by Scott Horner of Osler, Hoskin & Harcourt LLP
We recently represented a US bank in Ontario on a secured refinancing for a Canadian borrower. The Canadian borrower owns a number of Canadian and US subsidiaries (the Canadian borrower and its subsidiaries, the “Loan Parties”) which delivered secured guarantees. US counsel for the bank agreed to a request of US counsel for the Loan Parties that the US security agreement contain only a grant of a security interest (in contrast to also including an assignment, charge etc. by way of security like the US security agreement did on the original financing). The bank’s US counsel stated that they accepted this request on the basis that the Uniform Commercial Code applied to insurance proceeds.
Continue Reading »
Article by Jeffrey S. Graham, Stephen J. Redican and Jenna Grant of Borden Ladner Gervais LLP
BACKGROUND
The Office of the Superintendent of Financial Institutions (“OSFI”) has released a final version of revised Guideline B-6 – Liquidity Principles (“Guideline”). The Guideline has been updated to incorporate the principles set out in the Basel Committee on Banking Supervision (“BCBS”), Principles for Sound Liquidity Risk Management and Supervision (2008) (BCBS “Principles”).
In early 2009, OSFI had released an advisory stating its expectations concerning the adoption by banks and other deposit taking institutions’ (“DTIs”) of the updated BCBS Principles. At that time, OSFI noted its expectation that, in addition to meeting the minimum standards of the existing Guideline, DTIs should also comply with the BCBS principles.
Continue Reading »
By Blair W. Keefe, Peter A. Aziz and Eli Monas of Torys LLP
The Canadian federal government recently published three regulations that will impose additional requirements and restrictions on the use of credit card cheques, on cheque hold periods and on the provision of new optional products or services.
Proposed amendments to the Credit Business Practices Regulations would require federally regulated financial institutions (FRFIs) to obtain the express consent of borrowers before distributing credit card cheques. The Access to Funds Regulations will reduce the maximum cheque hold period for consumers and small and medium-sized enterprises. In addition, the Negative Option Billing Regulations will require FRFIs to obtain consumers’ express consent before providing a new optional product or service.
The Credit Business Practices Regulations were published in the Canada Gazette on March 10, 2012, for a 30-day comment period and will come into force on the date on which they are registered. The other two regulations were published on March 14, 2012, in final form and will come into force on August 1, 2012. The Financial Consumer Agency of Canada (FCAC) will oversee compliance with each regulation.
The details of these regulations are discussed below.
Continue Reading »
By Blair Keefe, Dan Logan, Peter Aziz and Eli Monas of Torys LLP
The Financial Consumer Agency of Canada (FCAC) issued several guidance notes and decisions affecting the payments and card business of federally regulated financial institutions (FRFIs) and others in 2011. In this bulletin, we highlight some of the FCAC’s more important pronouncements.
Background
In January 2010, the Canadian government introduced the Credit Business Practices Regulations1 (CBP Regs) and amended the Cost of Borrowing Regulations (CoB Regs) under the Bank Act, Trust and Loan Companies Act and the Insurance Companies Act to enhance the protection of consumers of financial products and to better ensure that consumers have access to credit on terms that are fair and transparent. In addition, in August 2010, the government introduced a Code of Conduct for the Credit and Debit Card Industry in Canada (the Code) to promote greater transparency for business owners and consumers who use credit and debit cards. In addition to monitoring various other consumer provisions applicable to FRFIs, the FCAC monitors compliance with, and provides guidance on the interpretation of, these regulatory requirements.
Continue Reading »
by Nick Miller of Clarity Advantage
In which we are reminded to engage our clients on what’s top of mind for them right now rather than on what’s top of mind for us.
I live near Boston, Massachusetts. The Red Sox are finished. Winter is coming. Around the Miller household, we are preparing our house and garden for the winter. Storm windows hung up, hosta cut down, lime and fertilizer spread around. Early days, still, and we’re working our way through the list, week by week, toward the inevitable arrival of sharply colder temperatures and snow.
As a business owner, I’m feeling like I’m in the same position now – another economic winter is coming, and I need to prepare.
The news coming out of the Eurozone ranges from “not encouraging” on a good day to “frightening” on other days. U.S. and foreign stock market heaves and rolls leave me sea sick as my investment values bounce up and down, almost carelessly. The political and regulatory environment in this country leaves me shaking my head. Our clients’ outlooks for 2012 range from guarded optimism to bracing for a crash.
Continue Reading »
John Eric Pollabauer posted this question to the Canadian Commercial Lenders group on LinkedIn:
“What is the current status regarding commercial lending practices in Canada as we are heading into the month of October, 2011? Is it business as usual or ???”
For myself [EG], account managers from two financial institutions tell me that at the same time as they are being pushed to produce, credit is being very difficult on each deal. The result is a lot of resulting stress and unhappiness.
I believe it helps everyone when we share our experiences with others. Please enter your comments below. I will then publish them for you, but omit your name and institution, unless you wish otherwise.
By Richard Dusome of Gowling Lafleur Henderson LLP
When structuring a new financing for a corporate borrower, lenders typically obtain postponements from all other creditors and shareholders advancing loans to the proposed borrower. Postponements establish the lender’s priority to receive payment from the borrower vis-à-vis these other known creditors.
