matters that they consider relevant in the circumstances related to granting an OrderFootnote 13. The requirements below are the general information expected from an Applicant. This information is reviewed in addition to the matters taken into account by the Superintendent in determining OSFI's ability to supervise and regulate the business in Canada of the FBB, as set out in the Administrative Guidance section of this Guide.
The Applicant is expected to provide, as applicable:
The Applicant is expected to provide a five-year business plan for the proposed FBB, including:
The Applicant is generally expected to provide:
The Applicant is expected to provide:
The Applicant is expected to provide a detailed description of the internal controls, policies and procedures that it would follow to ensure compliance with:
The Applicant is also expected to provide:
The Applicant is permitted to establish a branch in Canada to carry on business in Canada under Part XII.1 of the BA upon the making of a Ministerial Order. The Minister may set out in the Ministerial Order any provision that the Minister considers advisable, and impose any terms and conditions that the Minister considers appropriateFootnote 31. OSFI is required to publish a notice of the making of the Order in the Canada GazetteFootnote 32.
Please note that the FBB may not carry on any business in Canada until the Superintendent has made a Superintendent Order in respect of the FBB.
Once the Ministerial Order permitting the establishment of the FBB has been made, OSFI will continue its review of the application to ensure that the FBB has the necessary systems, management structure, control processes and regulatory compliance management systems in place to carry on business in Canada. All policies and procedures should be finalised and approved prior to the making of a Superintendent Order. The information requirements related to the Superintendent Order are set out below.
The Superintendent may not make an Order more than one year after the date the Ministerial Order becomes effectiveFootnote 33. Accordingly, in circumstances where OSFI requests additional information or documents from the Applicant with respect to the making of a Superintendent Order, the Applicant should respond to the request in a complete and timely manner.
A pre-commencement on-site review will be arranged after the making of the Ministerial Order and the anticipated areas for review and discussion will be provided by OSFI at that time. The purpose of the pre-commencement review is to determine whether the FBB is sufficiently prepared to commence business operations in Canada. The review is intended to assess, among other things, the operational readiness and control processes and management systems referred to in section 1.3, 1.4, 1.5 and 1.6 of the Step 1 Ministerial Order - Formal Requirements. The pre-commencement on-site review will also assess whether the FBB is capable of producing the required statutory and supervisory information in an accurate and timely manner at the commencement of operations.
OSFI will provide the FBB with a pre-commencement letter prior to a scheduled on-site review. The letter will request additional information that the Applicant is expected to provide sufficiently in advance of the pre-commencement review so that OSFI can consider the submissions prior to the review.
Following the pre-commencement review, OSFI will provide the FBB with a letter setting out any outstanding concerns and OSFI's expectations regarding their resolution.
In support of its application for a Superintendent Order, the Applicant is generally expected to provide:
The FBB may only commence business on the date provided in the Superintendent Order. The Superintendent may set out in the order conditions or limitations on the FBB's business to address supervisory and regulatory concerns.
The AFB will be required to publish notice of the making of the Superintendent Order in a newspaper in general circulation in the city where its principal office is located. OSFI is also required to publish a notice of the making of the Superintendent Order in the
Canada GazetteFootnote 37.
This portion of the Guide provides additional guidance to Applicants in respect of the matters for consideration relative to the approvals addressed in this Guide and the factors the Superintendent will take into account in determining OSFI's ability to supervise and regulate the business in Canada of the FBB.
In addition to any requirements specified in the BA, OSFI expects foreign banks that seek to establish an FBB in Canada to satisfy the following conditions, which are relevant to demonstrate their ability to support the operations of an FBB:
The Minister may make an order permitting the foreign bank to establish an FBBFootnote 39 only if the Minister is of the opinion, after consultation with the Superintendent, that:
OSFI will review the whole application with a view to ascertaining whether the criteria related to the Ministerial Order have been met. Prior to recommending that the Minister make an order establishing the FBB, OSFI's review will focus on determining whether the following broad considerations have been satisfied:
The Superintendent may make an order approving the commencement and carrying on of business in Canada by an Authorized Foreign BankFootnote 42 only if the Superintendent is satisfied that the Authorized Foreign Bank has:
OSFI's review relative to the Superintendent Order will focus on whether the FBB's management, policies, processes and systems are in place and meet OSFI's expectations. This component of the process will culminate in an on-site review of the FBB by OSFI to determine whether the FRFI is sufficiently prepared to commence business operations.
