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Financial Institutions Act

[RSBC 1996] CHAPTER 141

Part 9 — Deposit Insurance and Stabilization of Credit Unions

Definitions and interpretation for Part

260  (1) In this Part:

"assessment" means an assessment under section 268 (1) or 271 (1) by the deposit insurance corporation;

"credit union" does not include a central credit union;

"debenture" means a debenture issued by the deposit insurance corporation under this Part;

"deposits", used as a noun in relation to a credit union, means the total of

(a) money on deposit,

(b) money invested in non-equity shares issued by the credit union, and

(c) declared but unpaid dividends on the non-equity shares;

"money on deposit" means the unpaid balance of the aggregate of money received by a credit union from or on behalf of a depositor in the course of carrying on deposit business for which the credit union

(a) has given or is obligated to give credit to the depositor's account or has issued or is obligated to issue a receipt, certificate or other instrument in respect of which the credit union is primarily liable, and

(b) is obligated to repay the money to the depositor on a fixed day, on demand by the depositor, within a specified period of time following demand by the depositor or at specified intervals for a specified period of time,

including any interest accrued or payable to the depositor.

(2) For the purpose of the definition of "money on deposit", if a credit union has deposited money into its own deposits on behalf of itself as trustee, it is deemed to be obligated to repay the money to the same extent as it would have been obligated to repay the money had the money been deposited by a trustee other than itself.

Division 1 — Credit Union Deposit Insurance Corporation of British Columbia

Credit Union Deposit Insurance Corporation of British Columbia

261  (1) The Credit Union Deposit Insurance Corporation of British Columbia continues as a corporation to administer and operate the fund.

(2) A person who is a member of the commission is also a director of the deposit insurance corporation unless the Lieutenant Governor in Council orders that the person

(a) is not, or

(b) ceases to be

a director of the deposit insurance corporation.

(3) The directors of the deposit insurance corporation are its only members.

(4) The Lieutenant Governor in Council may, after consultation with the directors of the deposit insurance corporation, appoint an individual as the chief executive officer of that corporation.

General powers of the deposit insurance corporation

262  For the purposes of operating and administering the fund, the deposit insurance corporation

(a) may draw, make, accept, endorse, execute and issue promissory notes, bills of exchange, warrants and other negotiable and transferable security instruments,

(b) may raise or borrow money and secure its obligations in amounts and in a manner it sees fit, with or without security, all of which money must be paid into the fund and forms part of the fund, and the deposit insurance corporation may charge the whole or any portion of the fund or of the assets of the fund as security,

(c) may acquire or dispose of property,

(d) may guarantee the obligations of a credit union,

(e) alone or jointly with any other corporation, may provide insurance or arrange for insurance

(i)   for directors, committee members, officers and employees of credit unions and of subsidiaries of credit unions, and

(ii)   that may be required under section 206, and may charge premiums for the insurance,

(f) may reinsure the liability of the fund with one or more insurers in an amount the commission considers appropriate, and

(g) has the capacity to accept all powers, privileges and immunities that may be conferred on the deposit insurance corporation under the Canada Deposit Insurance Corporation Act, and to act as the agent of the Canada Deposit Insurance Corporation.

Accounting records

263  The deposit insurance corporation

(a) must maintain books of account in a form and in a manner that facilitates the preparation of its financial statements and other financial reports in accordance with generally accepted accounting principles, and

(b) must prepare its annual financial statements in accordance with generally accepted accounting principles and the regulations.

Appointment of auditor

264  The deposit insurance corporation must appoint an auditor annually.

Auditor's report

265  On receipt of the auditor's report, the deposit insurance corporation must deliver a copy to the commission and to each credit union immediately.

Division 2 — Deposit Insurance

Guarantee of credit union deposits

266  (1) In this section:

"depositor" includes 2 or more depositors, considered together as a single unit, who own a separate deposit in a credit union;

"guarantee" means the guarantee of the deposit insurance corporation under subsection (2).

(2) In the event of a credit union failing, neglecting or refusing to pay to a depositor of the credit union all or part of any of the depositor's deposits in the credit union, as and when payable, redeemable or withdrawable, then payment out of the fund of the deposit is guaranteed, subject to and in accordance with this section and the regulations, by the deposit insurance corporation.

(3) In the event of failure, neglect or refusal described in subsection (2), a depositor of the credit union, by written notice that is in a form satisfactory to the commission and is delivered to the deposit insurance corporation, may claim the deposit to the extent guaranteed under the guarantee.

(4) As soon as practical after receipt of notice in accordance with subsection (3) of a depositor's claim under the guarantee, if the commission is satisfied as to the correctness of the amount claimed, the deposit insurance corporation must pay out of the fund to the depositor the amount to which the depositor is entitled under the guarantee.

