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ARTICLE · 19 OCTOBER 2018

Canada's Bail-In Regime Now In Force

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Canada's bank recapitalization (bail-in) regime has officially taken effect.

CanadaFinance and Banking
Blair Keefe
Blair Keefe
David Seville
David Seville
Eli Monas
Eli Monas
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Canada's bank recapitalization (bail-in) regime has officially taken effect.

The bail-in regime—which came into effect on September 23—allows for expedient conversion of certain bank instruments into regulatory capital in the highly unlikely event that a domestic systemically important bank (D-SIB) becomes non-viable. It is aimed at ensuring that: (a) taxpayers are protected from having to bail out a D-SIB in the highly unlikely event of such institution running into financial difficulty; and (b) Canada's financial system remains strong by clarifying that banks' shareholders and creditors are responsible for bearing losses, thereby giving them stronger incentives to monitor the bank's risk-taking activities.

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