Level 1 flows of the Canadian operations of a large foreign bank, with a large French bank as the worked example: the Toronto branch (a Schedule III full-service foreign bank branch under the Bank Act, supervised by OSFI, with a Montreal office, no capital of its own and a capital equivalency deposit instead, deposits of C$150,000 and up and no CDIC cover), the group’s dealers in Paris and New York serving the Canadian institutions under the international dealer exemption, the New York branch of the same legal entity next door, and the head office in Paris behind them. Columns are the parties, rows the phases; numbered steps are messages, bookings, contracts, payments or reports between them, with the channel or infrastructure in the pill. Hover a step for the detail, click it or use the walkthrough to be taken through the diagram step by step. The groups are what makes a foreign bank different from a domestic one, in Canada’s version: structure and booking, funding (the Canadian dollar through the dollar, the Bank of Canada beside the correspondent), Canadian-dollar clearing, corporate banking, markets abroad and through the branch, the CED, liquidity and resolution, reporting and control. The product lifecycles themselves are on the Canadian sell-side page; here the steps that differ are who books, who funds and who reports. Canadian market conventions and CAD throughout; all numbers illustrative. New to this? Begin with Start here.
Area
Product
Structure and Booking
Funding: the Canadian Dollar and the Bank of Canada
Canadian-Dollar Clearing
Corporate Banking
Markets: Abroad and Through the Branch
The CED, Liquidity and Resolution
Reporting and Control
How the diagrams work, the flow common to all 19 diagrams, a map of the flows, which entity books each and what it takes in funding, capital and reporting, and a glossary.
What a foreign bank is in Canada and where its business books: a Schedule III full-service branch in Toronto with a deposit instead of capital and a floor on its deposits instead of insurance, the group’s dealers abroad serving the Canadian institutions under the international dealer exemption, the New York branch next door as the same legal entity; one client’s business across them; the back-to-back with Paris that is a booking inside one bank; and the Canadian-dollar book at home in Toronto with the global books passing through Paris and New York.
The entitiesThe Toronto branch (a Schedule III full-service branch under the Bank Act, OSFI-supervised, no capital of its own, the CED instead), the dealers in Paris and New York under the exemption, the New York branch of the same bank, the head office in Paris.
BookingLoans, deposits of C$150,000 and up, FX and swaps in the branch; the euro bonds in the Paris dealer; the dollars in New York; no Canadian dealer and no Schedule II subsidiary.
Risk transferClient trades moved to Paris or New York by internal transfer inside one legal entity: no intragroup contract, nothing to report, clear or margin between the offices.
The global dayHong Kong, Paris and London, then Toronto and New York together; the CAD book opens and closes in Toronto and is quoted from Paris overnight; the CAD legs settle through the correspondent on Lynx.
ControlThe booking documentation, the transfer pricing under the treaty, OSFI’s returns and the ECB’s market risk capital; three regulators reading three closes.
Where a French bank’s Canadian dollars come from: two swaps from the euro (a dear one into dollars, a cheap one into Canadian dollars) placed through the inter-branch account from New York, the wholesale deposits of C$150,000 and up and the bearer notes the branch raises in Toronto, the loans priced on CORRA since the end of the bankers’ acceptances; and the Bank of Canada reached through a Schedule I correspondent that holds the settlement account and the facilities, unless the branch joins Lynx itself.
RaisingEUR/USD at a cost and USD/CAD at a pickup; the inter-branch account from New York; wholesale deposits of C$150,000 and up, not CDIC-insured; bearer deposit notes.
PlacingThe loans at the CAD FTP: CORRA plus the term spread, the two swaps and a liquidity premium a Canadian bank does not pay; Term CORRA since June 2024.
RollingThe three-month swaps roll at the bases of the day; the deposits and the notes ladder; the term through five-year cross-currency swaps and the branch’s MTNs.
Backstops and reportsThe correspondent’s account and intraday limit, the overnight market, the group; the Bank of Canada’s facilities at one remove; the ECB’s LCR by currency, OSFI’s returns.
The Toronto branch as the group’s Canadian-dollar clearer through a Schedule I correspondent: the group’s CAD nostro in Toronto by internal account, the instructions screened against the Canadian, EU and US lists, the correspondent paying on Lynx and the ACSS within its intraday limit and settling at CDS, the dollars through New York and the euros through Paris inside one bank, FINTRAC and the sanctions returns; and the direct participation the largest foreign branches choose.
