Thank you, Mr. Chair.
This proposal seeks to strengthen Canada's bank resolution regime by formally designating the Canada Deposit Insurance Corporation as the resolution authority for its members and by requiring Canada's biggest banks to develop and submit resolution plans. The proposal would also clarify that the Superintendent of Financial Institutions may set criteria for how domestic systemically important banks must meet the requirement to maintain a minimum capacity to absorb losses.
The Canada Deposit Insurance Corporation has been responsible for providing deposit insurance for Canadian banks since it was established by the Canada Deposit Insurance Corporation Act in 1967. Following the financial crisis, and in line with the development of international standards, CDIC's powers and tools have been expanded to facilitate the orderly resolution of its member institutions in the event of a failure. The proposed changes would formally designate CDIC as the resolution authority for its member institutions.
In this capacity, CDIC has undertaken a number of initiatives to ensure its readiness to deal with any banking failures. One of them pertains to the development of resolution plans, which describe how a systemically important bank could be resolved in an orderly manner while ensuring the continuity of critical financial services and protecting financial stability.
In 2015 Canada's systemically important banks were asked to work with CDIC to prepare plans demonstrating how they could be resolved in a manner that ensures financial stability in the unlikely event of their failure. The proposed changes would put the requirement for Canada's largest banks to develop resolution plans in legislation and provide CDIC with the authority to set out the framework for these plans in a bylaw. Together, the proposed changes would provide additional transparency regarding CDIC's activities as the resolution authority for its members, which should facilitate CDIC's role in supporting the stability of the financial system.
This proposal would also clarify that the Superintendent of Financial Institutions may set criteria for how domestic systemically important banks must meet the requirement to maintain a minimum capacity to absorb losses. The requirement for systemically important banks to maintain a minimum capital to absorb losses is set by the superintendent and met through additional regulatory capital and debt, subject to conversion into common shares in a failure through the exercise of CDIC's bail-in power.
Thank you, Mr. Chairman.