## _cr1467

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---

### Executive summary — context and scope
- Prepared by Oana Nedelescu (MCM). Summarizes findings of the FSAP Update missions undertaken during June 19–23, 2013 and September 9–20, 2013; based on legal/policy documents and discussions with federal authorities, the Autorité des Marchés Financiers (AMF), and private sector representatives.
- Objective: test preparedness of crisis management and bank resolution framework and outline recommendations for improvements.

### Key findings and system strengths
- Resilience factors:
  - Strong prevention policies, traditionally strong prudential supervision and regulation, conservative bank business models, and sound economic fundamentals.
  - Authorities early adopters of global financial reforms.
  - Canadian safety net: complex, well established, high credibility; substantial part covered federally while ten provinces have functionally-independent crisis arrangements.
- Federal roles and leading practices:
  - Minister of Finance (MOF) is financial stability “gatekeeper” with broad intervention powers (can supersede some OSFI and CDIC decisions on financial stability grounds).
  - OSFI, CDIC, and Bank of Canada (BOC) have leading practices in supervision, resolution toolkit and single depositor view system, and emergency liquidity framework respectively.
  - Interagency committees facilitate clarity of responsibility and informal coordination.
- Historical/factual points:
  - Banks reported solid earnings in 2013; average capital adequacy ratio for domestic banks is above 13 percent.
  - OSFI established in 1987.
  - Most recent bank failure dated to 1996.

### Key quantitative items (preserved exactly)
- Current ex-ante CDIC coverage of insured deposits: 39 basis points.
- Target ex-ante CDIC coverage of insured deposits: 100 basis points.
- CDIC current funding: Can$2.6 billion (estimated 39 basis points of insured deposits).
- CDIC planned minimum target ex-ante funding: 100 basis points (currently equivalent to Can$6.5 billion).
- CDIC current borrowing limit: Can$19 billion.
- CDIC premiums limited to 33 1/3 basis points of insured deposits and currently average approximately 3 basis points of insured deposits.
- Maximum CDIC coverage: Can$100,000 per depositor, per institution, per category.
- Coverage estimates:
  - Coverage fully protects about 97 percent of the deposits of individuals.
  - Coverage fully protects about 31 percent of the value of deposits in the system.
- IMPP program: government committed to purchase up to a total of $125 billion in insured residential mortgage pools; around Can$70 billion was utilized; government expects estimated $2.5 billion in net revenues by the time it ends in 2014–2015.
- CDIC historical failures: 43 bank failures involving about Can$26 billion of insured deposits; largest failure insured deposits close to Can$10 billion.
- Past liquidations average period: between 10 to 15 years; bulk of liquidation typically occurs in the first two to three years.
- CDIC compliance with single customer view: 96 percent of member institutions complied within implementation period.
- AMF (Quebec) DI net resources at March 31, 2012: Can$505 million (equivalent to 0.58 percent of insured deposits).

### Gaps, coordination shortfalls, and data issues
- No single entity mandated to collect and analyze data for the financial system as a whole (federally and provincially regulated entities, unregulated entities, and markets), creating data gaps hindering system-wide stability assessments.
- No single entity with a clear mandate for macroprudential oversight and operationalizing system-wide crisis preparedness (policies, procedures, operational guidance).
- Federal–provincial coordination shortfalls: provincial regulators of deposit-taking and provincially incorporated institutions not represented on principal federal committees (FISC, SAC); prudential information not consistently exchanged with relevant provincial regulators.
- Data gaps identified in holding company credit intermediation, some pension fund activities, securities markets, and market interconnectedness across sectors.
- No system-wide crisis simulation exercises performed to test coordination mechanisms.
- CDIC autonomy constrained: some important tools under Financial Institution Restructuring Provisions (FIRP) require Governor in Council decision following MOF recommendation.
- CDIC powers limited regarding continuity of essential services across a group, contract termination, and temporary stays on early termination rights.
- Provincial deposit insurance systems and resolution frameworks highly heterogeneous; preparedness uneven across provinces.

### Main policy recommendations (preservation of priority labels and wording)
- Coordination (Priority: High / Medium)
  - Provide a clear mandate to an entity (i) to carry out macro-prudential oversight with participation broad enough to allow a complete view of systemic risks, and with powers to collect all necessary data for systemic risk analysis and (ii) to carry out system-wide crisis preparedness. — High
  - Perform regular system-wide crisis simulation exercises. — Medium
  - Enhance cross-sectoral coordination in the supervision and resolution of groups which span over both federal and provincially regulated areas; give priority to communication and cooperation on systemically important institutions (federal and provincial). — High
- Provincial safety nets (Priority: High / Medium)
  - AMF: Enhance early intervention powers; increase ex-ante funding of deposit insurance fund and introduce a capitalization target and a single customer view system; establish a crisis intervention framework. — High
  - Other provincial authorities: Undertake a self-assessment of the adequacy of safety nets and pursue necessary enhancements to ensure: well funded local deposit insurance schemes, broad resolution frameworks, and operationalized contingency planning. — High
  - All: Review and update, where necessary, cooperation agreements and contingent operational arrangements with federal authorities. — Medium
  - All: Introduce a more uniform approach on coverage levels of provincial deposit insurance schemes. — Medium
- Resolution powers (Priority: Medium)
  - Improve autonomy of CDIC in activating a broader range of resolution tools. — Medium
  - Enhance the CDIC’s resolution powers in line with the Key Attributes, including the power to bail-in for D-SIBs. — Medium
  - Introduce legal requirements for the preparation of recovery and resolution plans and powers to change a firm’s structure in order to enhance resolvability. — Medium
  - Consider introducing some form of depositor preference. — Medium
- Deposit insurance (Priority: Medium)
  - Bolster the ex-ante resources of CDIC. — Medium
  - Improve data collection on depositors’ profiles. — Medium
  - Simplify the rules for complex deposit products. — Medium
- Emergency Liquidity Assistance (Priority: Medium)
  - Remove the legal restriction which prohibits the BOC from taking mortgages as collateral when providing liquidity assistance. — Medium

### Crisis-preparedness operational steps emphasized
- Assign clear mandates and powers to an entity responsible for macroprudential oversight and system-wide crisis preparedness, with broad participation and data collection powers.
- Operationalize a system-wide crisis coordination framework and conduct periodic comprehensive simulations (e.g., with a two year frequency recommended in the source).
- Establish a crisis-preparedness committee road map: gap analysis mapping existing powers to desired features; contingency plan covering banking, insurance, securities, provincially regulated entities; formal communication channels with federal, provincial, and foreign supervisors; designate spokesperson and communication strategy.
- Consider joint databases (possibly based on the existing Tri-Agency Data System (BOC-OSFI-CDIC)) and review legal/operational hurdles for information exchange between federal and provincial authorities.

### Emergency liquidity and MOF exceptional powers
- BOC ELA framework:
  - Legal basis: Section 18(h) of the Bank of Canada Act with collateralization and duration constraints (duration must not exceed 6 months; loans can be renewed).
  - BOC constraints: legal restriction on taking mortgages as collateral (mortgages considered conveyance of real property); recommendation to remove this restriction.
  - BOC policy: liquidity support only for institutions judged solvent by the prudential supervisor; interest at least Bank Rate; ELA not normally provided in foreign currency.
- MOF powers expanded in 2009 via Financial Administration Act and Bank Act amendments:
  - MOF, with Governor in Council authorization, can enter contracts and/or provide credit the Minister considers necessary to promote stability or maintain efficiency of the financial system (Financial Administration Act section 60.2).
  - MOF empowered to acquire securities in federally regulated financial institutions to promote stability; to be used only in exceptional circumstances.

### Resolution framework, CDIC role, governance, and operational capacity
- CDIC dual role: deposit insurer and primary federal resolution authority for member institutions; statutory mandate includes promoting and contributing to stability while minimizing exposure to loss.
- Governance features:
  - Board composition: five members from federal safety net participants and five directors plus a Chairperson from private sector; Chairperson must be “a person of proven financial ability”.
  - Private sector directors appointed for terms not exceeding four years; can be dismissed by federal Cabinet without cause.
- Operational independence constraints:
  - Key resolution tools (FIRP, bridge bank) require Governor in Council order following MOF recommendation; CDIC discretion retained for assisted transactions and open bank assistance (OBA).
- Resolution toolkit (selected tools and decision triggers preserved)
  - Assisted Purchase and Assumption or Whole Bank Acquisition — Trigger: Voluntary agreement of shareholders — Decision making: CDIC decision; CDIC Board for financial assistance; OSFI approval for acquirer.
  - Forced sale under FIRP — Trigger: OSFI “non-viability” determination — Decision making: Governor in Council on MOF recommendation.
  - Bridge bank — Trigger: OSFI “non-viability” determination — Decision making: Governor in Council on MOF recommendation; bridge bank can operate for 2 years (possible extensions up to total 5 years).
  - Open bank assistance — Decision making: CDIC decision; CDIC Board.
  - Liquidation and payout — Trigger: OSFI’s application for a winding-up order — Decision making: Court.
- CDIC operational capacity:
  - Dedicated Complex Resolution Division; bridge bank manual; forced sale processes; templates; first iteration of resolution plans for each Canadian D-SIB completed; plan to extend RRPs to a foreign bank subsidiary.
- Empirical liquidation and creditor ranking:
  - Creditor ranking reproduced exactly in source (secured creditors first; shareholders last).
  - Loans made by CDIC (Crown claims) have higher priority than general unsecured creditors and shareholders.
  - Historical liquidation outcomes: about three quarters liquidated with CDIC reimbursing insured deposits; in one quarter of cases CDIC facilitated assisted transactions.

### Recommendations specific to resolution framework (preserved wording)
- Strengthen operational independence of CDIC:
  - Reduce requirement for government approval for routine resolution actions (e.g., purchase and assumptions for small banks or forced sale actions under FIRP).
  - Provide CDIC more legal powers to activate resolution actions, particularly those related to the FIRP.
- Enhance scope of CDIC powers:
  - Extend resolution powers to relevant non-regulated entities within a group, including holding companies and non-regulated operational entities significant to group financial activities.
  - Explicit power to terminate contracts.
  - Power to carry out bail-in within resolution (government committed to implement bail-in regime for D-SIBs).
  - Broader automatic temporary stay on early termination rights applicable to eligible financial contracts (EFCs) in resolution, including those under FIRP, with considerations for CCPs and counterparties.
- Mitigate moral hazard and signal OBA exceptionalism:
  - Adopt a stricter loss minimization test focused on payout cost and severe financial stability threats; shift resolution costs to private creditors to a greater degree.
  - Signal OBA as exceptional; cap OBA relative to CDIC cash resources; require systemic impact analysis and high-level safety net involvement where OBA considered.
  - Advisable to eliminate OBA from the Guide to Intervention to signal exceptional deployment only.
- Introduce some form of depositor preference:
  - Rationale: improve depositor recoveries, reduce costs to deposit insurance and government, and assist application of resolution tools and bridge institutions.
  - Design considerations preserved: avoid national depositor preference that hampers cross-border resolution; conduct rigorous analysis of impacts and interaction with bail-in and other framework features.

### Recovery and resolution planning (RRP), NVCC, and bail-in
- RRPs:
  - Recovery plans prepared by six largest domestic banks since 2011; resolution plans first iteration December 2012 by CDIC.
  - Recommendation: create legal requirement for RRPs for all systemically important firms; introduce resolvability assessments; grant legal powers to impose structural changes to improve resolvability; better articulate RRPs across sectors including securities firms and provincially regulated entities.
- NVCC:
  - Incorporated into OSFI CAR Guideline (section 2.2); effective January 1, 2013, all non-common Tier 1 and Tier 2 instruments must comply.
  - NVCC triggers described as “very late and very remote”; conversion at authorities’ discretion at point of non-viability.
- Bail-in:
  - Authorities preparing a bail-in regime applicable to systemically important banks; bail-in should work alongside NVCC and other capital rules.
  - Design considerations: consistency of triggers with other resolution tools; scope exclusions (secured claims, insured deposits, and possibly systemically important obligations); safeguards including “no creditor worse off” principle and ex-post judicial review where feasible.
  - Consider requiring D-SIBs to hold a minimum amount of capital instruments and senior, unsecured debt to ensure gone-concern loss-absorption capacity.