Instructions inThe head office and New York by internal instruction, the Toronto clients through the portal, the CLS pay-ins; screened against SEMA and the UN Act lists, the EU list and OFAC.
Payments outThe correspondent on Lynx 00:30 to 18:30 ET and the ACSS overnight; CDS on T+1; the MT950 and camt.053 statements back.
The other currenciesDollars by internal instruction to New York and through Fedwire and CHIPS; euros to Paris and through T2; the Canadian dollar is the one currency bought from a local bank.
ControlFINTRAC for the EFTs of C$10,000 and up and the STRs; the frozen assets return to OSFI; the Bank of Canada over Lynx and Payments Canada; the correspondent’s own AML on the branch.
What a French bank lends from Toronto and to whom: a share of an Ontario mining company’s revolver under Ontario law on CORRA beside its dollar twin in New York, project finance for a critical minerals mine with EDC, the Canada Infrastructure Bank and the French ECA, a letter of credit issued in Paris and confirmed in Montreal inside one bank, and the Canadian subsidiaries of the French groups served with cash management, pooling and FX from Toronto and Montreal.
ClosingThe credit agreement under Ontario law with the EU lender’s sanctions clauses; the common terms and the security for the mine with the First Nations agreements; the MT700 inside one bank; the accounts across three offices.
FundingEach draw paid on Lynx through the correspondent at the CAD FTP; the Bpifrance-covered tranche; the euros by book entry on the inter-branch account; the pools swept to Toronto.
LifeInterest and waivers through the agent; the offtakes, the waterfall and the hedges; the documents paid at sight in Montreal; the FX and the intercompany flows to Paris.
ControlThe CRR’s weights, AnaCredit and the ECB’s stress test; OSFI’s returns and Guideline B-15 on climate; the C$150,000 floor and FINTRAC on the deposits; three sanctions lists and two export control regimes.
What a foreign bank without a Canadian dealer does in the Canadian markets: euro bonds sold to the Canadian institutions from Paris under the international dealer exemption, Canadian bonds bought for the group and the French investors through a Canadian investment dealer that bid in the Bank of Canada’s auction, and the branch’s own Canadian-dollar swap business under the Canadian clearing, margin, reporting and conduct rules with EMIR on the other side.
ExecutionThe Paris dealer sells from its SVT position; the Canadian dealer sells what it bid for at noon; the branch deals the swaps and gives the cleared ones up on Markitwire.
Post-tradeMiFIR to the AMF in Paris; the Canadian dealer’s MTRS 2.0 reports; the branch’s reports to a designated trade repository; the valuations under the conduct rule.
Clearing and settlementEuroclear France on T2S on T+2; CDS on T+1; LCH through the bank’s membership or CDCC through a member; CLS for the Canadian dollars.
ControlThe exemption’s notices and limits at the OSC and the AMF; NI 94-101, NI 93-101 and OSFI’s E-22 on the branch; the CRR’s CVA and market risk capital at the ECB.
The prudential frame of a French bank’s Canadian branch: no capital in Canada but a capital equivalency deposit of 5% of the liabilities at an approved custodian that OSFI can raise, the parent’s CRR capital and the SREP in Paris with OSFI relying through the memorandum and the college; liquidity with no Canadian ratio, a buffer by policy with the CED inside it, the ECB’s LCR by currency and the Bank of Canada at one remove; and resolution built on the SRB’s single point of entry at home and, failing that, the Superintendent’s control of the assets in Canada for the Canadian creditors, with no CDIC and the C$150,000 floor.
The CEDC$1,000,000,000 of GoC bonds and bills at an approved custodian, 5% of the liabilities under Guideline A-10; OSFI can raise it, condition the order and take the assets in Canada; a deposit, not capital or a pledge.
Home capitalCET1 13% under the CRR with the SREP’s Pillar 2; the ECB’s joint supervisory team and the ACPR; OSFI’s reliance through the memorandum and the college.
LiquidityNo OSFI ratio on a branch; a C$2,000,000,000 buffer by policy, half pledged as the CED; the branch inside the French bank’s LCR by currency and ILAAP; the Bank of Canada through the correspondent.
