OSFI Finalizes Guideline for Foreign Branches of Entities in Canada
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.
Related Links
Keywords: Americas, Canada, Banking, Insurance, Location of Records, Foreign Banks, Foreign Branches, Banking Supervision, OSFI
Previous Article
MAS Launches Global Challenge for Retail CBDC SolutionsRelated Articles
APRA Issues Interim Update to Policy Priorities for 2021 and Beyond
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
EC Adopts Solvency II and Resolution Rules Package for Insurers
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
OCC Issues Booklets on Regulatory Reporting and Earnings
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
ECB Sets Out Results of Economy-Wide Climate Stress Tests
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
EBA Examines Implications of Increasing Use of Digital Platforms in EU
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
