Federal financial institutions legislative and regulatory reporter – October 2020

Institution

Published

Title and Brief Summary

Status

Patented Medicine Prices Review Board (PMPRB)

October 2020

PMPRB Final Guidelines

The Patented Medicine Prices Review Board (PMPRB) is a quasi-judicial body with a regulatory mandate created in 1987 as the consumer protection “pillar” of a major set of reforms to the Patent Act (the Act). The PMPRB has released its final guidelines (the Guidelines) that provide information on the general approach of its price review process and investigations.

The Guidelines, which are issued pursuant to subsection 96(4) of the Act, are intended to provide transparency and predictability to patentees regarding the triage and review process typically engaged in by public servant employees of the PMPRB (Staff). The review process assesses whether a patented medicine appears to be priced excessively in any Canadian market. The Guidelines also provide an overview of the processes patentees should be aware of regarding their filing obligations under the Patented Medicines Regulations.

Effective Jan. 1, 2021

Payments Canada

Oct. 31, 2020

Payments Canada Changes to Our Rules and Standards

Amendments to the following Payments Canada rules were approved by the Board and the Department of Finance (the Department) and come into effect on Nov. 29, 2020:

• ACSS Rules B1, B2, B9, G9, K4, K5 and Introduction

ACSS Rule G9 Amendments to the following rules were approved by the Board and the Department and come into effect on Nov. 23, 2020:

• ACSS Rule B1
• ACSS Rule B2
• ACSS Rule B9
• ACSS Rule D2
• ACSS Rule F1
• ACSS Rule F4
• ACSS Rule F7
• ACSS Rule G4
• LVTS Rule 1
• LVTS Rule 14

Amendments to the following rules were approved by the Board and the Department and come into effect on Nov. 2, 2020:

• ACSS Rule L3

Various amendments to rules effective, as applicable, on Nov. 2, 23, and 29, 2020

Financial Stability Board (FSB)

Oct. 29, 2020

2020 Status Report: Task Force on Climate-related Financial Disclosures

This 2020 Status Report from the Task Force on Climate-related Financial Disclosures (TCFD) finds that disclosure of climate-related financial information aligned with the TCFD recommendations has steadily increased since the recommendations were published in 2017. However, the report highlights the continuing need for progress in improving levels of TCFD-aligned disclosures, given the urgent demand for consistency and comparability in reporting.

The report also provides a ‘roadmap’ for preparers through highlighting insights from expert users on which information is most useful for decision making.

The TCFD also published guidance on climate-related scenario analysis for non-financial firms and on integrating climate-related risks into existing risk management processes. Additionally, the TCFD published a public consultation on forward-looking climate metrics for financial firms. Responses to the consultation are due by Jan. 27, 2021.

The FSB has asked the TCFD to publish a further status report in September 2021 and undertake further analysis on the extent to which companies describe the financial impact of climate-related risks and opportunities on their businesses and strategies. The TCFD also plans to gain better insight into reporting practices of asset managers and asset owners to their clients and beneficiaries.

Responses to the TCFD public consultation on forward-looking climate metrics for financial firms are being accepted until Jan. 27, 2021

Bank of Canada

Oct. 28, 2020

Monetary Policy Report – October 2020

On Oct. 28, 2020, the Bank of Canada announced its decision on the target for the overnight rate. The Bank also published its quarterly Monetary Policy Report (MPR) at the same time as the rate decision. The Bank expects Canada’s economy to grow by almost four per cent on average in 2021 and 2022, following a decline of about 5.5 per cent in 2020.

Bank of Canada

Oct. 28, 2020

Bank of Canada will maintain current level of policy rate until inflation objective is achieved, recalibrates its quantitative easing program

The Bank of Canada maintained its target for the overnight rate at the effective lower bound of ¼ per cent, with the Bank Rate at ½ per cent and the deposit rate at ¼ per cent.