(5) The deposit insurance corporation may deduct from an amount to which a depositor is entitled under the guarantee any indebtedness of the depositor to the defaulting credit union.

(6) On payment under subsection (4) by the deposit insurance corporation of the amount to which a depositor is entitled under the guarantee,

(a) neither the deposit insurance corporation nor the defaulting credit union is obliged to see to the proper application of the payment,

(b) the deposit insurance corporation and the fund are discharged from further liability to the depositor for the separate deposits for which payment is made, and

(c) the deposit insurance corporation is subrogated for the amount paid to all the rights and interests of the depositor as against the credit union in respect of the separate deposits for which payment is made.

Fund

267  (1) The fund constituted under section 139 of the Credit Union Act, R.S.B.C. 1979, c. 79, is continued under the administration of the deposit insurance corporation.

(1.1) The deposit insurance corporation must hold the fund in trust for the purposes of administering and operating the fund in accordance with this Part.

(2) The deposit insurance corporation must pay from the fund all

(a) payments, claims and advances required to be paid out of the fund under this Act,

(b) expenses incurred in the maintenance and operation of the fund, and

(c) of its and the commission's expenses related to the administration, purposes and requirements of this Part.

Contributions to fund

268  (1) In each year, the commission by order may assess each credit union an amount not exceeding 3/10 of 1% of the total of all deposits with the credit union as at the date of the credit union's immediately preceding financial year end.

(2) Assessments under subsection (1) must be determined on the basis of the annual returns filed by the credit union with the superintendent under this Act or if no returns or inadequate returns have been filed by a credit union the commission may assess the credit union on an estimated basis, subject to adjustment on the filing of adequate actual returns.

(3) On grounds it considers proper, the commission by order may waive an assessment under this section as the assessment applies to one or more credit unions named in the order, and in that case, the amount of the assessment that is waived constitutes financial assistance to the named credit union or named credit unions, as the case may be, for the purposes of section 280.

(4) Subject to an order under subsection (3), the amount assessed under subsection (1) against a credit union

(a) is recoverable as a debt owing by the credit union to the deposit insurance corporation,

(b) is payable in accordance with the order making the assessment,

(c) bears interest from the due date of the assessment at the rate, if any, ordered by the commission, and

(d) may be charged as an expense of the credit union.

Issue of debentures

269  (1) In each year, instead of or in addition to making an assessment under section 268 (1), the commission may order each credit union to purchase debentures issued by the deposit insurance corporation in an amount not exceeding 1/2 of 1% of the total of all deposits with the credit union as at the date of the credit union's immediately preceding financial year end, and section 268 (2) applies.

(2) The commission may

(a) set the rate of interest and other terms and conditions of a debenture referred to in subsection (1) of the deposit insurance corporation, and

(b) order the deposit insurance corporation to secure payment of the debenture by a charge on the fund.

Redemption of debentures

270  (1) The commission may order each credit union

(a) to tender for redemption by the deposit insurance corporation the debentures specified in the order that have been issued to the credit union by the deposit insurance corporation, and

(b) to purchase other debentures issued by the deposit insurance corporation in place of the debentures tendered for redemption under an order made under paragraph (a),

and, for the purposes of this section, a debenture is redeemable by the deposit insurance corporation before maturity of the debenture.

(2) If the deposit insurance corporation redeems debentures held by a credit union and the commission orders that the credit union purchase other debentures, the deposit insurance corporation must issue debentures in an amount equal to all or a part of the debentures redeemed as the commission may determine in the order, and the credit union must purchase the debentures.

(3) Section 269 (2) applies to debentures issued by the deposit insurance corporation under subsection (2) of this section.

Fund impaired

271  (1) If in the commission's opinion the fund is impaired, or is about to be impaired, the commission

(a) must so inform the minister by written notice, and

(b) by order may assess each credit union an amount not exceeding 1/12 of 1% of the total of all deposits with the credit union as at the date of the credit union's immediately preceding financial year end.

(2) An assessment ordered under this section is in addition to any assessment made under section 268 and must not be ordered more than once in any one calendar year.

(3) Section 268 (2) and (4) applies to an assessment ordered under subsection (1) of this section.

(4) If, at any time during the 12 months immediately after an assessment is ordered under subsection (1), the fund in the commission's opinion is impaired, the commission must report its opinion and the reasons for that opinion to the minister, who must refer the report to the Lieutenant Governor in Council.

(5) Despite section 72 of the Financial Administration Act or the regulations referred to in that section, the Lieutenant Governor in Council, if in concurrence with the commission's opinion that the fund is impaired, may

(a) specify the amount that the Lieutenant Governor in Council considers necessary to repair the fund, and

(b) direct that the Minister of Finance on behalf of the government enter into a guarantee of indebtedness that the deposit insurance corporation incurs to repair the fund

(i)   on terms approved by the Lieutenant Governor in Council, and

(ii)   not exceeding the amount specified under paragraph (a).

