Confirmation of Canadian Bank Law

Logo of the Office of the Superintendent
 of Financial Institutions, Ottawa

Joseph Perella of Perella Weinberg told me after the recent panel discussion on the U.S. Economy at Guild Hall in East Hampton that the Canadian bank regulatory authorities have the right to send a representative to the board meetings of large banks. What I found out online is that the Minister of Finance requires the Office of the Superintendent of Financial Institutions to send a representative to the Canada Housing and Mortgage Corporation board meetings.

I have today heard from OSFI confirming that Mr. Perella is correct and providing a citation of the law. OSFI says that attendance is their option, a RIGHT (not an obligation) to send a representative to any board meeting of any bank subject to its jurisdiction.

Here is the OSFI message:

With respect to OSFI’s right to send a representative to a meeting of the board in this particular scenario, the applicable provision would be subsection 187(1) Bank Act. Please note that this is true of not only large banks, but all banks.  Other sections of the Bank Act, such as paragraph 643(2)(b) and subsection 187(1) are also relevant. 

U.S. bank supervisory bodies should have the same right. In an article on bank examinations that I co-authored with the late George Benston in the Journal of Money, Credit and Banking, included in his collected works, we found that existing bank examination practices were inadequate and some practices were misconceived. The right to attend bank board meetings, suitably exercised from time to time, would address some of the information gaps we identified and, more important, would raise the standards of bank disclosure.

The two referenced Canada Bank Act sections read as follows:

Meeting required by Superintendent and Attendance of Superintendent
187. (1) Where in the opinion of the Superintendent it is necessary, the Superintendent may, by notice in writing, require a bank to hold a meeting of directors of the bank to consider the matters set out in the notice. (2) The Superintendent may attend and be heard at a meeting referred to in subsection (1). 

Access to records of bank
643. (2) The Superintendent or a person acting under the Superintendent’s direction
(a) has a right of access to any records, cash, assets and security held by or on behalf of a bank; and
(b) may require the directors, officers and the auditor or auditors of a bank to provide information and explanations, to the extent that they are reasonably able to do so, in respect of the condition and affairs of the bank or any entity in which the bank has a substantial investment. 

• 1999, c. 28, s. 46;
•  2001, c. 9, s. 176;
•  2012, c. 5, s. 76.