Upon receipt of a Ministerial Order, the Authorized Foreign Bank will be deemed to have a financial establishment in CanadaFootnote 44. As a result, the foreign bank and any entity associated with the foreign bank become subject to an operating framework in Canada that is substantively equivalent to the one applicable to Canadian banks in certain areas, such as substantial investments. Please refer to
OSFI Advisory 2006-01-R1 – Legislative Framework for Foreign Banks for additional information on the consequences of having a financial establishment in Canada.
No foreign bank may establish an FBB if it, or any entity that is affiliated with it:
Authorized Foreign Banks are also prohibited from engaging in the activities referred to in (a) and (b)Footnote 46.
With respect to matters of corporate governance, OSFI looks to the Principal Officer to oversee the management of the FBB. The Principal Officer must be a natural person who is ordinarily resident in Canada and is expected to be able to receive in Canada all notices from the Minister or the SuperintendentFootnote 47. This person must be familiar with the FBB's day-to-day operations and is required to maintain records in Canada related to the Authorized Foreign Bank's business in CanadaFootnote 48. Additional information regarding OSFI's expectations relative to the selection and duties of the Principal Officer are set out in OSFI
Guideline E-4B – Role of the Principal Officer and Record Keeping Requirements and OSFI
Guideline E-17 - Background Checks on Directors and Senior Management of FREs.
A lending branch is required to maintain assets on deposit equal to $100,000. A full-service branch is required to maintain assets on deposit equal to $5 million or five per cent of the liabilities of the Authorized Foreign Bank in respect of its business in Canada, whichever is greater. OSFI expects a full-service branch to maintain a buffer above this amount to take into account the projected fluctuations in the FBB's liabilities. The assets held on deposit must be of a type approved by the Superintendent and must be kept with a Canadian financial institution approved by the Superintendent. The Superintendent may also require an Authorized Foreign Bank to maintain additional assets as necessary to protect depositors and creditorsFootnote 49. Please refer to OSFI Guideline A-10
Capital Equivalency Deposit for information on the types of qualifying assets, the approval of a depository and other relevant matters related to the deposit requirements.
Applicants should also note that the consumer provisions in the BA are administered by the
Financial Consumer Agency of Canada (FCAC). OSFI will inform the FCAC of any application for a Ministerial Order.
Full-service branches must register with Payments Canada. Lending branches are not eligible to become members of Payments Canada.
OSFI will, on request, provide an Applicant with an appropriate contact at FCAC or Payments Canada.
All enquiries regarding the establishment of an FBB should be directed to:
Office of the Superintendent of Financial Institutions
Regulatory Affairs Division
15th Floor, 255 Albert Street Ottawa, Ontario, Canada, K1A 0H2
In consideration of the Minister of Finance (Canada) making an order pursuant to Section 524(1) of the
Bank Act authorizing (name of the foreign bank) [the Bank] to establish a branch in Canada to carry on in Canada the business of banking and any other business generally that appertains to the business of banking, the Bank hereby undertakes as follows:
For the purpose of this Guide, an FBB whose order is subject to the restrictions and requirements referred to in subsection 524(2) of the BA is referred to as a lending branch.
Return to footnote 1
Please see section 545 of the BA and the
Prescribed Deposits (Authorized Foreign Banks) Regulations.
Return to footnote 2
Please see subsection 524(1) of the BA.
Return to footnote 3
Please see subsection 534(1) of the BA.
Return to footnote 4
The BA provides broad authority to the Minister and Superintendent to take into account all matters that they consider relevant in the circumstances related to the granting of any approval (e.g., section 973.01).
Return to footnote 5
Please refer to the OSFI
Guide for Incorporating Banks and Federally Regulated Trust and Loan Companies, the OSFI
Guide for Continuing a Body Corporate as a Bank or a Federally Regulated Trust or Loan Company, or the OSFI
Guide for Continuing a Local Cooperative Credit Society as a Federal Credit Union, as applicable.
Return to footnote 6
The Minister makes the Order upon recommendation of the Superintendent. Please refer to Section II of the Administrative Guidance attached to this document, which sets out the factors that the Minister must consider relative to the granting of an order.
Return to footnote 7
The contact information for OSFI's Regulatory Affairs Division is located on the final page of this Guide.
Return to footnote 8
Please see subsection 534(9) of the BA.
Return to footnote 9
Please see section 3 of the BA.
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Review by OSFI of the draft Notice will ensure that the form and information contained in the Notice provides, in OSFI's opinion, the necessary information to the public.
Return to footnote 11
"Ultimate controlling shareholder" means any person who controls the Applicant but is not itself controlled by anyone. For more information on the concept of "control" please refer to section 3 of the BA and OSFI Advisory 2007-02
Control in Fact.
Return to footnote 12
See footnote 5.
Return to footnote 13
Please see section 10 of the BA.