The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program. The Bank is recalibrating the QE program to shift purchases towards longer-term bonds, which have more direct influence on the borrowing rates that are most important for households and businesses.

At the same time, total purchases will be gradually reduced by at least $4 billion a week. The Governing Council judges that, with these combined adjustments, the QE program is providing at least as much monetary stimulus as before.

Office of the Superintendent of Financial Institutions (OSFI)

Oct. 27, 2020

Public Consultation – Draft Guideline E-4

The Office of the Superintendent of Financial Institutions (OSFI) is seeking feedback on draft Guideline E-4 Foreign Entities Operating in Canada on a Branch Basis, which will replace existing guidelines E-4A Role of the Chief Agent and Record Keeping Requirements and E-4B Role of the Principal Officer and Record Keeping Requirements.

In draft Guideline E-4, OSFI places greater emphasis on the expectations of the foreign entity operating in Canada. This better reflects the responsibilities of the foreign entity and its management in overseeing the day-to-day operations of its business in Canada.

The draft Guideline also reflects new amendments to the location of records requirements contained in the Insurance Companies Act and the Bank Act, which will come into force July 2021. These amendments follow the ratification of the Canada-United States-Mexico trade agreement.

Comments on draft Guideline E-4 should be submitted to OSFI by email at [email protected] by Dec. 18, 2020. OSFI expects to issue the final guidance in spring 2021, along with a non-attributed summary of comments received and OSFI’s response.

Comments by Dec. 18, 2020

Bank of Canada

Oct. 19, 2020

CARR’s mandate expanded to include analysis of CDOR

The Canadian Fixed Income Forum (CFIF) has expanded the mandate of the Canadian Alternative Reference Rate working group (CARR) to include an analysis of the Canadian Dollar Offered Rate (CDOR). To accommodate for this change to its Terms of Reference, CARR will be reconstituted to deliver on its two primary objectives: (1) supporting the adoption of, and transition to, CORRA as a key financial benchmark for Canadian derivatives and securities; and (2) analysing the current status of CDOR. This work will ensure that Canada’s financial benchmarks remain robust, relevant and effective.

Bank of Canada

Oct. 19, 2020

Bank of Canada launches CORRA Advisory Group

Earlier this year, the Bank of Canada became the administrator of the Canadian Overnight Repo Rate Average (CORRA) and since June has published this Canadian interest rate benchmark on its website using an improved methodology. The CORRA Advisory Group (CAG) has now been established to advise the Bank’s CORRA Oversight Committee on any potential adjustments to the CORRA methodology, stemming from changes in repo market functioning and from any emerging methodology issues.

The Group consists of members representing a wide range of market participants, with expertise in the Canadian repo market and CORRA-related financial instruments.

CAG’s terms of reference and its list of members will be published on the group’s website, along with documents pertaining to meetings, including agendas and minutes.

The Bank is committed to ensuring that CORRA is a robust, reliable and representative measure of the secured overnight funding rate.

Financial Stability Board (FSB)

Oct. 19, 2020

Effective Practices for Cyber Incident Response and Recovery: Final Report

The Effective Practices for Cyber Incident Response and Recovery: Final Report toolkit includes 49 practices for effective cyber incident response and recovery across seven components: (i) governance, (ii) planning and preparation, (iii) analysis, (iv) mitigation, (v) restoration and recovery, (vi) coordination and communication, and (vii) improvement. This final version of the toolkit drew on feedback provided during a public consultation, including four virtual stakeholder workshops. The report was delivered to G20 Finance Ministers and Central Bank Governors for their October meeting.

See here for information on the public consultation conducted in support of the final report.

Financial Stability Board (FSB)

Oct. 16, 2020

Global Transition Roadmap for LIBOR

This Global Transition Roadmap for LIBOR report sets out clear actions for financial firms and their clients to take in order to ensure a smooth LIBOR transition. The report is intended to inform those with exposure to LIBOR benchmarks of some of the steps they should be taking now, and over the remaining period to the end- of 2021, to successfully mitigate these risks. These are considered prudent steps to take to ensure an orderly transition by the end of 2021 and are intended to supplement existing timelines/milestones from industry working groups and regulators.

