Canada Gazette, Part I, Volume 149, Number 50: By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Information By-law
December 12, 2015
Canada Deposit Insurance Corporation Act
Canada Deposit Insurance Corporation
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the By-law.)
The Board of Directors of the Canada Deposit Insurance Corporation (“CDIC”) proposes to make the By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Information By-law (the “Amending By-law”) pursuant to paragraph 11(2)(f) of the Canada Deposit Insurance Corporation Act (CDIC Act). Paragraph 11(2)(f) of the CDIC Act authorizes the CDIC Board of Directors to make by-laws “respecting representations by member institutions and other persons with respect to (i) what constitutes, or does not constitute, a deposit, (ii) what constitutes, or does not constitute, a deposit that is insured by the Corporation, and (iii) who is a member institution.” The Canada Deposit Insurance Corporation Deposit Insurance Information By-law (the “By-law”) was made on December 4, 1996, and came into full force on March 1, 1998. It was subsequently amended in September 1999, October 2001 and December 2006.
In 2010 the Bank Act was amended to allow provincially incorporated credit unions to become federal financial institutions (federal credit unions — FCUs). The CDIC Act was also amended to reflect that FCUs would become CDIC member institutions and that for a limited time, CDIC deposit insurance coverage would be similar to the deposit insurance coverage provided by the FCU's previous provincial deposit insurer (see section 12.1 of the CDIC Act). Deposit insurance coverage subsequent to the transition period will be the same as provided to all CDIC member institutions, and any deposits made subsequent to continuance as an FCU are not captured by CDIC transition coverage and are immediately subject to the CDIC coverage limit.
Section 1 of the Disclosure on Continuance Regulations (Federal Credit Unions) titled Notice and Disclosure (SOR/2012-267) made under the Bank Act requires that each depositor with the provincial credit union applying to become an FCU be notified of the differences between the deposit insurance coverage prior to becoming an FCU and CDIC coverage of an FCU, as well as be informed about the transition coverage set out in the CDIC Act. The requirements under the Disclosure on Continuance Regulations (Federal Credit Unions) come to an end once the provincial credit union becomes an FCU and a member of the CDIC.
The By-law was introduced in 1996 to govern statements made by financial institutions about their standing as a CDIC member institution and about what constitutes a deposit eligible for insurance. The focus of the By-law is to ensure that depositors receive accurate and timely information about CDIC deposit insurance where they conduct the majority of their banking activities.
In order to minimize the potential for confusion among depositors to an FCU during the transition period, it is necessary to amend the Information By-law. The Amending By-law introduces the requirements that the FCU
- prepare a Statement of Transitional Coverage (Statement), and have the CDIC verify the accuracy of the Statement;
- make a copy of the Statement available to any customer who is conducting deposit-taking business with staff at a branch of the federal credit union until the transition period expires;
- for the duration of the “transition period,” make the Statement available by way of a hyperlink on any pages of its Web site that reference deposit products;
- for a period of six months, commencing on the date on which the FCU became a member of CDIC, prominently display a sign in each branch and office where customers are served that refers customers to the Statement and indicates how customers can obtain a copy of the Statement; and
- in respect of a pre-existing deposit that is to be repaid on a fixed day and exceeds $100,000, provide that depositor, and at such time that is no sooner than 12 weeks (but no later than 4 weeks) from the expiry of the transition period, or as otherwise indicated by the CDIC to the FCU, with a copy of the Statement or an indication as to how that depositor can obtain a copy of the Statement.
The Statement, pursuant to the Amending By-law, would provide
- a generic description or overview of the purpose of Statement;
- a description of the CDIC coverage that applies during the transitional period to the deposits of the FCU;
- when transitional insurance coverage for the FCU ends; and
- a description of the CDIC coverage that applies after the transitional period expires.
There are no available alternatives. The CDIC Act specifically provides that the Board of Directors may make by-laws respecting representations by member institutions and other persons about who is a member institution and what constitutes an insured deposit.