### Provincial arrangements, heterogeneity, and Québec specifics
- Provincial safety nets:
  - Ten provincial systems vary widely in coverage limits, funding approach (ex-ante vs ex-post), resolution powers, and operational readiness.
  - Examples preserved exactly:
    - Alberta Credit Union Deposit Guarantee Corporation — Coverage Limit: No limit; Coverage Ratio: 11.5.
    - Manitoba — Coverage Limit: No limit (including foreign currency deposits); Coverage Ratio: 1.
    - British Columbia — Coverage Limit: No limit; Coverage Ratio: 0.8; Target Ratio: 0.8.
    - Ontario Deposit Insurance Corporation — Coverage Limit: Can$100,000; Coverage Ratio: 0.6.
    - New Brunswick — Coverage Limit: Can$250,000 per member; Funding: Primarily Ex-Post; Act as Receiver: No.
    - Prince Edward Island — Coverage Limit: CAD $125,000; Coverage Ratio: 1.5*.
    - Saskatchewan — Coverage Limit: No limit; Coverage Ratio: 1.58; Target Ratio: 1.6.
    - Québec AMF — Deposit Institutions Covered: 421; Coverage Limit: Can$100,000; Coverage Ratio: 0.58.
  - Heterogeneity concerns: level playing field, moral hazard from unlimited coverage in some provinces, uneven funding (some rely on ex-post financing).
- Québec / AMF:
  - AMF combines supervisor, deposit insurer, and resolution authority roles; resources and powers under AFSC, ADI, and Act on the AMF.
  - AMF DI net resources: Can$505 million at March 31, 2012 (0.58 percent of insured deposits).
  - Recommendations for AMF: shorten Federation notification period from ten days; clarify security funds’ legal obligations; strengthen ex-ante funding; governance improvements in line with IADI; implement single customer view; document crisis intervention procedures and test through simulations.
- Provincial–federal interaction:
  - Provincial self-assessments encouraged; federal authorities to support and share expertise.
  - Strengthen provincial DIS funding, governance, and operational contingency planning; pursue more uniform approach to coverage levels.
  - Update MOUs and cooperation agreements; increase frequency and comprehensiveness of supervisory information exchange for groups spanning federal and provincial boundaries.
  - Organize crisis simulation exercises including federal and provincial authorities.

### Cross-border cooperation and CMGs
- OSFI and CDIC engage actively in international cooperation:
  - OSFI has MOUs with over 30 foreign supervisory authorities.
  - CDIC MOUs: Instituto para la Protección al Ahorro Bancario (Mexico, 2012) and Federal Deposit Insurance Corporation (United States, 2013).
  - Since 2011 OSFI and CDIC have hosted CMGs with relevant foreign authorities for D-SIBs; fall 2013 CMGs involved major cross-border supervisors (U.K. and U.S.).
- Cross-border considerations:
  - CDIC resolution powers do not apply to branches of foreign banks; branches prohibited from taking insurable retail deposits (deposits of less than Can$150,000).
  - No legal obligation requires CDIC to take into account effects in other jurisdictions, though practice is to assess impacts and coordinate with foreign authorities.

*Source: EXECUTIVE SUMMARY and selected chapters/excerpts from FSAP Update for Canada (missions June 19–23, 2013 and September 9–20, 2013) as compiled in the provided _cr1467 PDF chapter.*

### EXECUTIVE SUMMARY ___________________________________________________________________________ 5

### EXECUTIVE SUMMARY

### Introduction
- Prepared by Oana Nedelescu (MCM). Summarizes findings of the FSAP Update missions undertaken during June 19–23, 2013 and September 9–20, 2013 and is based on analysis of legal and policy documents and discussions with federal authorities, the Autorité des Marchés Financiers (AMF), and private sector representatives.
- The note tests preparedness of the crisis management and bank resolution framework and outlines recommendations for improvements.

### Key findings
- The resilience of the Canadian financial system reflects strong prevention policies, including traditionally strong prudential supervision and regulation, conservative financial sector policies and business models of banks, and sound economic fundamentals.
- Authorities continuously improved legal and institutional arrangements and were early adopters of global financial reforms before and after the recent crisis.
- The Canadian safety net is complex, well established, and enjoys a high level of credibility: a substantial part of the financial sector is covered by the federal safety net, while each of the ten provinces has functionally-independent crisis management arrangements.
- At the federal level, the Minister of Finance (MOF) is legally and operationally the financial stability “gatekeeper”; the government has broad intervention powers and can supersede certain decisions of OSFI and CDIC on financial stability grounds.
- The OSFI, CDIC, and Bank of Canada (BOC) have each established leading practices in their areas. CDIC has a broad resolution toolkit and has introduced a single depositor view system. BOC has a strong emergency liquidity framework.
- A set of committees brings together main federal regulatory authorities, facilitating clarity of responsibility and nimble informal coordination.
- Gaps and risks identified:
  - No single mandate exists to collect and analyze data for the financial system as a whole (federally and provincially regulated entities, unregulated entities, and markets), creating data gaps that hinder system-wide stability assessments.
  - Lack of an entity with a clear mandate to carry out macroprudential oversight and to operationalize system-wide crisis preparedness (policies, procedures, operational guidance).
  - Coordination shortfalls between federal and provincial authorities could weaken crisis response.
  - CDIC’s autonomy in activating some resolution tools is constrained—some important tools under the Financial Institution Restructuring Provisions (FIRP) of the CDIC Act require activation by a Governor in Council decision following an MOF recommendation.
  - CDIC’s powers to require continuity of essential services across a group, to terminate contracts, and to temporarily stay early termination rights should be strengthened.
  - Provincial deposit insurance systems and resolution frameworks are highly heterogeneous; preparedness to overcome financial stress should be enhanced across provinces.

- Historical and factual points:
  - Banks continued to report solid earnings in 2013 and the average capital adequacy ratio for domestic banks is above 13 percent.
  - OSFI was established in 1987.
  - CDIC has generally resolved small and medium-sized banks; the most recent bank failure dated to 1996.

### Key quantitative items
- Current ex-ante CDIC coverage of insured deposits: 39 basis points.
- Target ex-ante CDIC coverage of insured deposits: 100 basis points.
- Recommendation priority levels used in the note: High, Medium (as in Table 1).

### Main recommendations (as summarized in Table 1)
- Coordination (Priority: High / Medium)
  - Provide a clear mandate to an entity (i) to carry out macro-prudential oversight with participation broad enough to allow a complete view of systemic risks, and with powers to collect all necessary data for systemic risk analysis and (ii) to carry out system-wide crisis preparedness. — High
  - Perform regular system-wide crisis simulation exercises. — Medium
  - Enhance cross-sectoral coordination in the supervision and resolution of groups which span over both federal and provincially regulated areas; give priority to communication and cooperation on systemically important institutions (federal and provincial). — High

- Provincial safety nets (Priority: High / Medium)
  - AMF: Enhance early intervention powers; increase ex-ante funding of deposit insurance fund and introduce a capitalization target and a single customer view system; establish a crisis intervention framework. — High
  - Other provincial authorities: Undertake a self-assessment of the adequacy of safety nets and pursue necessary enhancements to ensure: well funded local deposit insurance schemes, broad resolution frameworks, and operationalized contingency planning. — High
  - All: Review and update, where necessary, cooperation agreements and contingent operational arrangements with federal authorities. — Medium
  - All: Introduce a more uniform approach on coverage levels of provincial deposit insurance schemes. — Medium

- Resolution powers (Priority: Medium)
  - Improve autonomy of CDIC in activating a broader range of resolution tools. — Medium
  - Enhance the CDIC’s resolution powers in line with the Key Attributes, including the power to bail-in for D-SIBs. — Medium
  - Introduce legal requirements for the preparation of recovery and resolution plans and powers to change a firm’s structure in order to enhance resolvability. — Medium
  - Consider introducing some form of depositor preference. — Medium

- Deposit insurance (Priority: Medium)
  - Bolster the ex-ante resources of CDIC. — Medium
  - Improve data collection on depositors’ profiles. — Medium
  - Simplify the rules for complex deposit products. — Medium

- Emergency Liquidity Assistance (Priority: Medium)
  - Remove the legal restriction which prohibits the BOC from taking mortgages as collateral when providing liquidity assistance. — Medium

### Policy implications and operational steps emphasized
- Assign clear mandates and powers to an entity responsible for macroprudential oversight and system-wide crisis preparedness, with broad participation and data collection powers.
- Operationalize a system-wide crisis coordination framework and conduct periodic comprehensive simulations including federal and provincial authorities.
- Strengthen CDIC’s autonomy and resolution toolset consistent with the FSB Key Attributes, while retaining governmental approval where public funds or ownership are involved.
- Continue bolstering CDIC’s ex-ante funding toward the 100 basis points target and improve depositor data to calibrate coverage and funding.
- Enhance provincial safety nets toward greater uniformity, better funding, stronger resolution frameworks, and formalized operational contingency plans; prioritize cooperation on systemically important institutions.

*Source: EXECUTIVE SUMMARY, FSAP Update for Canada, missions June 19–23, 2013 and September 9–20, 2013.*

### 6.       An effective crisis management framework entails both institutional and operational

### _cr1467 - 6.       An effective crisis management framework entails both institutional and operational

### Framework components: legal, institutional, and operational foundations
- A sound and comprehensive legal and institutional setup is the foundation of an effective crisis management framework, reflected in legal powers and tools for systemic risk detection, early intervention, official liquidity assistance, resolution, and deposit insurance.
- Safety net institutions named: the supervisory agency, the central bank, the deposit insurance agency, and the resolution authority — each should have independent but mutually reinforcing mandates and enable cooperation and exchange of information domestically and internationally.
- An operational intervention mechanism should be set in policies, procedures, operational guidance (including pre-drafted documentation), and coordination mechanisms to support timely decision-making.
- Early detection of financial system risks allows more time for contingency planning and analysis of courses of action; once risks materialize, responses must be decisively implemented and communicated to preserve confidence.
- Operational mechanisms need periodic testing and review to ensure suitability to new conditions and emerging risks.

### Domestic safety nets: structure and institutional responsibilities
- The Canadian financial system:
  - Accounts for almost 500 percent of the GDP.
  - Is composed of a large spectrum of federally and provincially regulated institutions.
  - The six domestic systemically important banks (D-SIBs) and one large provincially incorporated credit cooperative network hold almost half of the financial sector assets.
- Federal vs provincial oversight:
  - The largest part of the financial sector (all banks, trust and loan companies, and insurance companies) is under federal prudential supervision; ten provinces oversee most credit unions/credit cooperatives and market conduct elements.
  - Federal safety net institutions: Department of Finance (DOF), Bank of Canada (BOC), Office of the Superintendent of Financial Institutions (OSFI), Canada Deposit Insurance Corporation (CDIC), and Financial Consumer Agency of Canada (FCAC).
  - Provincial safety nets: ten provinces have distinct authorities overseeing provincially incorporated institutions, some domiciled in local Ministries of Finance, and separate provincial deposit insurance systems.
- Federal institutional roles (as described):
  - DOF: operational arm supporting the Minister of Finance (MoF); MoF has broad powers including entering into contracts and providing credit necessary to promote stability or maintain efficiency of the financial system, and overarching authority over federal financial sector legislation.
  - BOC: central bank; does not have an explicit statutory mandate for promoting financial stability but contributes via liquidity provision; oversight of payment, clearing and settlement systems (Payment, Clearing and Settlement Act); participation in financial system policy development.
  - OSFI: federal prudential supervisory agency for banks, federally regulated insurers, trust and loan companies, cooperative credit associations, fraternal benefit societies, and private pension plans subject to federal oversight; contributes to financial stability via micro-prudential supervision.
  - CDIC: federal deposit insurer and main federal resolution authority; reports to Parliament through the MoF; has explicit statutory mandate to “promote and otherwise contribute to the stability of the financial system” (Canada Deposit Insurance Corporation Act); operational independence in activating some resolution tools is constrained.
  - FCAC: federal regulatory body protecting and informing consumers; supervises compliance with consumer protection legislation, conducts financial education and literacy outreach, and performs related research.
- Resolution regimes:
  - All federally regulated financial institutions are liquidated under the Winding-up and Restructuring Act rather than the Bankruptcy and Insolvency Act.
  - Private policyholder protection schemes: Assuris (life insurance) and PACICC (P&C insurance) play roles in insurance resolution; PACICC trigger is a wind-up order and it does not provide “open firm” financial assistance.
- Too-big-to-fail and systemically important institutions:
  - Six largest banks dominate the banking sector; risk of massive systemic/economic impact if a major bank fails.
  - March 2013 measures announced: a comprehensive risk management framework for D-SIBs including higher capital requirements, implementation of a bail-in regime, enhanced supervision, and recovery and resolution plans (some measures already implemented earlier).
- Provincially regulated institutions:
  - Follow different resolution regimes; securities and investment firms use ordinary corporate liquidation regimes; Canadian Investor Protection Fund protects customers of securities broker/dealers but lacks statutory intervention powers.
  - Credit cooperatives resolved under specific provincial legislation.
- Financial market infrastructures (FMIs):
  - Preliminary discussions to develop recovery and resolution policy framework; privately owned FMIs presently follow ordinary corporate insolvency regime.
  - BOC oversight: oversight framework articulated; designated FMIs required to observe the Principles for Financial Market Infrastructures and are regularly assessed.

