Budget Bill Proposes Significant Amendments To Financial Institution Statutes

Author:Mr John Jason
Profession:Osler, Hoskin & Harcourt LLP

On February 6, 2009 the Canadian federal government

tabled Bill C-10, the Budget Implementation Act, to

implement measures announced in the 2009 budget. The Bill proposes

the enactment of significant amendments to several financial

institution (and other related) statutes.

Canadian Lenders Assurance Facility

By amending the Financial Administration Act (FAA),

Bill C-10 provides the government direct authority to pay on the

guarantee under the Canadian Lenders Assurance Facility (CLAF) that

was announced in November 2008. The amendments also permit the

Minister of Finance (Minister), with the Governor in Counsel's

approval, to purchase securities, make a loan or provide a line of

credit to, guarantee any debt obligation or financial assets of, or

provide loan insurance or credit insurance for the benefit of any

entity for any debt, obligation or financial assets of the entity.

The CLAF will be extended to December 31, 2009.

The amendments also authorize payment out of the Consolidated

Revenue Fund for any contract entered into under the new authority,

including any contract entered into after November 30, 2008.

Canadian Life Insurers Assurance Facility

The government is also proposing the creation of the Canadian

Life Insurers Assurance Facility (CLIAF) to provide insurance on

the wholesale term borrowing of federally regulated life insurance

companies. Modelled on the Canadian Lenders Assurance Facility, the

CLIAF will also be made available to provincially regulated life

insurers on the same commercial terms as other eligible

institutions, on the approval of the Minister and with an indemnity

from the relevant provincial government.

Canadian Secured Credit Facility

While Bill C-10 does not expressly mention the Canadian Secured

Credit Facility (CSCF) announced as part of the 2009 budget, the

amendments to the FAA (mentioned above) will give the government

the authority to invest the $12 billion earmarked for the CSCF

program in the 2009 budget.

The CSCF is supposed to be run under "high standards for

transparency and credit enhancement" to protect the taxpayer.

It is to be priced on commercial terms and is expected to generate

a positive return for the government.

Only federally regulated financial institutions are to be

eligible to sell into the facility. Provincially regulated

financial institutions may be eligible on the Minister's

approval. It is not clear whether the government is contemplating

an expedited licensing process for the...

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