Benefits and costs
The primary benefit of the amendments is to decrease the confusion of depositors that may be caused as a result of the differences between provincial deposit insurance, transitional coverage provided by the CDIC, and CDIC deposit insurance.
The contents of the Statement reflect the contents of the notice that is required under the Disclosure on Continuance Regulations (Federal Credit Unions) made under the Bank Act. A prospective FCU can therefore rely on that notice when developing the Statement. No additional costs should be attributed directly to these changes.
By a letter dated September 5, 2013, member institutions and numerous financial services industry associations were made aware of the CDIC's need to amend the By-law. The By-law was discussed with selected stakeholders in the summer and fall of 2015. Any comments and concerns that were expressed have been addressed.
On the basis that amendments have no impact on existing member institutions, no further consultation is planned beyond pre- publication in the Canada Gazette providing for a 30-day comment period.
Compliance and enforcement
There are no compliance or enforcement issues.
Emiel van der Velden
Canada Deposit Insurance Corporation
50 O'Connor Street, 17th Floor
PROPOSED REGULATORY TEXT
Notice is given that the Board of Directors of the Canada Deposit Insurance Corporation, pursuant to paragraph 11(2)(f) (see footnote a) of the Canada Deposit Insurance Corporation Act (see footnote b), proposes to make the annexed By-law Amending the Canada Deposit Insurance Corporation Deposit Insurance Information By-law.
Interested persons may make representations concerning the proposed By-law within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Emiel van der Velden, Director, Insurance, Canada Deposit Insurance Corporation, 50 O'Connor Street, Ottawa, Ontario K1P 6L2 (email: EvanderVelden@cdic.ca).
Ottawa, December 2, 2015
President and Chief Executive Officer
Canada Deposit Insurance Corporation
BY-LAW AMENDING THE CANADA DEPOSIT INSURANCE CORPORATION DEPOSIT INSURANCE INFORMATION BY-LAW
1. The Canada Deposit Insurance Corporation Deposit Insurance Information By-law (see footnote 1) is amended by adding the following after section 7.1:
7.2 (1) A federal credit union shall prepare a statement of transitional coverage that contains the following information, the accuracy of which has been verified by the Corporation:
- (a) the purpose of the statement;
- (b) a description of the deposit insurance coverage provided by the Corporation that applies to the pre-existing deposits of the federal credit union during the transition period;
- (c) the day on which the deposit insurance coverage referred to in paragraph (b) expires; and
- (d) a description of the deposit insurance coverage provided by the Corporation that will apply to the deposits of the federal credit union after the transition period expires.
(2) The federal credit union shall, beginning on the day on which it becomes a member institution and ending on the day on which the transition period expires,
- (a) make the statement of transitional coverage available by way of a hyperlink on every page of its website that references deposit products; and
- (b) make a copy of the statement of transitional coverage available at each of its branches and offices to depositors.
(3) The federal credit union shall, for a period of six months after the day on which it becomes a member institution, prominently display, at each branch and office where customers are served, a sign that refers customers to the statement of transitional coverage and indicates how they can obtain a copy of that statement.
(4) Subject to subsection (5), the federal credit union shall, not earlier than 12 weeks but not later than four weeks before the end of the transition period, provide to a depositor in respect of any pre-existing deposit that exceeds $100,000 and is to be repaid on a fixed day, a copy of the statement of transitional coverage or an indication of how they can obtain a copy of that statement.
(5) A federal credit union that has, under subsection (4), provided to a depositor a copy of the statement of transitional coverage in respect of a pre-existing deposit described in that subsection, or given to a depositor an indication of how that copy can be obtained, is not required to provide to the same depositor in respect of any other such pre-existing deposit a copy of the statement or an indication of how the copy can be obtained.
COMING INTO FORCE
2. This By-law comes into force on the day on which it is registered.