### Inter-agency coordination: committees and information sharing
- Federal inter-agency committees exist to reinforce cooperation:
  - Financial Institutions Supervisory Committee (FISC): established 1987; mandated in the Office of the Superintendent of Financial Institutions Act to facilitate consultation and exchange of information between OSFI, CDIC, BOC, FCAC, and DOF; responsible for coordination and communication on strategies/action plans for addressing individual problem financial institutions; chaired by the Superintendent of Financial Institutions.
  - Senior Advisory Committee (SAC): same membership as FISC; chaired by the Deputy MoF; discussion forum for financial sector policy issues and systemic vulnerabilities to inform advice to the MoF; non-statutory and lacks well-defined terms of reference.
  - Heads of Agencies (HOA) Committee: chaired by the Governor of the BOC; includes DOF, OSFI, and four provincial securities regulators (Ontario Securities Commission, Autorité des Marchés Financiers (AMF), Alberta Securities Commission, British Columbia Securities Commission); coordinates federal and provincial securities market regulator actions.
  - Systemic Risk Committee (SRC) of the Canadian Securities Administrators (CSA): started operating October 2009 to identify and analyze systemic risks in Canadian capital markets; works with other CSA committees and domestic regulators.
- Overview characteristics of committees (as summarized in Table 2):
  - Memberships, chairs, mandates, frequency, and legal form vary across FISC, SAC, HOA, and SRC.
  - Frequencies noted: quarterly (or as frequent as necessary) for FISC, SAC, and HOA; semiannually (conference calls every two weeks) for SRC.
  - Legal form: FISC is statutory; SAC, HOA, and SRC are non-statutory.
- Evidence of cooperation:
  - Cross-agency participation in decision-making bodies and long practice of rotating senior civil servants across public authorities promotes blending of institutional cultures.
  - No legal impediments to information sharing among federal agencies; OSFI Act (section 18) entitles every FISC member to supervisory information in possession of other members; CDIC receives all OSFI examination information annually.

### Gaps and challenges in coordination, data, and mandate clarity
- Federal-provincial communication:
  - Communication between federal and provincial authorities is less well articulated. Provincial regulators of deposit-taking and provincially incorporated institutions are not represented on FISC or SAC.
  - Four largest provincial securities regulators participate in HOA discussions, but prudential information is not exchanged with relevant provincial regulators where consolidated supervision is split between OSFI and a provincial regulator.
  - Some ad-hoc communication exists between OSFI and provincial regulators; OSFI provides updates at provincial meetings.
- Data gaps:
  - Data gaps hamper collection and analysis for the financial system as a whole; a complete set of information is not collected systematically and regularly.
  - Gaps noted in: holding company credit intermediation, some pension fund activities, securities markets, and interconnectedness through markets across different financial sectors.
  - Bank of Canada undertakes extensive financial stability monitoring and vulnerability assessments (biannual Financial System Reviews) but lacks a specific mandate for system-wide monitoring and does not have access to a broader range of data and information.
- Mandate and accountability gaps for systemic risk monitoring and crisis management:
  - No single committee has an explicit mandate for systemic risk monitoring or for crisis management across banks, insurance and securities firms; federally and provincially incorporated institutions; unregulated entities; and markets.
  - No single forum provides a structured, high-level view of risks across all parts of the financial sector to enable coordinated policy action when needed.
  - No single committee has explicit crisis preparedness and management role, although FISC and SAC have been involved during recent turmoil.
  - No system-wide crisis simulation exercises have been performed to test responsiveness of coordination mechanisms.
  - Situations may arise requiring determination of whether triggers for crisis actions/powers have been met; without appropriate mandate, no agency or committee is accountable for this determination.

*IMF staff compilation from the provided chapter text.*

### 22.      The existing interagency arrangements functioned well during the crisis, although

### _cr1467 - 22.      The existing interagency arrangements functioned well during the crisis, although

### Interagency arrangements: functioning and blind spots
- The authorities’ reaction to contain spillovers of the global crisis was prompt and decisive and consisted of massive liquidity support and fiscal stimulus (Chapter III, Section B).
- Canada’s domestic isolated episode of financial turmoil, closely related to the global financial crisis, revealed blind spots and supports the argument that while tough prudential regulations and oversight help, effectively tackling emerging systemic risks requires a multi-sectoral policy approach (Box 1).

### Box 1 — Lessons from the ABCP Market Turmoil
- Event summary:
  - In August 2007, the non-bank Asset-Backed Commercial Paper (ABCP) market in Canada experienced significant turmoil.
  - A third of the non-bank ABCP market (Can$ 35 billion) froze when issuers were unable to roll over maturing paper amid investor concerns that the underlying collateral was exposed to CDOs backed by U.S. subprime mortgages.
  - Privately negotiated restructuring converted frozen short-term paper into medium-term notes; federal and three provincial governments (Ontario, Québec, and Alberta) provided a senior funding facility to help the restructuring (completed in January 2009).
- Key findings:
  - Tougher bank prudential standards helped protect banks. OSFI’s Regulation B-5 (2004) reduced incentives for local banks to commit liquidity support to third party conduits; many liquidity lines were conditional on a “general market disruption” determination, which was not made. Nonetheless, some sponsoring banks provided support above contractual obligations because of reputational concerns.
  - A multi-sectoral policy approach was needed. The ABCP market expansion was aggressive over 2003-2006, but the broader implications for overall financial stability were not clearly assessed. It was relatively late when authorities became aware that retail investors were holding ABCP paper—largely due to limited data on such financial entities.
  - Coordination gaps: It remains unclear the degree to which the HOA monitored ABCP developments and risks. The BOC gathered information on an ad-hoc basis; frequent discussions in the FISC occurred at the crisis peak. Provincial securities supervisors were not involved in assessment or response design.
  - Post-crisis reforms: Level of disclosure and transparency improved, including for bank-sponsored ABCP programs; reforms promoted to enhance the reliability of the credit ratings process. The SRC of the CSA was established in 2009 to identify and monitor systemic risk from securities markets.

### Mandates and institutional arrangements (paragraphs 23–24)
- Recommendations on mandates:
  - Mandates should be clearly assigned to an entity 1) to carry out macro-prudential oversight, and 2) to carry out system-wide crisis preparedness.
  - For macroprudential oversight the designated entity should have participation broad enough to allow a complete view of systemic risks and powers to collect all necessary data for systemic risk analysis.
  - For crisis preparedness the designated entity should establish a coordination framework composed of policies, procedures, and operational guidance to support timely and effective decision making in a crisis.
  - Mandates should preferably be in the form of legislation, but could be specified in terms of reference or in an inter-agency MOU.
- Crisis-preparedness committee actions (paragraph 24):
  - Agree on a road map for crisis management, including a “gap” analysis mapping existing powers to desired features for prompt coordination and decision making.
  - Develop a contingency plan with broad scope across financial subsectors (banking, insurance, securities, including provincially regulated entities), identifying human resources, legal basis, communication lines, and action plans for failure of a systemically important financial institution or systemic crisis; include formal communication channels with federal and provincial supervisory agencies and foreign supervisors; update regularly.
  - Perform regular crisis simulation exercises: organize comprehensive simulations to test capacity to respond to broad and severe scenarios on a periodic basis (e.g. with a two year frequency), with more targeted exercises conducted more frequently.
  - Establish a communication strategy: build media relationships and identify one spokesperson to coordinate and manage information for all authorities represented in the committee.
  - Clear legal and operational hurdles for information exchange: consider joint databases (possibly based on the existing Tri-Agency Data System (BOC-OSFI-CDIC)); review and propose measures to address existing information sharing restrictions between federal and provincial authorities.

### Federal crisis prevention and management framework — OSFI supervisory role (paragraphs 25–31, 32–33)
- OSFI supervisory strengths:
  - OSFI has an excellent track record of delivering high quality supervision with an intrusive, “close touch” approach, supporting forward-looking risk analysis and proactive adaptation of supervisory standards and practices.
  - The early intervention framework is well articulated and transparently communicated. OSFI has a legal mandate requiring early intervention to prompt institutions to address concerns.
  - The Supervisory Framework and Guide to Intervention (designed with CDIC for CDIC member institutions) outline supervisory powers, tools, and measures; the Guide is publicly disclosed.
- Intervention staging and practice:
  - OSFI’s operational intervention ladder (“staging”) entails four stages, supported by legislative authorities:
    - Early warning (Stage 1)
    - Risk to financial viability or solvency (Stage 2)
    - Future financial viability in serious doubt (Stage 3)
    - Non-viability/ insolvency imminent (Stage 4)
  - Actions range from limitations on business, higher prudential requirements, removing or restricting managers, limiting acquisitions, to withdrawing the license (Appendix I). Staging requires chief executives to report to their boards that they have been staged.
  - OSFI rarely uses formal intervention powers, preferring moral suasion and voluntary corrective actions; no formal corrective measures have been taken on supervised institutions or their management over the past decade.
  - The approach has succeeded due to hands-on supervision, clear supervisory expectations, a conservative prudential framework, and a reputation for high professionalism.
- Challenges and legal recommendations:
  - The corrective-action approach depends on timely and honest communication from institutions; one BCP assessment identified an occasion where an institution had not communicated in advance. A recommended remedy was an amendment to the Bank Act to clarify firms’ reporting obligations.
- OSFI–CDIC coordination and Guide to Intervention:
  - Cooperation is grounded in the “Strategic Alliance Agreement” to coordinate activities, promote consultation, and facilitate information exchange.
  - The Guide to Intervention outlines escalating involvement and coordination between OSFI and CDIC, clarifying when resolution may be triggered and retaining flexibility to adapt actions by circumstances. As severity increases, CDIC becomes more intensively involved and FISC and CDIC Board meetings increase to coordinate intervention and resolution.
  - Table 3 (Summary of the Guide to Intervention) outlines actions and inter-agency cooperation across No Staging, Stage 1, Stage 2, Stage 3, and Stage 4 (see source for full table entries).
- OSFI operational crisis tools and processes:
  - OSFI maintains a “Problem Situation Binder” with crisis checklists, communication plans, information gathering, resolution options, holding company issues, and discussions of the lender of last resort and payment systems; the binder is being updated to reflect recovery planning and changes to the resolution framework, such as the bridge bank tool.
  - OSFI and CDIC are closely working together to develop recovery and resolution plans for the D-SIBs (Chapter IV).
- OSFI authority in resolution:
  - OSFI can determine when to start orderly resolution or take control of a problem bank, including assuming temporary control of assets for less than 16 days, taking control for a period exceeding 16 days, taking control of the bank and applying for a winding-up order, or intending to liquidate once control is assumed.
  - CDIC may decide on resolution tools (e.g. a bridge institution) or a deposit payout once OSFI takes control; under section 648(1)(b) of the Bank Act the Minister may prevent supervisory intervention taking control of assets for a period exceeding 16 days, or taking control of the bank if necessary in the public interest.
  - Coordination through FISC and the CDIC Board of Directors means the Superintendent would—in practice—exercise powers from a position of consensus support.

*Source: _cr1467 - 22. The existing interagency arrangements functioned well during the crisis, although (PDF chapter).*

### 34.      A number of legal provisions create room for “constructive tensions” between the

### _cr1467 - 34.      A number of legal provisions create room for “constructive tensions” between the

### Constructive tensions between OSFI and CDIC
- CDIC can terminate deposit insurance even if the institution is still solvent (Section 30 of the CDIC Act).
- CDIC has previously terminated deposit insurance as an enforcement action against two solvent members.
- CDIC’s mandate to minimize exposure of the insurance fund to loss can create an incentive to resolve an institution sooner rather than later, which may conflict with supervisory interests.
- Such risks call for close bilateral coordination between OSFI and CDIC, as well as through the FISC cooperation.

### Official financial support: overview
- Official support can be provided by:
  - BOC (under the Bank of Canada Act),
  - MOF (under the Financial Administration Act),
  - CDIC (under the Canada Deposit Insurance Corporation Act).
- Measures can range from direct and indirect liquidity assistance (BOC, MOF, or CDIC), to recapitalization (MOF, CDIC), and/or nationalization (MOF, CDIC).