Return to footnote 14
Please refer to OSFI Advisory 2007-02
Control in Fact for further details.
Return to footnote 15
In this regard, the Applicant is expected to provide a comparison between the accounting standards used to complete its financial statements and International Financial Reporting Standards, where applicable.
Return to footnote 16
Depending on the circumstances, OSFI may request an explanation of the asset rating system of the home jurisdiction and amounts classified in each category, including a breakdown of the asset portfolio in Canadian and local currency, and the asset rating definitions used by home regulators.
Return to footnote 17
Please note that, in certain circumstances, OSFI may request that the Applicant provide information that demonstrates that it meets the BIS standards in
both its home jurisdiction and in Canada.
Return to footnote 18
The OSFI Security Information Form(s) must be provided to OSFI in the following two formats: (a) a signed and dated original hard-copy, and (b) an electronic version in Excel format. Once OSFI receives the completed forms, they are then forwarded to the relevant Canadian law enforcement and intelligence agencies to carry out the requisite background and security assessments. Please note that the time required by law enforcement and intelligence agencies to complete these assessments is not within OSFI's control, and the Superintendent will generally not seek the Minister's approval in respect of the Order until these assessments are completed without issue. As such, Applicants are strongly encouraged to remit the completed OSFI Security Information Form(s) at the earliest possible stage in the application.
Return to footnote 19
Please see OSFI
Guideline B-10 - Outsourcing of Business Activities, Functions and Processes.
Return to footnote 20
See footnote 19.
Return to footnote 21
OSFI generally expects operational risk management policies to include policies related to the following: outsourcing risk, business continuity and disaster recovery, privacy risk, information technology, information management and security, physical security, fraud risk and records retention. Please also see OSFI's
Supervisory Framework. Additionally, OSFI may request that an Applicant provide a self-assessment against OSFI's
Cyber Security Risk Self-Assessment Guidance.
Return to footnote 22
In particular, a FBB's business continuity plan should ensure that the FBB has in its possession or can readily access all records necessary to allow it to sustain business operations, meet its regulatory obligations, and provide all information as may be required by OSFI to meet its legislated mandate.
Return to footnote 23
Please see OSFI
Guideline E-13 - Regulatory Compliance Management (RCM).
Return to footnote 24
Please see OSFI
Cyber-Security Self-Assessment Guidance.
Return to footnote 25
OSFI will accept a NUANS corporate name search report, which includes a list of business names and trademarks that sound similar to the name being proposed. If the FBB would conduct business in the Province of Québec, a search of the Québec Corporations Database at "Registraire des entreprises" is also required.
Return to footnote 26
If the FBB will use both an English and French form of the proposed name, a name search report and corresponding analysis must be provided in respect of both forms of that proposed name. Reference should also be made to OSFI
Advisory 2002-01-R1 - Corporate Names, Registered Names and Trade Names.
Return to footnote 27
Prior to executing the undertaking, the Applicant must confirm that its contents are acceptable to OSFI.
Return to footnote 28
Please see section 2 of the BA for the definition of "non-WTO Member foreign bank".
Return to footnote 29
A wire transfer, cheque or draft should be made payable to the "Receiver General for Canada".
Return to footnote 30
Please see subsections 527(2) and (3) of the BA.
Return to footnote 31
Please see subsection 527(4) of the BA.
Return to footnote 32
Return to footnote 33
Please see subsection 536(2) of the BA.
Return to footnote 34
OSFI will provide a copy of the letter of commitment that the AFB is expected to sign.
Return to footnote 35
Material changes to the business in Canada may include new product offerings, changes in management structure or growth of the business beyond what was contemplated in the initial business plan submitted in support of the application for the establishment of an FBB.
Return to footnote 36
Please see subsections 534(7) and (8) of the BA.
Return to footnote 37
Please note that, in certain circumstances, OSFI may expect an Applicant to meet Canadian Capital standards.
Return to footnote 38
Please see subsection 524(4) of the BA.
Return to footnote 39
At least 50 per cent of the Applicant's gross revenues are derived from financial services or at least 50 per cent of the Applicant's assets are related to financial services.
Return to footnote 40
Please see section 973.01 of the BA.
Return to footnote 41
Please see subsection 534(3) of the BA.
Return to footnote 42
Please see Appendix II for a sample form OSFI 512.
Return to footnote 43
Please see paragraph 507(15)(a) of the BA.
Return to footnote 44
Please see section 524.1 of the BA.
Return to footnote 45
Please see section 524.2 of the BA
Return to footnote 46
Please see section 536 of the BA
Return to footnote 47
Please see section 597 of the BA.
Return to footnote 48
Please see section 617 of the BA.
Return to footnote 49