Among the steps i the roadmap are:

• Firms should have already, identified and assessed all existing LIBOR exposures and agreed on a project plan to transition in advance of the end of 2021.
• By the effective date of the ISDA Fallbacks Protocol, the FSB strongly encourages firms to have adhered to the Protocol.
• By the end of 2020, firms should be in a position to offer non-LIBOR linked loans to their customers.
• By mid-2021, firms should have established formalised plans to amend legacy contracts where this can be done and have implemented the necessary system and process changes to enable transition to robust alternative rates.
• By the end of 2021, firms should be prepared for LIBOR to cease.

Office of the Superintendent of Financial Institutions (OSFI)

Oct. 16, 2020

Update and consultation on OSFI’s activities on anti-money laundering/anti-terrorist financing (AML/ATF) supervision.

OSFI and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) have entered a new phase in their collaboration on AML/ATF supervision, as part of ongoing efforts to eliminate duplication and manage the regulatory burden on FRFIs.

Going forward, FINTRAC will be the primary agency conducting AML/ATF assessments of FRFIs to ensure compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated regulations (PCMLTFA/R). OSFI will focus on the prudential implications of FRFIs’ AML/ATF compliance, as part of its ongoing assessment of FRFIs’ regulatory compliance management frameworks.

OSFI and FINTRAC will co-ordinate on the state of the AML/ATF regime relative to their respective mandates and as it relates to FRFIs. This is consistent with Basel Committee guidance on co-operation and information exchange among prudential and anti-money laundering and countering financing of terrorism (AML/CFT) supervisors for banks.

As part of a review, the OSFI is assessing the ongoing relevance of OSFI’s Guideline B-8 (Deterring & Detecting Money Laundering and Terrorist Financing), which replicates elements of the PCMLTFA/R and does not align with OSFI’s new supervisory approach.

OSFI has initiated this review and is considering specific adjustments to Guideline E-13, Regulatory Compliance Management. The goal of this review is to ensure greater clarity about OSFI’s mandate in relation to AML/ATF and to prevent any overlap with FINTRAC’s role. OSFI is also considering whether Guideline B-8 should be rescinded.

OSFI is seeking FRFI views on the nature and timing of any potential guidance amendments, including:

• Whether amendments to Guideline E-13 are needed, and the extent any such changes in relation to AML/ATF supervision or clarifying OSFI’s expectations for compliance risk management more broadly; and
• Whether Guideline B-8 should be rescinded in full, or if elements of Guideline B-8 should be incorporated in a revised Guideline E-13.

Comments by Nov. 30, 2020

Bank of Canada

Oct. 15, 2020

Bank of Canada announces changes to programs that support key financial markets

As overall financial market conditions continue to improve in Canada, usage in several of the Bank of Canada’s programs that support the functioning of key financial markets has declined significantly. As such, the Bank is announcing changes to the Bankers’ Acceptance Purchase Facility (BAPF), the Canada Mortgage Bond Purchase Program (CMBP), and the extended Term Repo operations.

The Bank will discontinue the BAPF, with the last operation scheduled for Oct. 26, 2020. Similarly, the Bank will discontinue the CMBP, with the last operations scheduled for the week of Oct. 26, 2020.

Effective Oct. 21, 2020, the Bank will reduce the frequency of its Term Repo operations from weekly to biweekly. As such, the subsequent Term Repo operation will be conducted on Nov. 3, 2020. The exact date and terms will be announced prior to each operation.

In addition, effective immediately, the eligible securities for regular Term Repo operations will include only Canadian dollar-denominated marketable securities that are directly issued or explicitly guaranteed by the Government of Canada or by a Canadian provincial government and that are eligible for the Standing Liquidity Facility. Own-name covered bonds, own-name Term ABS and own-name ABCP will no longer be eligible (Terms & Conditions).

