OSFI issued the final version of Guideline E-4 that sets out expectations for foreign entities operating in Canada on a branch basis. This guideline replaces the existing guidelines E-4A titled "Role of the Chief Agent and Record Keeping Requirements" and E-4B titled "Role of the Principal Officer and Record Keeping Requirements." The final guideline reflects new amendments to the location of records requirements in the Insurance Companies Act and the Bank Act, which will come into force in July 2021. There is a six-month transition period for compliance with the guideline. Thus, OSFI expects all foreign entities operating in Canada on a branch basis to be compliant by January 2022.
In October 2020, OSFI had published draft version of the Guideline E-4 in October 2020. In the annex to a letter to foreign entities operating in Canada on a branch basis, OSFI summarizes the comments received on the draft version of the guideline, along with its response on the comments. During the consultation process, respondents expressed a concern that expectations regarding the location of records do not reflect the current state of technology, nor do they allow flexibility for Branches to modernize their systems. In response to this concern, OSFI noted that the guideline reflects OSFI's legal interpretation of the legislative requirements. Branches under the Bank Act are required to keep copies of the Records at the principal office in Canada of the authorized foreign bank, or at any other place in Canada that the principal officer thinks fit. If the Records are in electronic form, complete copies must be kept on a computer server physically located at the places stipulated in the Bank Act. Certain Branches under the Bank Act are exempted from the requirement to keep copies of the Records at the above noted places in Canada. In those circumstances, the Branch must provide OSFI with immediate, direct, complete, and ongoing access to the Records that are stored outside Canada.
According to Guideline E-4, a Branch is not a separate legal entity; rather, the Canadian branch is an extension or presence of the foreign entity in Canada. OSFI is not the solvency regulator of the foreign entity as a whole; OSFI supervises the foreign entity's business in Canada, including compliance with the requirements of the Bank Act and the Insurance Companies Act, along with the applicable OSFI guidance. As part of its supervisory framework, OSFI evaluates Branch operations in accordance with the statutory regimes set out in the Banking Act and the Insurance Companies Act and against the expectations set out in this guideline and other applicable OSFI guidance. The amendments incorporated in Guideline E-4 follow the ratification of the Canada-United States-Mexico trade agreement.
Keywords: Americas, Canada, Banking, Insurance, Location of Records, Foreign Banks, Foreign Branches, Banking Supervision, OSFI
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