### Emergency Liquidity Assistance (ELA) — BOC framework and practice
- Legal authority: Section 18(h) of the Bank of Canada Act allows BOC to make loans or advances to a financial institution subject to:
  - a) the loan must be collateralized;
  - b) the loan or advance must be made to a deposit-taking institution that is a member of the Canadian Payments Association; and,
  - c) the duration of the loan or advance must not exceed 6 months (although loans can be renewed).
- BOC facilities:
  - Standing Liquidity Facility (SLF) supports the payments system.
  - Special last-resort lending tool (ELA).
- Crisis operations:
  - During the recent crisis, BOC provided substantial liquidity support mainly via term purchase and sale agreements (PRAs).
  - Terms were expanded in four dimensions: maturities, amounts, counterparties, and collateral.
  - By spring 2009, participation in liquidity operations diminished.
  - BOC provided advance notices regarding the gradual reduction in the frequency and amounts of auctions.
- Operational framework:
  - BOC publicly discloses lender-of-last-resort policies and maintains internal guidelines detailing decision-making, collateral acceptance and valuation, and other terms and conditions.
  - Additional BOC policy requirements for ELA:
    - Institution must be judged to be solvent by the prudential supervisor.
    - A business plan to address deficiencies (including restrictions to activities or distribution of dividends) must be sent to OSFI and discussed within FISC.
  - The potential range of eligible collateral and beneficiary institutions under ELA is broader than under SLF.
  - Range of eligible collateral is constrained by a legal restriction on the BOC with respect to taking mortgages as collateral.

### Box 2: BOC’s Policy Statement on ELA — key principles and conditions
- Primary objective: To address market failures associated with persistent liquidity problems in institutions judged to be solvent.
- Eligible institutions:
  - Federally chartered banks (including foreign banks’ subsidiaries) and federally incorporated trust and loan corporations.
  - Although not normally eligible, in a widespread event BOC can consider providing ELA to a provincial credit union central or a caisse populaire system.
  - Foreign banks’ branches are not normally eligible, but in exceptional circumstances BOC could provide interim lending.
- Liquidity support only: Illiquid institution must continue to be solvent; government and CDIC are expected to deal with an insolvent institution.
- Collateral requirements: In a crisis BOC can consider accepting a broader range of collateral than under SLF, e.g., a greater proportion of non-mortgage loan portfolio and additional types of collateral.
- Interest rate: Determined case by case; minimum is the Bank Rate. In limited experience BOC has charged the Bank Rate.
- Transparency: ELA provided by BOC would not be announced publicly, though high frequency statistics could help indicate such support.
- Foreign currency lending: BOC does not provide ELA in foreign currency. Under extreme conditions BOC can provide liquidity to any firm and has powers under Section 18(g)(ii) to buy and sell securities, including equities, if the Governor deems severe and unusual stress on a financial market or the financial system exists.
- Legal constraint note: Bank of Canada Act restricts BOC from taking real estate as collateral (mortgages considered conveyance of real property); where primary assets are mortgages, security must be structured as assignment of mortgage receivables, not assignment of mortgages themselves.

### BOC experience, review, and recommended improvements
- Historical experience:
  - During the recent financial crisis, no banks used the ELA facility.
  - In 1985, BOC provided ELA to two small Canadian banks that eventually became insolvent; BOC withdrew liquidity support and was later named in litigation that was settled in BOC’s favor.
- Recommended improvements as part of BOC liquidity framework review:
  - Remove the legal provision which restricts the BOC from taking mortgages as collateral when providing liquidity assistance;
  - Consider the scope for and the conditions of liquidity support by BOC necessary under the new resolution framework (i.e. access by bridge banks, security dealers, or provincially regulated FMIs);
  - Consider allowing the provision of ELA in foreign currency under exceptional circumstances and with adequate safeguards;
  - Clarify the BOC’s scope for providing ELA relative to other official assistance provided by MOF and/or CDIC in systemic situations.

### Official assistance provided by MOF and crisis programs
- Legal powers strengthened in 2009 via amendments to the Financial Administration Act and the Bank Act:
  - MOF, with Governor in Council authorization, can enter contracts and/or provide credit the Minister considers necessary to promote stability or maintain efficiency of the financial system (Financial Administration Act section 60.2).
  - MOF empowered to acquire securities in one or more federally regulated financial institutions where this would promote stability.
  - DOF confirms such powers are meant to be used only in exceptional circumstances.
- Extraordinary Financing Framework (EFF) during the crisis:
  - Insured Mortgage Purchase Program (IMPP) launched in October 2008: government committed to purchase up to a total of $125 billion in insured residential mortgage pools from eligible financial institutions.
  - Government also offered various assurance facilities (guarantees) to eligible financial institutions, which were not used.
- Box 3: IMPP and related crisis programs—key outcomes:
  - IMPP purchased National Housing Act Mortgage-Backed Securities (NHA MBS) via CMHC to provide term funding; window ran from fall 2008 through March 2010.
  - Minimum pricing set at 20 bps over Canada Mortgage Bonds (CMBs) to create disincentive.
  - Overall, around Can$ 70 billion was utilized.
  - Government expects the IMPP will generate an estimated $2.5 billion in net revenues by the time it ends in 2014–2015.
  - Canadian Lenders Assurance Facility and Canadian Life Insurers Assurance Facility were offered for issuance of Government-guaranteed term debt up to 3 years; these facilities ran from late 2008/early 2009 until end-2009 and were not used.

### MOF recapitalization powers and systemic risk override considerations
- MOF can acquire shares in a bank under Bank Act via Governor-in-Council order on MOF recommendation; Minister must consult OSFI, BOC, and CDIC.
- In recapitalizations MOF can set terms and conditions including limits to executive compensation, appointment/removal of executives, prohibition of dividends, and requirements on lending practices.
- Systemic risk override:
  - Governor in Council, on MOF recommendation, can exempt CDIC from the requirement to minimize its exposure to loss where adherence might adversely affect financial stability.
  - Such overrides exist in other countries (U.S., Japan, New Zealand, Hong Kong).
  - In concentrated banking systems like Canada, such an override may be more problematic.
  - Recommended mitigants:
    - Continue developing resolution options that credibly place burden on private sector;
    - Consider introducing more clarity and possibly a stricter test for conditions under which systemic risk overrides would operate.

### Orderly and effective resolution: CDIC role and governance
- CDIC dual role: resolution authority and deposit insurance agency for federally registered deposit-taking institutions.
- CDIC Act mandates:
  1. Provide insurance against loss of part or all of deposits;
  2. Promote and otherwise contribute to stability of the financial system in Canada;
  3. Pursue the above objectives for the benefit of depositors in a manner that will minimize the Corporation’s exposure to loss.
- CDIC emphasizes preemptive action that complements OSFI prudential supervision.

### CDIC governance and operational independence
- Governance:
  - CDIC governed by CDIC Act and certain obligations under the Financial Administration Act.
  - Board composed of five members from other federal safety net participants and five directors plus a Chairperson from private sector.
  - Directors subject to disqualification criteria (including prohibition from being active bankers) and to the Conflicts of Interest Act.
  - Chairperson must be “a person of proven financial ability”; no specified term for the Chairperson who can be dismissed “for cause” by Governor in Council.
  - Private sector directors appointed for terms not exceeding four years; can be dismissed by federal Cabinet without cause.
  - CDIC publishes an annual report and quarterly financial statements and is accountable to Parliament.
- Operational independence limitations:
  - Key resolution tools, including Financial Institution Restructuring Provisions (FIRP), can only be triggered by an order of the Governor in Council following MOF recommendation.
  - CDIC retains discretion only for assisted transactions and open bank assistance (OBA); use of these should be limited to avoid moral hazard.
  - Governmental approval is required even for simple resolution actions that imply taking control and effecting a forced sale under FIRP—actions that are prerogatives of resolution authorities in many other countries.

### Resolution triggers, powers, and toolkit
- OSFI non-viability determination:
  - Generally the trigger for resolution (under FIRP and bridge bank tool) before insolvency.
  - OSFI’s determination of “non-viability” is flexible.
- CDIC actions:
  - CDIC can provide OBA and resolve a member via assisted purchase and assumption without a formal non-viability opinion, though such measures would be discussed in FISC.
- OSFI takeover powers:
  - OSFI can take control of assets and/or the institution itself but cannot take over shareholders’ powers (cannot force a merger or sale); takeover likely results in winding-up order.
- Table 4 (Triggers for Resolution and Winding-Up) — selected items:
  - Resolution triggers:
    - A. Non-viability determination by OSFI: indicators include excessive dependence on financial assistance; loss of depositor/public confidence; regulatory capital substantially deficient; failure or inability to pay liabilities as they become due; viability not restorable by Superintendent’s powers.
      - Process notes: OSFI provides bank reasonable time to make representations; OSFI reports to CDIC; CDIC initiates resolution under CDIC Act. Some tools require Governor in Council order on MOF recommendation.
    - B. Non-viability determination by CDIC when necessary to pursue CDIC mandate; decision by CDIC Board.
  - Winding-up (determination by OSFI) triggers:
    - failure or likeliness of failure to pay liabilities as they become due and payable;
    - assets not sufficient to give adequate protection to depositors and creditors;
    - assets not satisfactorily accounted for;
    - regulatory capital level reached or eroding in a manner detrimental to depositors/creditors;
    - failure to comply with an order to increase capital;
    - bank’s deposit insurance terminated by CDIC; or
    - any other state of affairs materially prejudicial to depositors, creditors, or owners of assets under administration.
  - Winding-up actions:
    - OSFI can take control, for a period exceeding 16 days, of the assets of the bank;
    - OSFI can take control of the bank;
    - Attorney General initiates winding-up under the Winding Up and Restructuring Act;
    - CDIC pays out deposits and can act as liquidator.

*Source: _cr1467 - 34.      A number of legal provisions create room for “constructive tensions” between the (PDF).*

### 49.      The resolution toolkit is vast and continues to be improved following the crisis. The full

### The resolution toolkit is vast and continues to be improved following the crisis.

### Resolution tools available to CDIC
- Full range of resolution tools can be utilized by CDIC, from purchase and assumption transactions to bridge banks.
- CDIC empowered to hold shares in its member institutions, subject to the MOF’s approval.
- When acting as a receiver, or in forced sale or bridge transactions, CDIC removes and replaces a failing institution’s board of directors and senior management and the powers of shareholders are suspended.
- 2012 legislative amendments strengthened provisions related to temporary stays on early termination rights of counterparties in the context of a bridge bank resolution, although some exemptions apply. The power to terminate contracts is indirect.

- Tabled resolution tools (summary of circumstances, triggers, decision making):
  - Assisted Purchase and Assumption or Whole Bank Acquisition
    - Use: when an acquirer is available and shareholders agree but CDIC financial assistance is needed.
    - Trigger: Voluntary agreement of shareholders.
    - Decision making: CDIC decision; CDIC Board for financial assistance; OSFI approval of transaction for acquiring bank.
  - Forced sale (shares or assets) under FIRP
    - Use: CDIC can take control to complete restructuring (sale of shares/subordinated debt, amalgamation, sale of assets/liabilities).
    - Trigger: OSFI “non-viability” determination.
    - Decision making: Governor in Council on recommendation of the Minister of Finance.
    - Note: In an Asset FIRP CDIC can temporarily take possession and control of assets, sell assets, arrange for liabilities to be assumed and carry on the business; powers and duties of directors and officers suspended. In a Share FIRP CDIC would have temporary share ownership (e.g. 60 days, renewable up to three times for a total of 180 days) and control to transfer the shares to an acquirer; could include restructuring, removal of problem assets, replacement of management.
  - Bridge bank
    - Use: Governor–in-Council order to incorporate a bridge bank; CDIC appointed receiver and decides assets/liabilities to pass to CDIC-owned bridge bank (including all insured deposits at a minimum); assets not acquired remain in failed bank placed into liquidation.
    - Trigger: OSFI “non-viability” determination.
    - Decision making: Governor in Council on recommendation of the Minister of Finance.
    - Note: Creditors and shareholders of the failed institution whose claims are not assumed by the bridge bank retain a claim in insolvency proceedings and would be entitled to receive no less than they would recover in conventional liquidation. The bridge bank can operate for 2 years (with possible 1-year extensions for a total of up to 5 years) and would be terminated through a sale of assets / shares or through an orderly wind-down of business.
  - Open bank assistance
    - Use: Not a primary resolution tool; last resort and in conjunction with another tool where failure/closure is undesirable, no acquirer has emerged, and bridging is not possible; assistance can range from a one-time loan to a blanket guarantee; CDIC can acquire problem assets, make a deposit or facilitate a managed liquidation.
    - Decision making: CDIC decision; CDIC Board.
  - Liquidation and payout
    - Use: Member institution wound-up under court-supervised liquidation and CDIC pays insured deposits.
    - Trigger: OSFI’s application for a winding-up order.
    - Decision making: Court.
  - Agency agreement
    - Use: Managed liquidation by a third party acting as agent of CDIC to dispose assets and honour deposits/liabilities as they come due.
    - Trigger: OSFI’s application for a winding-up order (in agreement with the bank).
    - Decision making: Court.