However, some shareholders who have not actually advanced loans to the borrower may still hold shares that contain a right of retraction that will require the borrower, at the shareholder’s option, to purchase the retractable shares at a pre-arranged price following the issuance of an exercise notice. The retraction serves to create a new debt obligation out of what was originally an equity holding.
Continue Reading »
By Mike Todd of Gowling Lafleur Henderson LLP
Lenders should be aware that one of the waivers found in most standard form guarantees of certain statutory rights is not effective under the British Columbia Personal Property Security Act (“BCPPSA”).
This was the result in the recent BC Supreme Court decision HSBC Bank Canada v. Kupritz. The facts of that case are unremarkable. A trucking company went out of business leaving an unpaid debt to the bank of approximately $1 million. The bank was unable to recover that amount from the company’s assets and therefore sued the two principals of the company on their unlimited guarantees. One of the principals defended the claim on the basis that the bank had breached its obligations to him under the BCPPSA by failing to secure the company’s assets, improvidently realizing on the collateral seized, failing to provide notice of the impending sale of the collateral and failing to provide an accounting.
Continue Reading »
By Lisa Brost and Jeffrey Levine of McMillan LLP
Generally speaking, banks’ customers have no immediate right to the proceeds of the cheques that they deposit. Under the terms of most banking services agreements, banks can place holds on cheques deposited by their clients for a reasonable period of time. Further, even if a hold is not put on a cheque, any advance of credit by a bank on deposit of a cheque is usually provisional in nature. The cheque may still be returned, or dishonoured, by the bank on which the cheque is drawn, leaving the bank that provided provisional credit in respect of the cheque with recourse to recover such amount from its client.
These guiding principles of the cheque payment process were recently considered by the Ontario Superior Court of Justice in Re*Collections Inc v The Toronto-Dominion Bank.1 The plaintiffs in this action moved to certify a class action against three of Canada’s six major banks (the “Banks”). In the proposed class action, the plaintiffs sought to recover profits that the Banks allegedly earned at their customers’ expense through use of the proceeds of held cheques between the time that cheques were deposited by their customers and the time that the proceeds of the cheques were made available to the customers.
Continue Reading »
Here are a few characteristics of the ideal banking account manager for a business, based on feedback from the businesses I work with:
- Returns your calls promptly
- Answers your questions with clarity and authority
- Always has time to consult with you about your needs and performance
- Suggests techniques for innovative loan structuring
Continue Reading »
by Nick Miller of Clarity Advantage
In which we are reminded that the value we create in our sales conversations is proportional to the quality of the questions we ask and whose interests we are attempting to serve by asking them.
This is a story about a sales call. A very experienced, productive (among the top 25% of his sales force) commercial banker took me on a call to one of his customers. Since rates are low and many banks are urgently seeking to lend money, the lender wanted to refinance the company’s building which, today, is financed by another bank. The objective of the call was to gain the company’s agreement to consider a proposal for refinancing the building.
The lender opened the call by indicating he wanted to discuss refinancing the building, then worked through a series of “fact” questions (how much is outstanding on the existing loan, when is the maturity date of the current loan, how big is the balloon payment at the end, what’s your current interest rate, who’s your attorney, when do you want to close), then led the conversation as follows:
Continue Reading »
by Chris Huband of Blake, Cassels & Graydon LLP
Bare trustees or nominees are often encountered in mortgage lending situations. Both borrowers and lenders need to know how to deal with a bare trustee in order to avoid potentially serious consequences.
What is a Bare Trustee?
A bare trustee, or nominee, arrangement exists where:
Continue Reading »
By Andrea Lockhart of Osler, Hoskin & Harcourt LLP
A recent decision of the Ontario Court of Appeal illustrates that secured creditors should address their priority position relative to all other creditors of their borrower in order to achieve a complete subordination of competing security. Failure to do so in this case resulted in circular priorities that the Court was left to resolve. In light of the Court of Appeal’s decision, secured creditors should ensure they are a party to all subordination agreements with the debtor in order to achieve their expected result.
Continue Reading »
by Diane Kazarian, Ryan Leopold, George Sheen and John MacKinlay of PricewaterhouseCoopers
In a time of accelerating change, Canadian banks have done far more than what’s necessary to survive over the past year. As many global banks struggled to regain their pre-crisis position, Canada’s Big Six banks leveraged their well managed, well regulated and well capitalized standing to actively pursue their growth strategies. And the effort paid off: the 2010 combined net income of the Big Six was $20.4 billion, exceeding 2009 net income by more than $6 billion and eclipsing the previous record of $19.5 billion set in 2007.
With the events of the past year in mind, we spoke with a number of Canadian analysts and portfolio managers to understand their opinion on what the future holds for Canadian banks. Overall, managing complexity, pursuing growth strategies and transforming through innovation were the overriding considerations to stay competitive. As is often the case, the real challenge going forward is how to execute while many pervasive risks remain.
Continue Reading »
by Mark McElheran of Stikeman Elliott LLP
It remains to be seen whether the reform fever that is presently sweeping through the US securitization market will continue unabated across the 49th parallel but there is no question that these monumental reforms have given rise to a considerable amount of discussion and debate over the appropriateness of similar reforms in Canada. This was perhaps inevitable given the degree of economic integration between the two countries and the fact that both have recently suffered through significant ABS-induced crises (albeit on entirely different scales).
Continue Reading »
Tags: bank, bankruptcy, bubbles, Canada, debt, Economics, finance, insolvency, lender, securitization, trend