(6) If the Minister of Finance receives a direction under subsection (5), the Minister of Finance must enter into the guarantee in accordance with the direction.

Investment by deposit insurance corporation

272  (1) The deposit insurance corporation may make investments

(a) [Repealed 2002-33-8.]

(b) in shares of a central credit union, if the investment does not exceed 3% of the fund's assets,

(c) in the form of deposits kept in a central credit union or a chartered bank, or

(d) of any prescribed type.

(2) The deposit insurance corporation must not

(a) make a deposit in or purchase non-equity shares of a credit union other than as authorized by subsection (1) (b) or (c), or

(b) purchase equity shares in a credit union,

except for the purpose of granting financial assistance to the credit union as permitted under section 280.

Acts not applicable

273  (1) The Securities Act does not apply to or in respect of the deposit insurance corporation.

(2) [Repealed 2011-29-115(b).]

(3) The Business Corporations Act, other than section 102 of that Act, does not apply to or in respect of the deposit insurance corporation.

Fund protection symbol

274  (1) The commission may issue to each credit union a mark, sign or device, designating coverage under the fund, that may be displayed at the office of the credit union and reproduced on the credit union's stationery or advertising.

(2) A credit union must not represent, advertise or hold out that the credit union or any of its shares or deposits or money invested in or deposited with it is protected or insured under this Act otherwise than by the use of marks, signs, advertisements or other devices

(a) authorized by the commission, or

(b) in accordance with prescribed standards of advertising.

(3) A credit union must not represent, advertise or hold out that its deposits or shares other than those guaranteed under section 266 are guaranteed or insured under this Act.

Division 3 — Stabilization

Supervision of credit union

275  In any of the following circumstances, the commission by order may declare a credit union to be subject to the supervision of the commission:

(a) the credit union requests and the commission determines that financial assistance should be provided from the fund;

(b) the credit union has failed to pay its liabilities, or in the opinion of the commission, will not be able to pay its liabilities as they become due and payable;

(b.1) the assets of the credit union are not, in the opinion of the commission, sufficient to give adequate protection to the credit union's depositors and creditors;

(b.2) the liquidity or capital of the credit union has, in the opinion of the commission, reached a level or is eroding in a manner that may detrimentally affect its depositors or creditors;

(c) in the commission's opinion the credit union is conducting its affairs in a manner that

(i)   might reasonably be expected to harm the interests of depositors, or the interests of persons for whom a credit union acts in a fiduciary capacity, or

(ii)   tends to increase the risk of claims against the fund;

(d) the credit union or an officer of it does not file, submit or deliver a report or document required to be filed, submitted or delivered under this Act within the time limited under this Act;

(e) the credit union has failed to comply with the commission's order issued under section 244;

(f) the credit union requests in writing that it be subject to supervision;

(g) the credit union has contravened or is in contravention of a provision of Part 5;

(h) the credit union is not complying with its own investment and lending policy.

Duration of supervision

276  If

(a) immediately before September 15, 1990 a credit union is subject to supervision of the board under the Credit Union Act, R.S.B.C. 1979, c. 79, or

(b) the commission under section 275 declares a credit union to be subject to supervision,

the credit union remains subject to supervision by the commission until

(c) the credit union applies in writing to the commission to be released from supervision, stating reasons in support of its application, and the commission consents to the release,

(d) the credit union is wound up, or

(e) the commission orders that the credit union is released from its supervision.

Orders in relation to credit union that is subject to supervision

277  If a credit union is subject to the supervision of the commission, the commission may make orders

(a) requiring the credit union to correct any practices that in the commission's opinion are contributing to the problem or situation that caused the credit union to be ordered subject to supervision,

(b) requiring a credit union and its directors, committee members, officers and employees to refrain from exercising, in whole or in part, the powers of the credit union or of its directors, committee members, officers and employees, or any of them, as may be specified in the order,

(c) establishing guidelines for the operation of the credit union,

(d) requiring the credit union not to declare or pay a dividend or to restrict the amount of dividend to be paid to a rate or an amount set by the commission,

(e) appointing an individual, who may be an employee of the commission, as the administrator of the credit union if the commission considers that the credit union

(i)   is not otherwise likely to be released from supervision within a reasonable period of time, or

(ii)   has breached a term or condition imposed or a requirement of an order made by the commission while supervising the credit union,

and may terminate the appointment,

(f) if an administrator has been appointed under paragraph (e), terminating the appointment of and removing any or all of the directors and officers of the credit union and appointing directors and officers to fill any vacancy, and

(g) if an administrator has been appointed under paragraph (e) and the capital base of the credit union is less than the amount prescribed for the purposes of this paragraph, requiring

(i)   one credit union to amalgamate with another credit union,

(ii)   the credit union to dispose of all or substantially all of its assets and liabilities to another credit union, or

(iii)   that the credit union be wound up.

