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...