Ottawa has laid out its final regulations for banks aimed at avoiding the use of taxpayer dollars to bail out financial institutions in the unlikely event of a failure.
Under the so-called bail-in regime, authorities could convert certain kinds of unsecured, long-term debt of a failing lender into shares to stabilize the financial institution, rather than asking taxpayers to fund a government bailout.
The new regulations, published in the Canada Gazette and which take effect in September, are part of a raft of measures put in place by regulators globally to prevent a recurrence of the government bailouts needed during the 2008 financial crisis.
Unlike in the U.S. and the U.K., Canada's banks did not need a bailout, but the regulations shore up the country's banking framework and outline a contingency plan for future crises.
David Beattie, senior vice-president at ratings agency Moody's, says the regulations are positive for depositors and taxpayers, but affected banks will be required to have more capital on hand.
The federal financial services regulator also released updated guidelines for Canada's largest banks concerning capital requirements and the minimum capacity to absorb losses in the event of a failure.