Additional circumstances in which section 277 orders may be made

277.1  If a credit union is not subject to the supervision of the commission, but the commission considers that

(a) one or more of the circumstances referred to in section 275 apply to the credit union, and

(b) supervision would not be adequate to ensure that a guarantee under section 266 would not need to be invoked,

the commission may make an order under section 277 with respect to the credit union as though that credit union were subject to the supervision of the commission.

Assistance to administrator in relation to section 277 orders

277.2  The commission may appoint one or more persons to assist the administrator in the management of a credit union that is subject to an order under section 277.

Administrator's powers

278  If the commission appoints an administrator of a credit union, the administrator has the following powers, and must report regularly to the commission as to the exercise of them:

(a) to carry on, manage and conduct the operations of the credit union;

(b) in the name of the credit union to preserve, maintain, realize, dispose of and add to the property of the credit union;

(c) to receive the income and revenues of the credit union;

(d) to exercise all the powers of the credit union and of the directors, officers, credit officers and credit committees;

(e) to exclude the directors of the credit union and its officers, committee members, employees, servants and agents from the property and business of the credit union.

Administrator

279  (1) On being discharged from duties, an administrator appointed by the commission must fully account to the commission for the administration of the credit union.

(2) Unless the commission otherwise orders within 30 days after completion of the accounting, the administrator is released from all claims by

(a) the credit union or a member, or

(b) a person claiming under the credit union or a member,

other than claims arising out of fraud or dishonesty.

(3) Unless the commission approves payment of all or part of the remuneration out of the fund, the credit union must pay the administrator's remuneration in an amount established by the commission.

Financial assistance

280  (1) The deposit insurance corporation may grant financial assistance to a credit union in any manner the commission thinks fit

(a) whether directly from the fund or as a charge against the fund or otherwise, and

(b) whether conditionally or unconditionally.

(2) Without limiting subsection (1), the deposit insurance corporation may grant financial assistance to a credit union by purchasing equity shares of the credit union.

(3) Despite section 41 of the Credit Union Incorporation Act, if the deposit insurance corporation holds equity shares of a credit union, the deposit insurance corporation is a member of the credit union and has the rights and benefits of a member.

Division 4 — Stabilization Authority

Stabilization authority defined

281  In this Division, "stabilization authority" means the central credit union designated under section 282.

Designation

282  The Lieutenant Governor in Council may make orders

(a) designating a central credit union as the stabilization authority for the purposes of this Division, or

(b) revoking a designation made under paragraph (a).

Mandatory membership

283  It is a condition of every business authorization issued to or held by a credit union during the period

(a) after designation of a central credit union as the stabilization authority, and

(b) before revocation of that designation

that the credit union is a member of the stabilization authority.

Revocation of stabilization authority status and delegated powers

284  If a central credit union that is the stabilization authority resolves to be wound up voluntarily, or is ordered by the Supreme Court or the commission to be wound up, then

(a) the central credit union's designation under section 282 as the stabilization authority and any delegation under section 285 is immediately revoked without the necessity of an order under either section,

(b) the central credit union must repay to the deposit insurance corporation the unused balance of advances made to it by the deposit insurance corporation under section 287, and

(c) the central credit union must deliver to the commission

(i)   a proper accounting for advances made to it by the deposit insurance corporation under section 287, and

(ii)   a written report on its activities as the stabilization authority since the date of the last report submitted under section 288.

Commission may delegate to stabilization authority

285  (1) If

(a) a credit union is under the supervision of the commission, and

(b) the commission is satisfied that

(i)   the stabilization authority, if any, is willing and able to undertake the supervision of that credit union, and

(ii)   the delegation of powers to the stabilization authority is unlikely to increase the risk of claims against the fund,

the commission by order may delegate to the stabilization authority any of the commission's powers under section 277 (a) to (d) in relation to that credit union.

(2) The commission may revoke a delegation made under subsection (1).

Stabilization authority is subject to direction

286  In a manner consistent with the responsibilities delegated to it under this Act, the stabilization authority must follow policy directions issued by the minister with respect to the exercise of the delegated powers under this Act.

Advance from fund to stabilization authority

287  If the stabilization authority is authorized under a delegation made under section 285 (1) to exercise powers of the commission in relation to a credit union, the commission may authorize the deposit insurance corporation to advance money from the fund to the stabilization authority for use in supervising or providing financial assistance to a credit union.

Annual report of stabilization authority

288  Not later than April 30 of each year, the stabilization authority must submit to the commission a report on the activities of the stabilization authority for the 12 month period ending the previous December 31.

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