Regulatory Capital (Bank Holding Companies) Regulations

Regulatory Capital (Bank Holding Companies) Regulations

The Regulatory Capital (Bank Holding Companies) Regulations were made by the Governor General in Council on October 4, 2001, pursuant to section 978 of the Bank Act. The regulations aim to regulate the capital requirements for bank holding companies.

Definition of Regulatory Capital
The regulatory capital of a bank holding company is calculated using the formula: A - B, where A is the total of shareholders' equity, minority interests, and subordinated indebtedness, and B is the amount of goodwill. An amount can be included in respect of a security only if it meets certain conditions.

Restriction on Security
In calculating the regulatory capital, an amount may be included in respect of a security only if it is subordinate to all liabilities other than those with equal or lower ranking, has an initial minimum term of five years or more, and cannot be redeemed or purchased for cancellation within the first five years after issuance.

Investment Limits
For the purposes of sections 938 to 940 of the Bank Act, the regulatory capital of a bank holding company is reduced by the total amount of shareholders' equity or subordinated indebtedness of controlled entities, investments, loans, and minority interests.

Coming into Force
These regulations came into force on October 24, 2001.