### Operational capacity
- CDIC has dedicated teams for collecting/reviewing member information, analyzing and monitoring risk, preparing for small and large bank resolutions and implementing resolution powers.
- The Complex Resolution Division focuses on:
  - development and maintenance of resolution plans for large complex member institutions;
  - enhancing CDIC preparedness for large bank resolution (coordination of communication, funding and capacity enhancements; development of strategies based on CDIC’s resolution tools and powers);
  - advancing crisis management co-ordination activities with international resolution counterparts and liaising with domestic resolution entities impacted by resolution activities.
- CDIC has prepared extensive failure resolution guidelines, including:
  - a comprehensive bridge bank manual;
  - step-by-step process for forced sales;
  - template agreements for member institutions based on past domestic failures and international experiences.
- CDIC is developing a communication plan specific to large banks and implementing stand-by arrangements for D-SIB resolution.
- CDIC has completed a first iteration of resolution plans for each Canadian D-SIB and plans to extend the process to a foreign bank subsidiary.

### Experience with bank failures and liquidation practice
- No bank failures since 1996.
- Historical CDIC activity:
  - CDIC dealt with 43 bank failures, involving about Can$26 billion of insured deposits.
  - 30 failures with insured deposits of less the Can$0.5 billion.
  - The largest failure had insured deposits close to Can$10 billion.
  - About three quarters of failed banks have been liquidated and CDIC reimbursed insured deposits.
  - In one quarter of cases CDIC facilitated assisted transactions.
  - One instance where CDIC provided temporary liquidity assistance to a former member (considered exceptional).
- Liquidation process:
  - Liquidation is under the Winding-up and Restructuring Act and is court-supervised.
  - CDIC typically nominates experienced liquidators as court-appointed liquidators and recommends adjustments as liquidation proceeds.
  - Liquidator has broad powers including challenging preferential transactions before liquidation.
  - CDIC ensures depositors receive prompt settlement of their full entitlement for insured deposits.
  - Liquidator may consult with OSFI regarding exercise of its powers.
- Creditor ranking on insolvency (as provided in the source):
  1) Secured creditors [s. 79 WURA];
  2) Liquidator’s fees and costs [s. 94 WURA];
  3) Priority payment items [s. 31 CPA];
  4) Amounts owing to the Federal Crown (except if under 8 or 9 below) [s. 369 Bank Act];
  5) Amounts owing to any Provincial Crown (except if under 8 or 9 below) [s. 369 Bank Act];
  6) Arrears of wages [s. 72 WURA];
  7) Ordinary unsecured claims – including deposits [s. 369 Bank Act];
  8) Subordinated debts [s. 369 Bank Act];
  9) Fines and penalties [s. 369 Bank Act];
  10) Shareholders [s. 95 WURA].
- Loans made by CDIC (Crown claims) have a higher priority than general unsecured creditors and shareholders in liquidation.
- Past liquidations average period has varied between 10 to 15 years; bulk of liquidation typically occurs in the first two to three years.
- Example: One insurance company (Union of Canada) was liquidated under WURA over about a one year period (February 2012–May 2013).

### Collaboration with other federal safety net participants
- Institutionalized “Strategic Alliance Agreement” between CDIC and OSFI for cooperation and information sharing.
- CDIC interacts with other federal safety net providers via participation in FISC and SAC Committees.
- Broad composition of CDIC board reinforces coherence in decision making and actions.

### Recommendations for the resolution framework

- Strengthen the operational independence of CDIC
  - Rationale: Key Attributes require resolution authority to enjoy adequate operational independence.
  - Recommendation: Reduce requirement for government approval for routine resolution actions (e.g., purchase and assumptions for small banks or forced sale actions under FIRP) to avoid multi-layered approval processes (CDIC board, MOF recommendation, Governor in Council).
  - Specific: Provide CDIC more legal powers to activate resolution actions, particularly those related to the FIRP.

- Enhance the scope of CDIC’s powers in resolution
  - Recommendation: Extend resolution powers to relevant non-regulated entities within a group, including holding companies of a member institution and non-regulated operational entities significant to group financial activities.
  - Additional improvements in line with FSB Key Attributes to consider:
    - CDIC should have an explicit power to terminate contracts.
    - CDIC should have the power to carry out bail-in within resolution. Note: the government has already committed to implement a bail-in regime for D-SIBs.
    - CDIC should have a broader power of automatic temporary stay on early termination rights applicable to eligible financial contracts (EFCs) in a resolution, including those effected under a FIRP tool, while considering implications for central counterparties and other counterparties.

- Develop cooperation mechanisms in resolution with non-bank resolution authorities
  - Rationale: Given Canadian financial groups structure (banks dominate) CDIC likely to act as lead resolution authority in group-wide resolution.
  - Recommendation: Establish a more coordinated process for resolution of banking groups with other resolution authorities (CDIC, OSFI, relevant provincial supervisors).

- Work on mitigating moral hazard risks
  - Recommendation: Adopt a stricter loss minimization test that:
    1) considers only the cost of the payout of the failure of the bank and not the impact on other banks, unless the failure would severely endanger financial stability;
    2) shifts resolution costs to private creditors to a more substantial degree.
  - Open Bank Assistance (OBA):
    - CDIC should clearly signal that OBA is only an exceptional measure for systemic threats.
    - If CDIC provides funding beyond least cost assistance (e.g., loans to purchasers, capital injections), restrict such assistance to situations with threats to financial stability and require high-level involvement of other safety net providers, including government.
    - Require a systemic impact analysis to inform high-level decisions where OBA is considered.
    - Any OBA should be capped as a percent of CDIC’s cash (or cash equivalent) resources.
    - Advisable to eliminate the possibility for open bank assistance from the Guide to Intervention to signal deployment only in exceptional circumstances.

- Introduce some form of depositor preference
  - Observation: Currently no depositor preference; depositors ranked on same level as unsecured creditors, reducing recoveries for depositors and CDIC in liquidation.
  - Rationale: Depositor preference would likely reduce costs to depositors, CDIC, and government and could assist in applying resolution tools such as bridge institutions by allowing clearer carving out of depositors as a class from other creditors.

*Source: _cr1467 (IMF).*

### 65.      The authorities should consider introducing some form of depositor preference.

### 65.      The authorities should consider introducing some form of depositor preference.

### Depositor preference: rationale and design considerations
- Depositor preference mitigates the risk of depositor runs and can improve recoveries for depositors, the deposit insurance agencies, and the government in the case of a bank’s failure.
- In the context of introducing bail-in powers, depositor preference is important because unsecured creditors will need to be written-down or have their debts converted into equity; if depositors are ranked equally with unsecured creditors, a bail-in cannot be effected without discriminating within the class of creditors.
- Depositor preference could be tailored to take different forms, but national depositor preference should be avoided as it could hamper cross-border resolution.
- Design should be based on rigorous analysis of desired impact and interaction with other features of the existing bank operating and resolution framework (Appendix II).

### D. Federal Deposit Insurance — CDIC overview and recent developments
- CDIC has worked proactively to improve its deposit insurance function; there have been no deposit payouts since the failure of Security Home Mortgage Corporation in 1996.
- Modifications to the CDIC Act, by-laws, processes, and guidelines have improved deposit insurance capacity, including faster reimbursement of depositors and rebuilding ex-ante funding.
- CDIC acts as both deposit insurer and resolution authority for member institutions and is ensuring operational cohesion between deposit insurance and resolution functions.

### General features of CDIC coverage
- Deposit insurance covers eligible deposits in member institutions.
- Maximum coverage: Can $100,000 (principal and interest combined) per depositor, per institution, and per category of deposits.
- Eligibility conditions: deposits must be made in Canada and in Canadian currency; term deposits must be repayable no later than five years after the date of deposit.
- Seven categories of deposits can be insured separately by the CDIC: in one name; in more than one name (joint deposits); in trust for another person; in Registered Retirement Savings Plans; in Registered Retirement Income Funds; in paying realty taxes on mortgage property; in tax-free savings accounts.
- No exclusions currently apply for certain categories of depositors (e.g. deposits made by directors of the bank, managers, and related parties) — the report notes such exclusions would be advisable to prevent moral hazard.
- Current deposit limit estimated to fully cover about 97 percent of the deposits of individuals and about 31 percent of the value of deposits in the system.
- Current data collection does not allow clear determination of specific coverage of categories of other small-scale depositors (i.e. small and medium-sized enterprises and corporates).
- The definition of eligible deposits under the CDIC Act is relatively difficult for the public to understand; ambiguities linger regarding eligibility of some complex deposit products.
- CDIC has issued Information Bulletins and regularly reviews relevant by-laws (e.g. Joint and Trust Disclosure) to improve clarity.

### Funding mechanisms and coverage
- CDIC is ex-ante funded and reviews its target funding level regularly.
- Current funding: Can$2.6 billion representing an estimated 39 basis points of insured deposits.
- Existing resources sufficient to repay insured deposits in all small banks individually, or concurrently in a number of small banks, but not sufficient to cover insured deposits in a medium-sized institution.
- CDIC plans to achieve a minimum target ex ante funding of 100 basis points of insured deposits (currently equivalent to Can$6.5 billion) over the coming ten years.
- CDIC may also borrow from the federal government or in the capital markets, or a combination of the two.
- Current borrowing limit: Can$19 billion, which grows in step with the insured deposits; combined with ex-ante funding this would ensure a coverage of 325 bps of insured deposits.
- Beyond the line with the government, CDIC could seek additional funding through a Parliamentary Appropriation Act, though the process would be potentially protracted and requires approval of Parliament.
- CDIC utilizes a differential premiums structure with four premium categories set in the Differential Premiums Bylaw Manual.
- Premiums are limited to 33 1/3 basis points of insured deposits and currently average approximately 3 basis points of insured deposits.
- Repayment of ex post liquidity funding would be through recoveries from failed member estates and annual premiums levied on member institutions.

### Investment policy and risk management
- CDIC invests almost exclusively in government securities and government-backed securities; it does not invest in its member institutions.
- Financial risk is monitored by a risk management unit and an asset liability management committee.
- The CDIC Board undertakes a comprehensive review of its financial risks (treasury) policies every three years.

### Corrective actions and supervisory interaction
- CDIC conducts regular risk assessments of its members and monitors financial performance; it relies on OSFI and provincial supervisors for annual examinations but conducts special/preparatory examinations when necessary.
- CDIC has the power to assess deposit insurance premium surcharges after consultation with OSFI or the provincial supervisor; there have been no instances where CDIC has charged a premium surcharge under the Premiums Surcharge By-law to date.
- CDIC can terminate deposit insurance (Section 30 Report) for evidence of unsound standards of prudent business financial practices; a Section 30 report is typically preceded by a special examination and is provided to the MOF (or provincial Minister).
- The MOF has power to override a termination decision on public interest grounds.
- Termination of deposit insurance triggers taking control of the supervised institution by OSFI. Existing eligible deposits remain insured for two years from termination date (or until maturity date for longer term deposits). CDIC has discretion to make an immediate deposit insurance payment for all eligible deposits.
- Historically, CDIC has terminated deposit insurance for three member institutions via the Section 30 process and immediately reimbursed deposits in all three cases.

### Reimbursement mechanics and IT readiness
- CDIC deposit repayment is generally triggered by OSFI’s actions; taking control by OSFI typically triggers payment of insured deposits.
- CDIC may also make payments if the member is unable to make any payment because of a court order or action by a supervisory/regulatory body.
- CDIC’s Data and System Requirements By-law came into effect January 1, 2011; member institutions are required to implement capabilities to support faster insurance determinations.
- CDIC insurance determination rules calculate payments based on a depositor view of their account holding (equivalent to the single customer view).
- Current compliance: 96 percent of member institutions complied within the two and half year implementation period; the remaining members plan to be compliant within the next year.
- Where deposit records are presented in a usable format, CDIC can make a payment available to depositors in five days or less, as confirmed by recent payout simulations.
- Exceptions to five-day payment: tax-efficient deposits and trust deposits (require third-party information/approval).

