The Cyprus model for Canada’s big banks

• The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that,in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.
• Systemically important banks will continue to be subject to existing risk management requirements, including enhanced supervision and recovery and resolution plans.

This risk management framework will limit the unfair advantage that could be gained by Canada s systemically important banks through the mistaken belief by investors and other market participants that these institutions are “too big to fail.”

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