Budget 2025 implementation: proposed amendments affecting small and mid-sized federal financial institutions

The federal government (the Government) tabled An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 (the Budget Bill) as a Notice of Ways and Means Motion, introduced for First Reading on November 18 as Bill C-15, only two weeks following the announcement of Budget 2025 (which is an impressive feat, as historically the budget implementation bill has been tabled approximately six to eight weeks following the budget announcement). We would note, however, that most amendments from the 2018 financial sector review, which were designed to stir innovation, are still not in force, and we are hopeful that the Government will continue to make the coming into force of those amendments a priority.

In our bulletin, “Torys on Budget 2025: proposals for small and mid-sized federal financial institutions” (Budget Bulletin), we discussed certain high-level proposals set forth in Budget 2025. In this bulletin, we analyze related proposed amendments to the Bank Act (Canada) (BA), the Trust and Loan Companies Act (Canada) (TLCA) and the Insurance Companies Act (Canada) (ICA) that were included in the Budget Bill¹.

Portfolio limits, real property, equities and commercial lending limits

The statutory restrictions on portfolio limits, real property and equities in the BA, TLCA and ICA, as well as the TLCA and ICA restrictions on commercial lending (together with the definition of “commercial loan”) will be repealed and replaced with a new provision that permits the Superintendent of Financial Institutions Canada (the Superintendent) to direct a federal financial institution (an FI) to reduce the aggregate value of its interests in real property, equities (other than where the FI has a substantial investment) and, in the case of trust and loan companies and insurance companies, commercial loans. The Superintendent will only be permitted to make such an order on the basis of prudential considerations that the Superintendent considers relevant. We would also note that there may be some ambiguity as to what constitutes a “commercial loan” for purposes of the Superintendent’s power above since the definition will have been repealed. The Budget Bill is also proposing to repeal provisions in the ICA that imposed limitations pertaining to the amount of debt obligations that an insurance company could issue.

This is a very welcome development for the insurance industry, in particular. The commercial lending restriction (and very broad definition) was becoming particularly challenging for a number of insurance companies, since many of the types of investment options now available to companies are significantly less risky than other types of investments (e.g., private credit investments caught as commercial loans can generate compelling risk adjusted returns and lower volatility) and should be encouraged as opposed to restricted. Unfortunately, the Budget Bill did not also address the narrowly drafted Permitted Infrastructure Investments Regulations and definition of “permitted infrastructure entity” discussed in our Budget Bulletin.

Public float requirement/large bank characterization

As anticipated, the Budget Bill proposes to amend the BA, TLCA and ICA to raise the equity threshold for the 35% public holding requirement from $2 billion to $4 billion (allowing small financial institutions to grow larger before having to change their ownership structure). Unfortunately, the threshold for becoming a large bank ($12 billion since 2012) was not also included in the proposed amendments.

Notice-and-access

The Budget Bill proposes to amend the BA, TLCA and ICA to permit both distributing FIs and non-distributing FIs, including federal credit unions (FCUs), to use the “notice-and-access” method (aligned with securities law rules) with respect to the delivery of documents in connection with a meeting of shareholders, members or policyholders, as applicable. While these changes are well overdue, the proposed amendments are narrowly written—if notice-and-access is superseded or supplemented by rules that permit access equals delivery (or some other rule that could be adopted in the future by the securities regulators), the amendments as written would not permit the use of that other mechanism. Accordingly, we would have liked to have seen amendments drafted more broadly to refer to applicable securities law delivery requirements in force at the time (whether that be the notice-and-access method, access equals delivery or other rules that could be adopted in the future), which would avoid the problem of continued disharmony between the corporate statutes and securities laws.

Federal credit unions

Continuance/continuance and amalgamation

The Budget Bill proposes to amend the BA to permit an FCU that results from a continuance (or a continuance and amalgamation with an existing FCU) to seek transitional relief from the Minister of Finance (the Minister) in respect of the application of one or more provisions of the BA financial consumer protection framework for a period of up to three years from the date on which its letters patent are issued. The Minister would need to be satisfied that the resulting FCU has an acceptable plan to bring itself into compliance with the framework within that period.