### Activities to increase public awareness
- CDIC and member institutions conduct extensive public awareness activities using multiple channels (corporate website, toll-free call centre, media, paid advertising, speeches, etc.).
- Internal surveys show CDIC consistently exceeds its public awareness targets.
- Under CDIC’s Information By-law, the CDIC decal must be posted on the door of each retail branch of each CDIC member institution and on each member’s website; branches must provide customers with the CDIC “Protecting Your Deposits” brochure.

### Recommendations for improving the deposit insurance function
- Increase ex-ante funding of CDIC: the ex-ante funding should continue to be increased; to achieve the targeted minimum coverage of 100 basis points of the insured deposits (from the current 39 basis points) within a reasonable timeframe, an increase of the premiums paid by financial institutions will be necessary.
- Enhanced data collection on depositors: broaden information on depositor profiles to ensure coverage limit and target ex-ante financing strike the right balance between depositor protection, financial stability, and market discipline.
  - Aim: protect the majority of depositors (small-scale individuals and corporate depositors) while keeping a meaningful percentage of the value of deposits uninsured to preserve market discipline among large-scale depositors.
  - Certain categories of deposits (e.g. deposits made by directors, managers, and related parties) should be excluded from coverage to help prevent moral hazard.
- Simplify eligibility rules for complex deposit products: clarify which products are insured and enable CDIC to quickly determine eligibility to effect payouts; pending efforts to clarify the definition of deposits should continue and be transparently communicated to the public.

### Improving the resolvability of D-SIFIs — Recovery and Resolution Planning
- Canada has established a more stringent regime applicable to D-SIBs: the six federally-designated D-SIBs will be subject to continued supervisory intensity (including recovery and resolution planning), enhanced disclosure, and a one per cent risk weighted capital surcharge (by January 1, 2016).
- Authorities have stated their intention to introduce a bail-in tool to support resolution of D-SIBs.
- Desjardins (Québec-headquartered group) has been designated as a D-SIFI (June 2013) by the provincial supervisor.
- Recovery and resolution planning experience:
  - Recovery and resolution plan pilots began in 2010; recovery plans have been prepared by the six largest domestic banks since 2011.
  - Recovery planning for two large insurance companies is at its second iteration.
  - CDIC prepared a first generation of resolution plans in December 2012; plans exist to extend recovery and resolution planning to a larger spectrum of institutions.
  - Québec supervisor AMF announced Desjardins will be subject to recovery and resolution planning.
- Inter-agency cooperation:
  - OSFI and CDIC cooperate closely in preparing RRPs and, where necessary, with relevant foreign authorities.
  - OSFI provides institutions’ recovery plans and other firm information to CDIC; other domestic authorities (BOC, DOF) engage through RRP working groups, information sharing, and Crisis Management Groups (CMGs).
  - CDIC shares information with OSFI and has legislative authority under the CDIC Act to share member institution-specific information obtained from OSFI with relevant foreign authorities, subject to agreement by the Superintendent and the CDIC Board.
- Box summary (Canada’s experience with RRPs):
  - Recovery Plans: implemented and approved by firm senior management; guided by OSFI’s industry-wide recommendations, Recovery Plan Principles, and technical notes; OSFI analyzes submissions and provides feedback; discussions facilitated with CDIC, BOC, DOF and relevant U.S. and U.K. authorities within annual CMGs.
  - Iterative process: scope and depth increased over iterations; firms have become more receptive and are integrating recovery plans into strategic business and risk management decision-making.
  - Resolution Plans: prepared by resolution authorities based on firm-provided information; CDIC’s 2012 work focused on critical functions and continuity in resolution and separability challenges; 2013 work expanded to consider resolution challenges in greater detail.
  - Engagement and exercises: banks engaged in analyzing resolution challenges and identifying mitigating strategies; CDIC planned an annual tabletop exercise of a large bank failure beginning in 2014 to inform further improvements.

*Source: Excerpt from provided IMF document.*

### 87.      A few elements would further reinforce the implementation of the RRP framework:

### _cr1467 - 87.      A few elements would further reinforce the implementation of the RRP framework:

### Elements to reinforce RRP implementation
- First: create a legal requirement for the formulation of RRPs for all Canadian financial firms that are of systemic importance.
  - The requirement should apply to deposit takers, insurance companies, and financial market infrastructures which could be systemically significant or critical if they fail.
- Second: introduce resolvability assessments as an addition to the domestic resolution framework.
  - Resolvability assessments, as envisaged in the Key Attributes, are designed to evaluate the feasibility of resolution strategies for the institution and their credibility in light of the likely impact of the firm’s failure on the financial system and overall economy.
  - If a firm is assessed to be insufficiently resolvable, the firm should be encouraged through the supervisory process to take voluntary measures to improve its resolvability.
- Third: grant authorities legal powers to impose changes to firms’ structures to improve resolvability.
  - Currently, supervisory and resolution authorities do not have direct power to require a bank to restructure with the purpose of improving resolvability.
  - The resolution legal framework should provide clear powers to improve resolvability by requiring changes to firms’ business practices, structures or organization, justifiable under the legal framework on public interest grounds and taking into account the effect on the soundness and stability of the on-going (domestic and foreign) operations of the firm.
- Fourth: better articulate recovery and resolution planning across sectors.
  - OSFI’s supervisory mandate in respect to banks and insurance companies facilitates coordination of recovery and resolution planning of groups involved in both sectors.
  - Some of the largest securities firms are subsidiaries of major Canadian banks and play important roles in the securities markets, which are provincially regulated.
  - A comprehensive protocol to deal with the insolvency of large investment dealers is needed, of which OSFI and relevant provincial supervisors should be an integral part.

### Resolvability assessment specifics (Key Attributes references)
- Key Attribute 10 suggests authorities assess:
  - (i) the extent to which critical financial services, and payment, clearing and settlement functions can continue to be performed;
  - (ii) the nature and extent of intra-group exposures and their impact on resolution if they need to be unwound;
  - (iii) the capacity of the firm to deliver sufficiently detailed accurate and timely information to support resolution; and
  - (iv) the robustness of cross-border cooperation and information sharing arrangements.
- The CDIC is in the process of developing a framework for conducting resolvability assessments, which should be finalized in early 2014.

### The Non-Viability Contingent Capital (NVCC) Framework
- NVCC context and incorporation:
  - OSFI’s Non-Viability Contingent Capital (NVCC) framework has been incorporated into OSFI’s Capital Adequacy Requirements (CAR) Guideline (section 2.2).
  - The guideline specifies that effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments (i.e. preferred stock or subordinated debt) issued by an institution must comply with the NVCC requirements.
- NVCC purpose and triggers:
  - The NVCC is a gone-concern contingent instrument intended to ensure that investors in non-common Tier 1 and Tier 2 regulatory capital instruments bear losses before taxpayers where the government determines it is in the public interest to rescue a non-viable bank, based on clearly specified trigger events.
  - The NVCC triggers are described as very late and very remote; Canadian authorities confirm they would only elect to trigger the NVCC where there is a high level of confidence that the conversion accompanied by additional measures would restore the viability of the failed financial institution.
  - The NVCC instruments are not contingent convertible instruments (Co-Cos); the key distinction is timing and nature of the NVCC triggers, which can be exercised only at the discretion of the authorities at the point of non-viability.
- NVCC as one option within resolution toolkit:
  - Decision to maintain an institution as a going concern will be informed by OSFI’s interaction with the FISC and on the CDIC Board of Directors.
  - Canadian authorities retain full discretion not to trigger NVCC notwithstanding a determination by the Superintendent that an institution ceased, or is about to cease, to be viable.
  - Other resolution options, including creation of a bridge bank, could be used as an alternative to NVCC or in conjunction with or following an NVCC conversion.
- Observations on issuance:
  - To the date when the FSAP was conducted, none of the major banks had issued a de novo NVCC instrument, although the first issuance was expected soon.
  - CIBC amended via a deed poll the terms of three series of its preferred shares to make them NVCC-compliant.
  - A number of smaller, closely-held banks have issued NVCC or modified instruments to make them NVCC-compliant.
  - For unlisted or intra-group issuances, OSFI has permitted alternatives to the market-based conversion required under the CAR Guideline.
  - Under the CAR Guideline, each instrument must have a formula governing the conversion mechanism that references the market value of equity when OSFI determines the institution is no longer available.
  - OSFI expects good demand from institutional fixed income and other investors for NVCC.

### Bail-in framework
- Purpose and scope:
  - Canadian authorities are preparing a bail-in regime applicable to systemically important banks.
  - Bail-in supports resolution by providing sources of capital when the institution is unable to raise capital through private markets and ensures that major creditors, equity holders and other providers of regulatory capital face the risk of loss.
  - The DOF is working closely with relevant authorities to prepare the legal and operational regime for bail-in.
- International context:
  - The Key Attributes list bail-in as one of the instruments effective resolution regimes should have available.
  - Bail-in should be deployed in conjunction with other resolution powers (removal of problem assets, replacement of management, preparation of a viable business plan, etc).
  - The U.S. introduced bail-in power in the 2010 Dodd-Frank Act; the U.K. bail-in powers were proposed by the Vickers Report; the European Union is preparing a recovery and resolution directive framing a regime for statutory bail-in.
- Design considerations:
  - The bail-in regime should be articulated to work alongside the existing NVCC framework and other capital rules; triggers for bail-in power should be consistent with those used for other resolution tools.
  - The legal framework needs to establish an appropriate balance between rights of private stakeholders and public policy interest in preserving financial stability.
- Financial-stability interactions and incentives:
  - Introduction of bail-in could increase funding costs for unsecured debt and trigger shifts in banks’ liability structure towards secured funding outside the scope of bail-in.
  - Arbitrage incentives can be countered by other regulatory measures including the Basel III Net Stable Funding Ratio and asset encumbrance limits.
  - Consider requiring D-SIBs to hold a minimum amount of capital instruments and senior, unsecured debt in conjunction with the bail-in regime to ensure a minimum amount of gone-concern loss-absorption capacity.
  - When deploying bail-in, authorities should be mindful of cross-sector contagion in crisis times, for example insurance companies as major investors in banks’ debt instruments.

### Provincial arrangements for crisis management — Characteristics of provincial safety nets
- Provincial safety nets are operationally independent from the federal safety net.
  - Designed to tackle financial stability concerns related to provincially regulated deposit taking institutions, which have small operations generally limited to serving members of local communities (credit cooperatives) or certain professional affiliations (credit unions).
  - Provinces are equipped with classical safety net elements: financial supervision, deposit insurance—often empowered to offer liquidity and solvency support—and bank resolution.
- High heterogeneity across provincial arrangements:
  - Responsibilities are spread between distinct provincial supervisory authorities, local governments, and separate deposit insurance schemes (DIS).
  - In smaller provinces, supervision of deposit taking institutions is allocated to local governments; larger provinces (Québec and Ontario) have autonomous supervisory agencies.
  - Each province has its own deposit insurance scheme (DIS); resolution and liquidation of deposit taking institutions handled according to provincially-applicable laws.

