Wholesale Banking - Positioned for Growth
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Bail-in Overview
Scope of Bail-in
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In Scope Liabilities. Senior unsecured long-term debt (original term
to maturity of 400 or more days) that is tradable and transferable
(has a CUSIP, ISIN or other similar identification) and issued on or
after September 23, 20181. Unlike other jurisdictions, Canadian D-
SIBS cannot elect to issue non bail-in unsecured senior debt.
Excluded Liabilities. Bank customers' deposits including chequing
accounts, savings accounts and term deposits such as guaranteed
investment certificates ("GICs"), secured liabilities (e.g., covered
bonds), ABS or most structured notes.
All in scope liabilities, including those governed by foreign law, are
subject to conversion and must indicate in their contractual terms
that the holder of the liability is bound by the application of the CDIC
Act.
Bail-in Conversion Terms
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Stage 1:
Pre-loss balance sheet
Stage 2:
Losses diminish
assets and equity
Debt &
Other
Debt &
Other
Assets
Bail-in
Debt
NVCC Sub-
Debt
Assets
Bail-in
Debt
NVCC Sub-
Debt
NVCC Pref.
Shares
Equity
Equity
Loss
NVCC Pref.
Shares
Stage 3:
Convert NVCC
bail-in debt to equity
Debt &
Other
Assets
Bail-in
Debt
Flexible Conversion Terms. CDIC has discretion in determining the proportion of bail-in debt that is converted, as well as an
appropriate conversion multiplier² which respects the creditor hierarchy and that is more favourable than the multiplier provided to
NVCC capital investors.
No Contractual Trigger. Bail-in conversion is subject to regulatory determination of non-viability, not a fixed trigger.
Equity
Full NVCC Conversion. There must be a full conversion of NVCC capital instruments before bail-in debt can be converted. Through
other resolution tools, holders of legacy non-NVCC capital instruments could also be subject to losses, resulting in bail-in note holders
being better off than such junior-ranking instruments.
No Creditor Worse Off. CDIC will compensate investors if they incur greater losses under bail-in than under a liquidation scenario.
Bail-in debt holders rank pari passu with other senior unsecured obligations, including deposits, for the purposes of the liquidation
calculation.
Equity Conversion. Unlike some other jurisdictions, bail-in is affected through equity conversion only, with no write-down option.
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