The proposed amendments also aim to simplify amalgamations between FCUs and provincial credit unions by removing the requirement for the FCU to seek member (and shareholder, as applicable) approval by special resolution² if the following are met:

• the total assets of the provincial credit union do not exceed 25% of the total assets of the FCU; and
• the amalgamation is approved by a resolution of the directors of the FCU and by separate special resolutions of the members and shareholders, if any, of the provincial credit union.

The resolutions must also provide that (1) the by-laws of the resulting FCU, including any by-laws respecting shares, will be the same as those of the FCU before the amalgamation, and that (2) the head office of the resulting FCU will be in the same province as the head office of the FCU before the amalgamation. One of the challenges that could unfortunately limit the useability of this provision is that the amalgamated corporation can not retain any pre-existing classes of shares of the provincial credit union (other than membership shares), since the share capital by-laws must be the same as the existing FCU. To the extent that an FCU is able to use this provision, it will be required to disclose to all its members that it has entered into an amalgamation agreement and that the amalgamation is subject to the approval of the members and shareholders (if any) of the provincial creditor union, the Minister and the applicable provincial regulatory authorities.

Asset transactions with provincial credit unions

The Budget Bill also proposed amendments to specifically contemplate the purchase by an FCU of all or substantially all of the assets of a provincial credit union, including that the consideration for the acquisition of assets may be cash or fully paid securities of the FCU, or in part cash and in part fully paid securities of the FCU, or any other consideration provided for in the purchase agreement. The proposed amendments intentionally use the term “securities” instead of “shares” because “share” is defined in the BA to not include membership shares. The Minister will be permitted to grant transitional relief to the FCU consistent with the transitional relief currently available to FCUs that have continued under the BA (including the new proposed transitional relief in respect of the financial consumer protection framework provisions discussed above). Corresponding changes are also proposed to the Canada Deposit Insurance Corporation Act to grant transitional relief, in respect of the deposits of the provincial credit union, that is consistent with the relief that is currently available on a continuance. In addition, the BA will be amended to permit an FCU to appoint one or more directors of the provincial credit union to serve as additional directors of the FCU for a term expiring not later than the close of the FCU’s next annual meeting.

A Ministerial approval will be required to approve the asset purchase agreement, and the Minister will be required to make a decision in respect of an application within 45 days of the Superintendent certifying receipt of the application (which receipt will be provided once the Superintendent is of the opinion that the application includes all required information, material and evidence), but the Minister may extend the period by an additional 45 days if the Minister considers it appropriate to do so.

However, a materiality threshold was not also included, which would have exempted transactions from Ministerial approval where the value of the provincial credit union’s assets is below a certain threshold when compared to the value of the FCU’s assets. And while the proposed amendments would appear to be drafted to help ensure a more expedient Ministerial approval process, in practice (and based on experience with similar provisions that already exist in the BA), the receipt of an application issued by the Superintendent could take months to obtain; however, given the clear intention from the Government to help facilitate FCU growth, we are optimistic that the Office of the Superintendent of Financial Institutions will take a measured approach to reviewing applications of this nature based on the relative size of the provincial credit union as compared to the FCU. We would also highlight that, while the proposed changes to the BA are a positive step, corresponding changes to most of the provincial credit union statutes would still need to be made in order to permit a provincial credit union to sell its assets to an FCU³.

Motor vehicle leasing

The Budget Bill is proposing amendments to the BA that would permit a provincial credit union that continues as an FCU (or that amalgamates with an FCU) to engage in the following activities, with Ministerial approval, if such activities were carried on by the credit union (or its subsidiary) prior to its continuance: (a) the leasing of motor vehicles in Canada for the purpose of extending credit to a customer or financing a customer’s acquisition of a motor vehicle; or (b) providing temporary possession of motor vehicles to customers in Canada for a purpose other than to finance a customer’s acquisition of a motor vehicle. The Budget Bill also provides that Ministerial approval to engage in these activities may also be sought by an existing FCU that was continued from a provincial credit union if that credit union (or its subsidiary) was engaging in such activity on the day before it was continued.