### Characteristics and concerns about provincial deposit insurance systems
- Heterogeneous insurance coverage:
  - The ten DISs have different levels of coverage, ranging from Can$ 100,000 (similar to coverage offered by CDIC) to unlimited deposit insurance in four of the ten provinces.
  - Variation raises level playing field concerns relative to federally chartered deposit taking institutions.
  - Unlimited insurance coverage creates moral hazard risks.
- Funding mechanisms and resolution powers:
  - Funding mechanisms are uneven; some provinces remain reliant on ex-post financing (New Brunswick).
  - It remains unclear whether provincial governments’ backstopping is explicitly provided in all cases.
  - Evidence suggests funding of some DISs needs improvement; in some cases, resolution powers are incomplete.
- Specific data points (reference date end 2012 or most recent publicly available):
  - Autorité des Marchés Financiers (Quebec) — Deposit Institutions Covered: 421; Coverage Limit: Can$ 100,000 per person per institution; Coverage Ratio: 0.58; Target Ratio: No target; Funding: Ex-ante; Act as Receiver: Yes; Governed by: Bankruptcy/Insolvency laws and Deposit Insurance Act.
  - Credit Union Deposit Guarantee Corporation (Alberta) — Deposit Institutions Covered: 34; Coverage Limit: No limit; Coverage Ratio: 11.5; Target Ratio: Ex-ante; Act as Receiver: Yes; Governed by: Bankruptcy/Insolvency laws and special resolution regime.
  - Credit Union Deposit Guarantee Corporation (Manitoba) — Deposit Institutions Covered: 38; Coverage Limit: No limit (including foreign currency deposits); Coverage Ratio: 1; Target Ratio: No target; Funding: Ex-ante; Act as Receiver: Yes; Governed by: The Manitoba Credit Unions and Caisses Populaires Act.
  - Credit Union Deposit Insurance Corporation (British Columbia) — Deposit Institutions Covered: 45; Coverage Limit: No limit; Coverage Ratio: 0.8; Target Ratio: 0.8; Funding: Ex-ante; Act as Receiver: Yes; Governed by: Financial Institutions Act.
  - Deposit Insurance Corporation (Ontario) — Deposit Institutions Covered: 152; Coverage Limit: Can$ 100,000; Coverage Ratio: 0.6; Target Ratio: Under review; Funding: Ex-ante; Act as Receiver: Yes; Governed by: Credit Unions and Caisses Populaires Act.
  - Credit Unions and Caisses Populaires (New Brunswick) — Deposit Institutions Covered: 34; Coverage Limit: Can$ 250,000 per member; Coverage Ratio: N/A; Target Ratio: N/A; Funding: Primarily Ex-Post; Act as Receiver: No; Governed by: Bankruptcy Insolvency laws.
  - Credit Union Deposit Guarantee Corporation (Newfoundland and Labrador) — Deposit Institutions Covered: 10; Coverage Limit: Can$ 250,000 per type of deposit; Coverage Ratio: 0.6; Target Ratio: N/A; Funding: Ex-ante; Act as Receiver: Yes; Governed by: Credit Union Act.
  - Deposit Insurance Corporation (Nova Scotia) — Deposit Institutions Covered: 31; Coverage Limit: Can$ 250,000; Coverage Ratio: N/A; Target Ratio: N/A; Funding: Ex-ante; Act as Receiver: Yes; Governed by: Other.
  - Credit Union Deposit Insurance Corporation (Prince Edward Island) — Deposit Institutions Covered: 10; Coverage Limit: CAD $125,000; Coverage Ratio: 1.5*; Target Ratio: N/A; Funding: Ex-ante; Act as Receiver: Yes; Governed by: Other.
  - Credit Union Deposit Guarantee Corporation (Saskatchewan) — Deposit Institutions Covered: 61; Coverage Limit: No limit; Coverage Ratio: 1.58; Target Ratio: 1.6; Funding: Ex-ante; Act as Receiver: Yes; Governed by: The Credit Union Act.
  - Source for table: FSB, "Thematic Review on Deposit Insurance Systems, Peer Review Report"; various provincial authorities websites; staff estimates. * based on best available information.

### Québec: deeper analysis of provincial crisis management arrangements
- Québec’s provincial financial system is the largest in Canada and hosts Desjardins, the country’s sixth most important financial group.
- The Autorité des Marchés Financiers (AMF) plays multiple roles: supervisor, deposit insurance agency, and resolution authority.
  - AMF powers and responsibilities are enshrined in the Act on Financial Services Cooperatives (AFSC), the Act on Deposit Insurance (ADI), and in the Act on the AMF.
- Reforms and measures:
  - The AMF has engaged in reforms aimed at enhancing supervisory capacity and deposit insurance function, framed in the agency’s Work Plan for 2012–2017.
  - The AMF announced that the systemically important financial institution — Desjardins Group — will be subject to additional capitalization and disclosure requirements, as well as enhanced supervision.

*International Monetary Fund — CANADA, FSAP excerpts*

### 100.      From a crisis management perspective, the credit cooperatives networks in Québec

### _cr1467 - 100.      From a crisis management perspective, the credit cooperatives networks in Québec

### Credit cooperatives networks in Québec — internal crisis-management features
- Networks are organized under the umbrella of a Federation which acts as an internal supervisory body with broad corrective action powers; the federation becomes the first layer of supervision and an important partner of the AMF in performing the overall oversight.
- Intra-network support mechanisms:
  - “Security funds” are fed by contributions of the individual credit cooperatives into a separate legal entity.
  - “Liquidity funds” are set up at the individual cooperative level, but can be mobilized across the network should security funds be exhausted.
- Current notification practice: the Federation is required to notify the AMF within ten days about corrective actions imposed on individual credit cooperatives.

### Autorité des marchés financiers (AMF) — intervention powers and deposit insurance (DI) arrangements
- AMF intervention and resolution powers:
  - Can order a credit cooperative to cease a course of action or to implement specified measures (article 567 of the AFSC).
  - Can suspend the powers of the board of directors and appoint a provisional administrator (article 403 of the AFSC).
  - Can act as a receiver (article 40 of ADI), but only upon receiving the approval of the Superior Court (article 19.1 of the Act on the AMF).
  - Can suspend or cancel the permit of a supervised institution (article 31 of ADI).
  - Access to supervisory information is broad (article 556 of the AFSC), although information received on federally chartered institutions which are part of the same group is limited.
  - Legislation provides for rather discretionary open bank assistance (OBA) powers; authorities confirm such prerogatives have not been used in the past, though predecessor authorities have provided OBA historically. Use of OBA is strongly discouraged except when needed to mitigate systemic risks.
- AMF deposit insurance features and resources:
  - Insured amount per depositor: Can$100,000, covering around 95 percent of depositors and 65 percent of the deposits of participating institutions.
  - AMF has an ex-ante financing system with a uniform premium system; plans to introduce differentiated contributions.
  - At March 31, 2012 the net resources of AMF for deposit insurance purposes were Can$505 million (equivalent to 0.58 percent of insured deposits).
  - AMF has unrestricted borrowing capacity from the Government of Québec.

### Recommendations to improve AMF early intervention, resolution, and DI functions
- Internal safeguards and federation-AMF interaction:
  - Shorten the Federation’s notification period to the AMF (current requirement: within ten days) to allow the AMF to react promptly to important developments affecting individual credit cooperatives.
  - Clarify legal obligations of security funds: current law stipulates they “can” provide support; it is unclear whether they are required to provide support when an individual credit cooperative is under stress. This is important because security funds (Can$757 million) are larger than the funds available to AMF to reimburse depositors.
- Strengthen AMF ex-ante funding and operational readiness:
  - Improve AMF ex-ante funding and finalize the process of deciding on a long-term capitalization target.
  - Improve governance of the deposit insurance function in line with the IADI Core Principles.
  - Introduce a single customer view recordkeeping to enhance capacity to ensure a prompt depositor repayment (i.e. five to seven days); AMF is closely following CDIC’s steps on this.
- Establish clear crisis intervention policies and procedures:
  - Document policies and operational procedures to be executed in a crisis, including clear conditions and steps for activation of intra-network support, AMF intervention, and recourse to the federal safety net if necessary.
  - Review and update cooperation arrangements with relevant federal authorities as a prerequisite for federal recourse.
  - Periodically test the overall crisis management approach through crisis simulation exercises and improve as needed.

### Provincial-federal safety net interaction — practice and legal links
- Local handling vs. federal access:
  - Financial problems are handled locally in the first instance; provincial support has been used (example: New Brunswick support package of Can$ 60 million in 2007 for Shippagan Credit Cooperative, with Can$ 40 million used to recapitalize the institution).
  - Historical example: provincial deposit insurance scheme in Québec entered a loan agreement with the CDIC in 1981 to provide liquidity support; the liquidity line was partly used and repaid quickly.
- Crisis responses during the recent financial crisis:
  - Federal and provincial fiscal stimulus measures were deployed.
  - One province introduced full deposit insurance coverage (British Columbia).
  - In late 2008, the Caisse Centrale Desjardins (provincially incorporated) was provided the ability to access the Canadian Lenders Assurance Facility based on a Government of Québec guarantee; the facility was never accessed.
- Points of interconnection and cooperation needs:
  - Supervisory cooperation: some provincial groups are ultimate parents of entities under federal supervision; close cooperation and exchange of information between provincial and federal supervisors is needed, preferably formalized in MOUs.
  - Emergency Liquidity Assistance (ELA) from BOC:
    - BOC may provide ELA to a broad range of institutions, including provincially incorporated ones, under strict conditions related to eligibility (timely and accurate opinion from responsible supervisory authority regarding solvency) and collateral availability.
    - Provincial authorities should proactively engage with BOC on conditionality for federal ELA support and ensure adequate legal arrangements are in place for mobilizing guarantees at the network level to access ELA.
  - CDIC provincial links (summary):
    - CDIC and AMF share responsibilities for deposit insurance in Québec: deposits made in Québec with provincially incorporated members are insured by the AMF; deposits made outside Québec with such AMF members are insured by the CDIC.
    - Under section 17.1 of the CDIC Act, provincially incorporated financial institutions may apply for CDIC membership (currently, CDIC has one provincially-regulated CDIC member).
    - CDIC may, with federal Governor in Council approval, enter into an agreement with provincial authorities to restructure a financial institution (CDIC Act, Section 39.38).
    - CDIC can enter into liquidity arrangements with provincial deposit insurance schemes or other entities (Section 39 of the CDIC Act); Sections 482 and 483 of the Federal Cooperatives Credit Associations Act permit CDIC to make short-term (e.g. six month) loans for liquidity purposes to cooperative credit societies and provincially created corporations that provide or administer stabilization or liquidity funds, subject to conditions. Arrangements currently in place with British Columbia and Alberta; no funds have been advanced under these provisions to date.
- Federally regulated credit unions:
  - 2012 federal legislation allows credit unions to apply under the Bank Act to operate federally, becoming supervised by OSFI and members of CDIC. Transition deposit insurance arrangements are outlined in the law; to date no institution has applied to use the federal framework.

### Provincial and federal recommendations for crisis management and cooperation
- Provincial self-assessment and convergence:
  - Provincial authorities should undergo self-assessments of the adequacy of their safety nets; Québec AMF’s thorough analysis is a useful precedent.
  - Federal authorities could support provincial exercises by sharing experience and expertise.
  - Long-term objective: introduce more uniformity across operating standards of provincial safety nets and convergence towards best practices.
- Strengthen provincial crisis management capacity:
  - Ensure locally systemically important financial institutions are subject to enhanced oversight (in line with requirements for D-SIFIs), and implement recovery and resolution plans.
  - Reinforce provincial DISs to ensure adequate funding of insured deposit exposure, timely repayment of insured deposits, and sound governance arrangements.
  - Pursue a more uniform approach on coverage levels across provincial schemes to enhance credibility and transparency.
  - Establish clear policies, procedures, and operational guidance for crisis management and regularly test them, potentially in conjunction with federal authorities.
- Improve provincial–federal cooperation and information exchange:
  - Provincial authorities should increase frequency and comprehensiveness of supervisory information exchange with OSFI for groups spanning federal and provincial boundaries.
  - Update cooperation agreements with CDIC and step up communication with other federal authorities as necessary.
  - Enhanced cooperation should complement, not substitute, strengthened provincial safety nets to ensure self-sufficiency for provincial crises.
  - Promote more intense communication on financial stability issues at both provincial and federal levels to enable preemptive and comprehensive risk identification and proportionate responses (“comprehensiveness in prevention, proportionality in intervention”).
  - Organize crisis simulation exercises including relevant federal and provincial authorities.

### Cross-border coordination and exchange of information (summary)
- OSFI and CDIC information-sharing:
  - OSFI and CDIC can share member-specific confidential information with international counterparts where they are satisfied the information will be treated as confidential.
  - OSFI has MOUs with over 30 foreign supervisory authorities and routinely exchanges information with foreign home and host regulators.
  - CDIC has MOUs with the Instituto para la Protección al Ahorro Bancario (Mexico, 2012) and the Federal Deposit Insurance Corporation (United States, 2013) to strengthen cross-border cooperation on bank resolution and deposit insurance; CDIC also participates in supervisory colleges held by OSFI.
  - 2012 legislation allows CDIC to share certain institution-specific information it receives from OSFI with international counterparts when satisfied confidentiality will be respected and with agreement of the Superintendent and the CDIC Board.
- CDIC resolution scope and foreign branches:
  - CDIC resolution powers do not apply to branches of foreign banks; branches are prohibited from taking retail deposits (i.e. deposits of less than Can$150,000) and are not eligible to become CDIC members.
  - To take retail deposits, a foreign bank must establish a regulated subsidiary.
- Consideration of cross-border effects:
  - No legal obligation requires CDIC to take into account possible effects in other jurisdictions from its resolution actions, but Canadian authorities would, in practice, seek to understand and take into account impacts on foreign jurisdictions and discuss such impacts with foreign authorities where helpful.
  - Cross-border MOUs aid Canadian authorities in evaluating such impacts.
  - There are no laws discriminating against creditors based upon nationality or location.

