E. The Canadian Payments Association

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 53-58

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The Canadian Payments Association (CPA) was created by Act of Parliament in 1980 for the purpose of establishing and operating a nation-

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al clearing and settlement of payments system, and in 1983 it took over that function from the CBA. In the decade prior to the incorporation of the CPA, the demands of non-bank financial institutions to have direct access to the payments systems and the rapid development of costly electronic funds transfers, in addition to the traditional paper-based system, suggested the need for a national electronic transfer system accessible to all financial institutions directly.

The Canadian Payments Act¹⁶⁵creates a unique corporation: a non-profit, non-share capital corporation,¹⁶⁶which is not a government agency¹⁶⁷and whose members are the Bank of Canada and various financial institutions that fund the corporation’s activities, over which the Governor in Council, the Minister of Finance, and the Governor of the Bank of Canada exercise oversight. The CPA is truly sui generis, structured and funded like a private corporation but subject to public regulation of its activities.

The statutory objects of the CPA are the following: (i) to establish and operate national clearing and settlement of payments systems and other arrangements for the making or exchange of payments; (ii) to facilitate the interaction of its systems with other systems in the exchange, clearing, or settlement of payments; and (iii) to facilitate the development of new payment methods and technologies.¹⁶⁸

In fulfilling these objects, the CPA is also under a statutory duty to promote the efficiency, safety, and soundness of its systems and to take into account the interests of its users.¹⁶⁹

The CPA fulfills the first object by running the Automated Clearing Settlement System (ACSS) and the Large Value Transfer System (LVTS), and it fulfills the second object insofar as subordinate systems such as Interac and the Debt Clearing Service of the Canadian Depository for Securities Ltd. (CDS) rely on the ACSS and LVTS to settle the payment obligations of their participants at the Bank of Canada.¹⁷⁰

However, other third party payment systems are not linked because of the ambiguity in relation to the third object, which permits the CPA to facilitate but not necessarily to operate and regulate new payment systems.

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The Canadian Payments Act extends membership in the Canadian Payments Association beyond the banks. The members are the Bank of Canada, every bank operating in Canada,¹⁷¹and any other person entitled to be a member who applies for membership,¹⁷²that is, a credit union central, a trust company or loan company that accepts deposits transferable by order to a third party, any province or agent that accepts deposits transferable by order to a third party, a life insurance company, a securities dealer, a cooperative credit association, the trustee of a qualified trust, and a qualified corporation on behalf of its money market mutual fund.¹⁷³

Non-bank members cease to be members if they cease to meet the requirement for membership or decide to cease to be members.¹⁷⁴

The CPA is governed by a board of directors consisting of sixteen members, of whom the chair is appointed by the Bank of Canada,¹⁷⁵three members are appointed by the Minister of Finance,¹⁷⁶and the remaining twelve are elected by the members, who are divided into classes for the purpose of representation on the board.¹⁷⁷

With the exception of the Ministerial appointees, alternative directors may also be elected, and any one of these directors may act as a director when the director is absent or unable to act.¹⁷⁸

At least three quarters of the directors must be Canadian citizens ordinarily resident in Canada.¹⁷⁹

The board may be chaired by the alternate Bank of Canada appointee if the chair is absent or unable to act, and the chair enjoys a second vote in the event of a tie vote.¹⁸⁰

The Act contains standard corporate governance provisions for a chief executive officer,¹⁸¹the duties and powers of the board to manage the affairs of the CPA,¹⁸²by-laws,¹⁸³committees,¹⁸⁴budgets,¹⁸⁵annual

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meetings,¹⁸⁶and the appointment of an auditor.¹⁸⁷

However, CPA affairs are also subject to government supervision in light of the systemic risks to the Canadian economy should its systems fail and payments can neither be made nor settled. This supervision includes the following: (i) the board chair must be a Bank of Canada appointee and three directors are Ministerial appointees; (ii) by-laws must be approved by the Minister of Finance;¹⁸⁸(iii) rules relating to the payment and settlement system must be sent to the Minister of Finance within ten days after they have been made, and the Minister may disallow them in whole or in part;¹⁸⁹ (iv) the Minister of Finance may issue a directive to make, amend, or repeal any by-law, rule, or standard;¹⁹⁰(v) the Minister may request any information or documents at any time;¹⁹¹(vi) the Minister shall be consulted about board appointments to the Stakeholder Advisory Council (SAC);¹⁹²(vii) only Parliament may wind up the affairs of the CPA;¹⁹³ (viii) the Governor in Council may make regulations in relation to directors, committees, membership, voting, and any other matter connected with the Act;¹⁹⁴and (ix) the Minister of Finance may designate a payment system to be of national importance and issue guidelines and directives for it.¹⁹⁵

The CPA is no ordinary corporation.

Two other types of accountability for the CPA are also provided by the Act. First, through the right to elect directors, the financial services sector generally has a means of shaping CPA affairs; secondly, the Act provides for the Stakeholder Advisory Council (SAC). The object of the SAC is to provide advice to the board on any matters relating to the CPA objects.¹⁹⁶

The SAC consists of twenty members,¹⁹⁷of whom up to two are appointed from the board¹⁹⁸and...