ResolutionSingle point of entry at the French parent under the BRRD; the branch stays open; the Winding-up and Restructuring Act ring-fences the assets in Canada for the Canadian creditors; no CDIC; the crisis management group.
How a French bank’s Canadian branch is reported and supervised: the calendar across two regimes (OSFI’s returns for branches with no capital return, the Bank of Canada’s statistics, FINTRAC, the trade repository, the dealers’ exemption notices, the Canadian taxes with the Part XIV branch tax at the treaty rate), the Paris line (one IFRS ledger with the branch as a segment of the French bank’s, one year-end, two audits), and the supervision (OSFI’s framework for branches, FINTRAC, the OSC, the ECB’s joint supervisory team, the college).
Daily and monthlyThe trade repository by T+1 and EMIR at home; FINTRAC within five days; the balance sheet to OSFI and the Bank of Canada monthly; the Toronto close in IFRS every evening.
Quarterly and annualOSFI’s returns on the loans, the deposits, the derivatives and the CED; COREP, FINREP and AnaCredit at home; the audited annual return; December 31 on both sides; the dealers’ exemption notices.
TaxesCorporate tax at 26.5% on the profit attributed under the treaty; the Part XIV branch tax at 5%; the withholding on the head office interest; the branch profit exempt in France.
SupervisionOSFI’s supervisory letter and overall risk rating with the CED and the order as levers; FINTRAC’s examinations; the OSC on the exemption; the ECB’s JST and the SRB on the bank; the college.
How to read a diagram
Columns are the partiesThe client on the left, then the Toronto branch (the French bank’s Schedule III full-service branch, with its Montreal office), the group entities (the head office in Paris, the New York branch of the same bank, the dealers in Paris and New York, the Hong Kong branch), the market and the Schedule I correspondent, the infrastructure (the Bank of Canada, Lynx and the ACSS, CDS and CDCC, CLS, Euroclear and T2 at home) and the regulators on both sides; the group entities share a lighter navy so the line between the branch and the rest of the group is visible on every diagram.
Rows are the phasesTime runs down the page: mandate, booking, funding, settlement, life of the relationship, control and reporting, or the phases of the flow in hand (the Asian, European and Americas hours; the order, the execution and the settlement). The band label gives the timing.
Arrows are stepsNumbered in order. Solid arrows are messages, deliveries or payments; dashed ones are standing flows like reports and statements; two-headed ones are exchanged or matched. Boxes on a lifeline are things a party does internally; an arrow between the branch and the head office or the New York branch is a booking inside one legal entity, an arrow between the branch and the Paris dealer is a contract between two.
Pills are the channelAmber for voice and chat, blue for electronic platforms and portals, rose for SWIFT messages, grey for infrastructure and regulatory systems (Lynx, CDS, the OSFI returns, the CED account, the trade repositories), teal for market data, lavender for the bank’s internal systems. Each pill shows a one-line definition on hover.
Figures are the worked exampleThe short figures under the arrows follow one illustrative trade, loan or day through the flow; the strip above the diagram summarizes it. Hovering a step shows the full detail; clicking it opens the walkthrough.
The worked example is a large French bank in TorontoA French société anonyme supervised by the ECB and the ACPR, with a Schedule III full-service branch whose principal office is in Toronto and a Montreal office for the Québec clients, no Schedule II subsidiary and no Canadian dealer, the New York branch of the same bank next door, the SRB as resolution authority and the euro as the home currency. A US or Japanese bank in Toronto, the more common case, changes the home side (the funding runs through one swap or none, and the resolution regime differs) and little on the host side; the US and EU pages of this set use a Japanese bank and the UK page a US bank for that reason.
A flow can be read two ways: scroll the diagram and hover for detail, or press Walk through the steps above any diagram to follow it one step at a time, with the detail in a card. The arrow keys move forward and back.
