June 26, 2017
In order to prepare for a potential bank failure, the Canadian government is creating a process called a “bail-in” regime which will ensure taxpayers would not be responsible or fiscally affected should an institution be deemed non-viable. Rather than taxpayers’ money being used to bail out struggling big banks (as seen during the 2008 financial crisis in the U.S.), a bail-in involves “automatically converting certain debt securities into regulatory capital to stabilize the financial institution.” Banks will be given until November 2021 to fully accommodate the new rules.
Financial Post turned to a bulletin written by Blair Keefe, Thomas Yeo, David Seville, and Eli Monas regarding how the bail-in regime will require a transformation of senior debt, refinancing it into a debt which “qualifies under the bail-in regime.” Below is an excerpt from the article.
In a note to clients, lawyers at Torys LLP said holders of bail-in debt would receive more common shares per dollar of claim than holders of subordinated debt and preferred shares in the unlikely event of an actual bail-in. This would be consistent with prior claims in the hierarchy of claims, according to the note.
To read the full article, click here.
To read our complete bulletin on Canada’s new bail-in regime, click here.