The Bank will continue to monitor market conditions and, if warranted, may further revise its programs, including making changes to the size and maturity tranches of the term repo operations.

OSFI and FSRA

Oct. 14, 2020

FSRA and OSFI establish a committee to collaborate on defined contribution plans

The Financial Services Regulatory Authority of Ontario (FSRA) and the Office of the Superintendent of Financial Institutions (OSFI) are establishing a new special purpose committee and hoping to attract interested applicants.

The committee will review the regulatory approaches of both regulators to supervising defined contribution (DC) plans and, where possible, find opportunities for regulatory harmonization.

Through this collaboration, FSRA and OSFI will work towards improving outcomes for plan members. The committee will also focus on enhancing regulatory efficiency and effectiveness for DC plans.

The deadline for submissions is Nov. 4, 2020.

The committee will begin its work on Dec. 11, 2020.

Financial Stability Board (FSB)

Oct. 13, 2020

Enhancing Cross-border Payments: Stage 3 roadmap

The Enhancing Cross-border Payments: Stage 3 roadmap developed by the FSB, in co-ordination with the Committee on Payments and Market Infrastructures (CPMI) and other relevant international organizations and standard-setting bodies, builds on the FSB’s Stage 1 report, setting out the challenges and the frictions in cross-border payments that contribute to them, and the CPMI’s Stage 2 report, describing the necessary elements of a response, in the form of a set of 19 building blocks.

International Association of Insurance Supervisors (IAIS)

Oct. 13, 2020

IAIS issues Draft Application Paper on the Supervision of Climate-related Risks in the Insurance Sector for public consultation.

The International Association of Insurance Supervisors (IAIS) has developed a draft Application Paper on the Supervision of Climate-related Risks in the Insurance Sector, jointly with the Sustainable Insurance Forum (SIF). The draft Application Paper provides background and guidance on how the IAIS supervisory material can be used by supervisors to manage the challenges and opportunities arising from climate-related risks.

The IAIS is now seeking feedback on this draft Application Paper through public consultation. Feedback is invited by Jan. 12, 2021 24.00 CET (Basel time). Feedback received by this deadline will enable the IAIS to further develop and finalise the Paper. The document and consultation tool can be found here.

Responses by Jan. 12, 2021

Bank for International Settlements (BIS)

Oct. 12, 2020

Stress-testing banks during the Covid-19 pandemic

The Financial Stability Institute (FSI) has released Stress-testing banks during the Covid-19 pandemic.

In response to COVID-19, a number of authorities that regularly conduct stress tests on individual banks adjusted their approach. They performed ad hoc exercises to assess the vulnerability of banking sectors as a whole. These exercises are different from regular ones in terms of key features such as objectives, design and methodologies, and communication.

In the short term, such stress tests can support the assessment of the pandemic's impact at an aggregate level.

As the pandemic evolves and its impact is better understood, authorities can further adjust their stress tests and refine their key features accordingly. That will allow for a more granular, bank-level assessment. It may also help authorities to achieve the necessary balance between keeping banks safe and sound, and ensuring an adequate flow of credit to the real economy.

Financial Stability Board (FSB)

Oct. 9, 2020

FSB report highlights increased use of RegTech and SupTech

The Financial Stability Board (FSB) has published a report on the use of supervisory (SupTech) and regulatory (RegTech) technology by FSB members and regulated institutions.

This report, The Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions: Market developments and financial stability implications, finds that technology and innovation are transforming the global financial landscape, presenting opportunities, risks and challenges for regulated institutions and authorities alike. The report includes 28 case studies giving practical examples on how SupTech and RegTech tools are being used.

