Taxpayer Protection and Bank Recapitalization Regime: Consultation Paper

DOF consultation paper setting out major features of proposed bail-in regime for Canada

Department of Finance of Canada consultation paper on conversion of certain bank liabilities into regulatory capital when a domestic systemically important bank (D-SIB) fails. Enables a resolution strategy that protects taxpayers by ensuring that losses are borne by shareholders and creditors, while preserving same legal entity and contracts of the bank (i.e., keeping it open or "continuing") and maintaining critical services provided to customers. Policy objective is to preserve financial stability while protecting taxpayers by: i) reducing likelihood of D-SIB failure by enhancing market discipline, limiting moral hazard and constraining incentives for excessive risk-taking by ensuring that bank creditors and capital providers bear losses in resolution; and ii) ensuring that a D-SIB can be quickly restored to viability with minimal taxpayer exposure to loss through a resolution strategy which enables conversion of certain liabilities into additional equity capital.

Publisher: National Government     Release date: Jul 2014     Country: Canada

Type: Consultative, discussion and issues paper

Parent: Key Attributes of Effective Resolution Regimes for Financial Institutions

Topics: Recovery and resolution, Crisis management and contingency planning

Sectors: Banking