Minority Investment (Bank Holding Companies) Regulations

The Minority Investment (Bank Holding Companies) Regulations are a set of rules made under the Bank Act that regulate bank holding companies' investments in designated entities. The regulations, which came into force on October 4, 2001, apply to bank holding companies and their subsidiaries.

The regulations define what constitutes a "designated entity," including entities with financial intermediary activities or specialized financing activities. A bank holding company is allowed to acquire or increase a substantial investment in a designated entity under certain circumstances, but there are restrictions on the total value of such investments.

For example, if the total value of all shares, membership shares, ownership interests, loans, and guarantees held by the bank holding company and its subsidiaries in designated entities exceeds 50% of the regulatory capital, then further investments may be restricted. Additionally, a bank holding company cannot make loans to or give guarantees for designated entities over which it does not exercise control if such investments would exceed 50% of the regulatory capital.

The regulations also provide guidance on how to calculate the "total value" referred to in sections 3 and 4.