*Source: _cr1467 - 100. From a crisis management perspective, the credit cooperatives networks in Québec (PDF chapter).*

### 115.      The practice of recovery and resolution planning has also reinforced the cooperation

### _cr1467 - 115.      The practice of recovery and resolution planning has also reinforced the cooperation

### Recovery and resolution planning — international cooperation and CMGs
- Since 2011, when the practice of submitting recovery plans was formally extended to all large banks, OSFI and CDIC have hosted annual and semi-annual crisis management groups (CMGs) with the participation of relevant foreign authorities (i.e. regulators from the U.K. and the U.S.).
- OSFI and CDIC have also attended one CMG as a host regulator with generally good experience.
- In the fall of 2013, CDIC, in collaboration with OSFI, hosted CMGs with all the six D-SIBs which focused on resolution related issues and involved the major cross-border supervisory agencies of each of the big six banks (i.e. the U.K. and U.S.).
- OSFI and CDIC participation in international policy debates:
  - OSFI and CDIC have played an active role representing Canada in FSB Cross Border Crisis Management (CBCM) initiatives, providing input on: recovery triggers; stress scenarios; operationalizing recovery and resolution plans; developing assessment methodology; and Peer Reviews.
  - OSFI participates in the CBCM work stream on loss absorbency capacity.
  - CDIC participates in three CBCM work streams on loss absorbing capacity, data templates (which it chairs), and funding in resolution.
  - CDIC is an active member in IADI and chairs the IADI regional committee of North America and the guidance group.
  - OSFI engages in other international crisis management work and outreach with relevant non-CMGs host authorities.

### Appendix I — OSFI’s intervention powers (selected powers and statutory references)
- Restricting the current activities of the bank:
  - Varying its Order to Commence and Carry on Business (section 54); issuing a Direction of Compliance (section 645); requiring an Undertaking related to an approval (section 973.02) or an investment (section 470); or entering into a Prudential Agreement (section 644.1).
- Imposing more stringent prudential limits and requirements:
  - Issuing a Capital/Liquidity Order (section 485); issuing a Direction of Compliance (section 645); requiring an Undertaking related to an approval (section 973.02) or an investment (section 470); entering into a Prudential Agreement (section 644.1); or placing a limit on the assets held by a bank (section 54.1).
- Withholding approval of new activities or acquisitions:
  - Preventing a bank from undertaking a new activity if it would require an approval to amend the bank’s license (section 54) or constitute an unsafe or unsound practice (section 645).
- Restricting or suspending payments to shareholders or share repurchases:
  - Restrict payment of dividends or share repurchases by way of a Capital Order (subsections 79(4) and 485(4)); or issue a Direction of Compliance (section 645) to direct the bank not to pay a dividend.
- Restricting asset transfers:
  - Denying approval where a bank seeks to acquire or transfer assets that comprise more than 10 per cent of the bank’s total assets (section 482); or issuing a Direction of Compliance (section 645); entering into a Prudential Agreement (section 644.1); or securing an Undertaking related to an approval (section 973.02) or an investment (section 470).
- Barring individuals from the banking sector:
  - Remove a director or senior officer if not qualified (section 647.1); veto the appointment of a director or senior officer of a “problem” bank if not qualified (section 647).
- Replacing or restricting powers of managers and Board members:
  - Revoke, suspend, or amend an approval; where the Superintendent takes control, powers of directors and officers are suspended and assumed by the Superintendent (section 649). OSFI cannot take decisions which require shareholder general assembly approval (i.e. a merger).
- Facilitating a takeover by or merger with a healthier institution:
  - Superintendent may encourage voluntary assumption of obligations by a substitute bank (typically at stage 3 or 4); where Superintendent takes control under section 648, must manage business with objective to protect depositors and may seek transfer to a healthier institution (section 649).
- Providing for interim management of the bank:
  - Section 649 provides that when taking control, powers of directors and officers are suspended and assumed by the Superintendent, who may appoint persons to assist in management.
- Revoking the banking license:
  - Pursuant to section 54, Superintendent may revoke a bank’s Order to Commerce and Carry on Business (a bank’s license).

### Appendix II — Considerations in introducing depositor preference (DP)
- Advantages:
  - Reducing resolution costs incurred by the deposit insurance scheme (DIS), and in a systemic crisis, by the State; via subrogation of insured depositors’ preferential rights to the DIS upon a payout or by giving the DIS an equivalent right upon financing of a resolution, allowing the DIS to maximize recoveries.
  - Where the DIS borrows from the State in a systemic crisis, the State could have recourse over the failed bank by enjoying the same preferential right, reducing public exposure.
  - Enhancing depositor confidence: DP (particularly combined with a DIS, funded ex-ante) can mitigate bank runs by providing higher recovery confidence.
  - Facilitating resolution: DP can reduce legal challenges from other unsecured creditors in transfers of deposits or bail-in; DP provides clear legal grounds for preferential treatment of depositors and simplifies DIS mandate performance, reducing potential claims under the “no creditor worse off” safeguard.
  - Maximizing market discipline: by increasing potential loss exposure of unsecured creditors, DP incentivizes closer monitoring and pricing of bank risk; banks relying on non-deposit unsecured funding must provide higher transparency and sufficient capital and available non-collateralized assets.
- Disadvantages:
  - Wholesale funding costs: tilting protection toward depositors increases potential loss exposure of other unsecured creditors, which could (i) increase unsecured funding costs or re-profiling (such as shortening maturities); and (ii) increase asset encumbrance on bank balance sheets.
- Approaches to DP (descriptive distinctions preserved as in source):
  - Insured depositor preference: ranks all unsecured creditors including depositors pari passu, but gives the DIGS preferred status in liquidation; preferential treatment of depositors in other resolution tools is not explicitly provided for; uninsured depositors rank equally with other senior unsecured creditors.
  - Depositor preference (DP): ranks all eligible deposits pari passu (with the DIS subrogated for insured depositors), but higher than other senior unsecured creditors; shares resolution costs equally between DIS and uninsured depositors.
  - Tiered depositor preference: prefers insured deposits (and the DIS) over uninsured deposits, but prefers both over other senior unsecured (bondholders); affords greater depositor protection while minimizing costs to the DIS.
- Note: Empirical evidence is mixed on whether the introduction of DP in the U.S. in 1993 reduced subsequent resolution costs for the FDIC, in part because of the lumpiness and heterogeneity of failures.

### Appendix III — Observations on the federal deposit guarantee scheme (selected Core Principles observations)
- Core Principle 1: Public Policy Objectives
  - CDIC Act sets two principal objectives: a. to provide insurance against the loss of part or all of deposits; and b. to promote and otherwise contribute to the stability of the financial system in Canada.
  - All financial sector legislation, including the CDIC Act, is reviewed publicly every five years.
- Core Principle 2: Moral Hazard
  - Federal deposit insurance incorporates features to reduce moral hazard: prudential supervision and regulation, effective resolution, limited coverage, differential premiums.
  - Coverage is limited to $100,000 per depositor, per institution.
  - The coverage limit fully protects about 97 percent of the deposits of individuals in Canadian dollars, but only about 31 percent of the value of total deposit liabilities in the system.
- Core Principle 3: Mandate
  - CDIC’s mandate is clearly set out in legislation and consistent with its public policy objectives; its powers are consistent with its mandate.
- Core Principle 4: Powers
  - CDIC has all necessary powers to fulfill its deposit insurance mandate, though some resolution powers are constrained by the need for government approval.
- Core Principle 5: Governance
  - CDIC can use its powers without undue external influence; no significant evidence of government or industry interference.
  - Government has authority to remove some directors without cause in law, which is inconsistent with the Core Principles.
  - CDIC is financed in a manner that does not undermine its autonomy.
- Core Principle 6: Relationships with other Safety-Net Players
  - CDIC is part of a framework sharing information on deposit-taking institutions and can obtain advance information from the supervisor or members; information is subject to confidentiality provisions.
  - CDIC introduced standardized data extracts and systems requirements for speedy insurance determination.
- Core Principle 7: Cross-Border Issues
  - CDIC does not insure banks in jurisdictions outside Canada, nor do foreign deposit insurers insure banks in Canada.
  - Branches of foreign-owned banks are not permitted to take insurable retail deposits in Canada; foreign banks must incorporate separate Canadian subsidiaries.
- Core Principle 8: Compulsory Membership
  - Membership in CDIC is compulsory for all banks, federally and provincially chartered trusts and loan companies, federal credit unions, and cooperative credit associations. Membership is determined by OSFI; all CDIC members must follow CDIC’s Deposit Insurance Policy Bylaw.
- Core Principle 9: Coverage
  - Coverage is defined in law, credible, limited and meets public policy objectives.
  - Ambiguities remain for some complex deposit products regarding eligibility.
  - Consideration should be given to reviewing limits and coverage based on granular depositor profile information to balance small depositor protection, financial stability, and market discipline.
- Core Principle 11: Funding
  - CDIC’s funding arrangements are set out in legislation; ex-ante differentiated premiums; established fund invested conservatively with emphasis on safety and liquidity; pre-established access to backup funding.
  - CDIC has a target coverage level of ex-ante funding revised regularly.
  - Management is reviewing fund adequacy in light of recovery and resolution planning for large complex member institutions.
- Core Principle 12: Public Awareness
  - CDIC has a robust public awareness program with defined objectives; works with members and safety-net organizations to ensure messaging consistency.
- Core Principle 13: Legal Protection
  - CDIC and its directors, officers, employees, and others working on behalf of CDIC are protected against legal action for actions taken in good faith and are indemnified from related legal costs.
- Core Principle 14: Dealing with Parties at Fault
  - CDIC has authority to seek legal redress against parties at fault but must establish that individuals acted in a personal capacity rather than that of the failed institution.
- Core Principle 15: Early Detection and Timely Intervention and Resolution
  - CDIC is part of a safety net that provides for effective early detection and timely intervention; CDIC and OSFI follow the OSFI-CDIC Guide to Intervention for Federally Regulated Financial Institutions.
  - Safety-net participants have generally adequate operational independence and necessary powers to act timely.
- Core Principle 16: Effective Resolution Processes
  - OSFI authority to determine non-viability and trigger CDIC resolution actions (bridge banks or FIRP) is clearly set out in legislation.
  - CDIC has a suite of resolution tools, but some important tools require government approval.
  - CDIC is called upon to resolve institutions in a manner that minimizes its exposure to loss.
  - Basis for CDIC to terminate its deposit insurance policy is clearly stated in legislation.
- Core Principle 17: Reimbursing Depositors
  - CDIC has legal, technological and human resources to reimburse depositors promptly under the CDIC Act.
- Core Principle 18: Recoveries
  - CDIC shares in recoveries from failed institutions’ estates; claims of insured depositors are subrogated to CDIC. There is no depositor preference.
  - Recoveries process balances minimizing costs of prolonged liquidation with achieving highest gross realizations.

### Appendix IV — Bail-in within resolution (design elements and safeguards)
- Definition and mechanics:
  - Bail-in encompasses the power to write down equity and unsecured and uninsured creditor claims to absorb losses; convert unsecured and uninsured creditor claims into equity; and convert or write-down outstanding contingent capital instruments not already triggered.
  - Bail-in must respect the hierarchy of claims in liquidation: equity first, then subordinated debt (including regulatory capital instruments), and finally senior unsecured debt.
  - Creditors have the right to compensation where they do not receive at least the amount they would have received in liquidation (the “no creditor worse off” principle).
- Legal framework design elements to address:
  - Triggers for bail-in:
    - Generally consistent with triggers for other resolution tools — e.g., where a financial institution is no longer viable or likely to be no longer viable with no reasonable prospect of becoming so.
    - Threshold should be before balance-sheet insolvency and before all equity is wiped out.
  - Scope of application:
    - Certain liabilities should be excluded from bail-in. While equity and subordinated debt should absorb losses first, the Key Attributes exclude secured creditor claims and insured deposits and leave open possible exclusion of other liabilities of systemic or strategic importance (e.g. inter-bank deposits, payment and settlement obligations, trade-finance obligations).
  - Effect on financial contracts:
    - Bail-in should not trigger contractual rights of acceleration, termination, or set-off as long as substantive obligations continue to be performed, subject to creditor safeguards regarding hierarchy of claims and the “no creditor worse off” principle.
  - Safeguards and judicial review:
    - Preferable, subject to constitutional frameworks, that bail-in be exercisable as part of an administrative process subject to ex-post judicial review to ensure authorities act within legal powers.

*Italicized source attribution: Content derived from _cr1467 (selected sections 115–Appendix IV) contained in the supplied PDF excerpt.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2014/_cr1467.pdf_