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The most recent move towards enacting the new structure for bank bailouts — in the form of bail-ins by existing securities holders — came on June 8 when the Budget Implementation Act was passed. It included proposed amendments to existing legislation to give the Office of the Superintendent of Financial Institutions authority to designate the domestic systemically important banks to which the bail-in regime would apply.

The Canada Deposit Insurance Corporation (CDIC) will also need new powers to carry out a bail-in by converting the eligible debt of a non-viable bank into common shares. This would enable the CDIC to resolve a failed bank by taking temporary control to carry out a bail-in conversion, according to DBRS.

While the government is moving forward, the process is still expected to take months, the ratings agency said. Amendments must be made to the Bank Act, the CDIC Act, the Financial Administration Act, the Payment Clearing and Settlement Act, and the Winding-up and Restructuring Act. In addition, regulations related to the legislation need to be developed and pre-published with time for consultation.

“Thus, even after the amendments are passed, there would be some months before the final steps are likely to be completed,” DBRS said.

The ratings agency changed its view on the trend for Canada’s largest banks to negative from stable on May 20, 2015, “to reflect the declining likelihood of systemic support” after the federal government committed to creating a bail-in regime.

“The maintenance of the negative trend reflects DBRS’s view that ongoing changes in Canadian legislation and regulation still indicate that the potential for timely systemic support for these six banks that DBRS considers systemically important institutions is declining,” the ratings agency said in the report.