Financial Stability Board (FSB)

Oct. 9, 2020

FSB encourages broad and timely adherence to the ISDA IBOR Fallbacks Protocol

The FSB welcomes the announcement by the International Swaps and Derivatives Association (ISDA) of the forthcoming launch of its IBOR Fallbacks Protocol (the Protocol) and IBOR Fallbacks Supplement (the Supplement) for IBOR-linked derivative contracts.

The FSB strongly encourages widespread and early adherence to the Protocol – by all affected financial and non-financial firms – which will be a major driver of transition for derivatives in all LIBOR currencies and a critical step in benchmark transition ahead of the end of 2021.

Bank of Canada

Oct. 9, 2020

Central banks and BIS publish first central bank digital currency (CBDC) report laying out key requirements

Seven central banks and the Bank for International Settlements (BIS) have released a report assessing the feasibility of publicly available CBDCs in helping central banks deliver their public policy objectives.

The report, Central bank digital currencies: foundational principles and core features, outlines foundational principles and core features of a CBDC, but does not provide an opinion on whether to issue.

Central banks are to continue investigating CBDC feasibility without committing to issuance.

Financial Stability Board (FSB)

Oct. 7, 2020

Fifth Progress Report – Countdown to 2021 in light of COVID-19

This report provides an overview of the progress on the implementation of the second phase of the G20 Data Gaps Initiative (DGI-2).

The main objective of DGI-2 is to implement the regular collection and dissemination of reliable and timely statistics for policy use.

The report sets out the challenges encountered by participating economies during this pandemic and the remaining steps to implement the DGI-2 recommendations in 2021. The report highlights that:

• The COVID-19 pandemic posed significant challenges to the 2020 DGI work program, and thus participating economies agreed to extend DGI work by six months, to December 2021.
• Nevertheless, progress in implementing the DGI-2 recommendations continued, despite the challenges that COVID-19 poses. Positive developments include enhancements in compilation processes, data sharing arrangements, production and dissemination of additional tables, as well as instrument and sector breakdowns.
• To continue addressing data needs beyond 2021, many participating economies support maintaining an organized international collaboration process.
• The COVID-19 crisis has increased policymakers’ needs to obtain more granular, relevant and reliable data. A possible new mandate could help address emerging policy questions. A general framework could be defined in 2021 and presented in the next DGI-2 progress report, which will be published in the second half of 2021 and delivered to G20 Finance Ministers and Central Bank Governors.

Bank of Canada

Oct. 6, 2020

Corporate Bond Purchase Program expanded to buy-side participants

In May, the Bank of Canada introduced a Corporate Bond Purchase Program (CBPP) to support the liquidity and proper functioning of the corporate debt market.

To ensure the program can continue to function as an effective backstop should market conditions deteriorate, the Bank is amending the terms of the program to allow eligible buy-side participants to offer bonds into the program.

This change will allow buy-side participants, who are either a portfolio manager registered with a provincial securities commission, or a federally or provincially regulated Canadian pension plan, to submit offers to the CBPP via primary dealers.

Buy-side participants who register with the Bank of Canada were able to participate starting with the tender on Oct. 20, 2020.

All information on this program, including the buy-side registration form, is available on the CBPP webpage.

Office of the Superintendent of Financial Institutions (OSFI)

Oct. 6, 2020

OSFI releases its 2019-2020 Annual Report

Office of the Superintendent of Financial Institutions (OSFI) has released its Annual Report, which covers the regulator’s activities from April 1, 2019 to March 31, 2020 and also details the progress made in delivering the first year of OSFI’s 2019-2022 Strategic Plan.

See here for the full Annual Report 2019-2020

See here for the 2019-2022 OSFI Strategic Plan

Financial Stability Board (FSB)

Oct. 6, 2020

Public responses to the Evaluation of the effects of too-big-to-fail reforms: consultation report

On June 28, 2020, the FSB published an Evaluation of the effects of too-big-to-fail reforms: consultation report. The FSB also carried out extensive public engagement as part of the consultation. Interested parties were invited to provide written comments by Sept. 30, 2020. The public comments received are available here for review.