International Banking - Annual Overview
CANADIAN BAIL-IN RESOLUTION FRAMEWORK
Principles based approach to bail-in conversion with no explicit conversion ratio
•
Eligibility criteria for bail-in debt and conversion into common shares
under the CDIC Act
。 Senior unsecured debt with original term to maturity > 400 days, issued or re-opened by a D-SIB after regulations come into
force
。 Tradeable and transferable; assigned a CUSIP, ISIN or similar designation
o Excludes deposits, secured liabilities (e.g. covered bonds), eligible financial contracts (i.e. derivatives) and structured notes
• Mechanism - designed using no creditor worse off principle
。 Upon determination by OSFI that a bank has ceased to be viable, CDIC will take temporary control/ownership and carry out
bail-in conversion and/or other restructuring activities
Creditors should not incur greater losses through bail-in resolution than if institution had been wound-up under normal
insolvency proceedings
。 Respects relative creditor hierarchy; complete conversion of all subordinate ranking claims before converting any bail-in
securities (including legacy non-NVCC capital securities)
。 Legacy debt not subject to the bail-in regime but subject to other resolution regimes available to CDIC
Senior creditors should receive relatively better conversion terms vs. junior creditors
Bail-in risk mitigated by extremely low probability of event
•
Principles based approach to bail-in conversion
。 No explicit conversion ratio
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