Financial Performance and ESG Strategy Update
Canadian Bail-in Regime - Comparison to Other Jurisdictions
Bail-in implementation in other jurisdictions has increased the riskiness of bail-inable bonds vs. non-bail-inable
bonds:
•
Legislative changes prohibit bail-outs, increasing the probability that bail-in will be relied on
The hierarchy of claims places bail-in debt below deposits and senior debt through structural subordination, legislation
or contractual means
Bail-in is expected to rely on write-down of securities, imposing certain losses on investors
The Canadian framework differs from other jurisdictions on several points:
•
The Canadian government has not introduced legislation preventing bail-outs
•
•
Canadian senior term debt will be issued in a single class and will not be subordinated to another class of senior term
debt like other jurisdictions such as the US and Europe
Canada does not have a depositor preference regime; bail-in debt does not rank lower than other liabilities
No Creditor Worse Off principle provides that no creditor shall incur greater losses than under insolvency proceedings
•
There are no write-down provisions in the framework
•
Conversion formula under many scenarios may result in investor gains
CIBC◇
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