Budget 2016: Introduction Of A Bail-In Regime

On March 22, 2016, the federal Liberal Government released its 2016 budget, which includes a plan to implement a bail-in regime for Canada's six domestic systemically important banks. The bail-in regime holds shareholders and bondholders responsible for a bank's risk in the event of failure, rather than taxpayers. The bail-in regime would convert eligible long-term debt into common shares in order to recapitalize the bank and allow it to remain viable and operating.

Bail-Ins: A Response to the Financial Crisis

The bail-in regime aims to protect Canadians in the event of big bank failure. Concerns about such failure stem from the 2008 global financial crisis, when some banks that had previously been considered "too-big-to-fail" needed to be bailed-out by their government. While none of these banks were Canadian, the bail-outs raised concerns about Canadian taxpayers having to fund the rescue of big banks in the future.