The flow every diagram follows
BankGroup entitiesClientMarket infrastructuremessage or transferstanding flowexchanged and matchedoption, when needed1sequence, on the party that actsElectronic platform, APISWIFT messageInfrastructure system (payment, clearing, reporting)Internal systemOtherhover an arrow or a badge for the full detail
Every flow on this page is a variation of this sequence: the client’s business with the Toronto branch (the French bank acting in Canada, with a deposit instead of capital and a floor on its deposits instead of insurance) or with the group’s dealers abroad under the international dealer exemption, the booking of risk in the bank’s global books by transfer inside one legal entity, the Canadian dollars from the group through the dollar and from the Toronto market, the settlement through a Schedule I correspondent on Lynx and CDS, the life of the relationship, and the reports to two regimes. What changes from the US, EU and UK pages is that there is no local entity beside the branch and no local dealer: the securities business stays abroad under an exemption, and the host’s protections are a deposit it can raise and a ring-fence in liquidation.
The flows, 19 of them
Each card opens its diagram. The tabs at the top do the same; the search box finds a flow by name, rule, report or keyword.
Which entity books it, how it is funded or executed, where it settles, what capital and liquidity it takes, what is reported
The same five questions for every flow. A foreign bank’s Canadian operations are the answer to the first: the Toronto branch is the French bank acting in Canada with a deposit instead of capital, the dealers abroad serve the Canadian institutions under an exemption, and every product sits on one side of the line the Bank Act draws at C$150,000.
the branch under OSFI, FINTRAC and the OSC; the French bank under the ECB’s JST and the SRB
none: the examinations and the findings
none
OSFI’s letter sets the actions; the CED and the order as the levers
the supervisory letter; the FINTRAC examination; the college and the crisis management group
Glossary
The terms that come back on every diagram. Every pill in the diagrams also shows its definition on hover.
Concepts, terms and rules
Schedule III branch: A branch of a foreign bank authorized under Part XII.1 of the Bank Act (since 1999) to carry on banking business in Canada without a Canadian subsidiary: a full-service branch or a lending branch, supervised by OSFI, with a capital equivalency deposit instead of capital and no CDIC membership.
Full-service branch: A Schedule III branch authorized to lend and to take deposits of C$150,000 and up (no smaller deposit, since its depositors are not CDIC-insured), with the disclosure to every depositor; the usual form of a foreign bank’s Canadian branch.
Lending branch: A Schedule III branch authorized to lend but not to take deposits (it may borrow only from financial institutions), with lighter requirements; chosen by the foreign banks whose Canadian business is lending only.
Schedule II bank: A Canadian bank that is a subsidiary of a foreign bank, incorporated under the Bank Act with its own capital, a CDIC member taking insured deposits; the model the foreign banks used before 1999 and keep where they want retail or insured deposits.
Authorized foreign bank: The Bank Act’s term for a foreign bank that has the Minister of Finance’s order to carry on business in Canada through a branch (a Schedule III branch), subject to OSFI’s supervision and the Act’s Part XII.1.
Capital equivalency deposit: The unencumbered securities a Schedule III branch must hold at an approved Canadian custodian, worth at least 5% of its liabilities and at least C$5,000,000 under OSFI’s Guideline A-10, with OSFI’s consent to any withdrawal and the Superintendent’s power to require more; the Canadian substitute for a branch’s capital, available to the Canadian creditors in a liquidation.
Guideline A-10: OSFI’s guideline on the capital equivalency deposit of the foreign bank branches: the eligible assets, the 5% of liabilities and the C$5,000,000 floor, the approved custodian, the quarterly compliance certificate and the Superintendent’s discretion to raise it.
Assets in Canada: The assets of an authorized foreign bank held in Canada (the CED, the loans, the securities, the nostros), which the Superintendent can take control of under the Bank Act if the bank fails or the order is revoked, and which the Winding-up and Restructuring Act applies first to the creditors of the Canadian business.
C$150,000 floor: The Bank Act’s rule that a full-service foreign bank branch may not take a deposit of less than C$150,000 (and a lending branch none), because the branch is not a CDIC member; the line that keeps the retail and small business deposits at the Canadian banks.
Principal officer: The officer resident in Canada whom the Bank Act requires an authorized foreign bank to appoint for its Canadian branch, accountable to OSFI for the branch’s business and compliance; a branch has no board, so OSFI looks to the principal officer and the parent’s oversight.
International dealer exemption: Section 8.18 of National Instrument 31-103: a dealer registered in its home jurisdiction may trade foreign securities (and foreign-issued debt) with Canadian permitted clients without Canadian registration, on a notice to each provincial regulator (Form 31-103F2), a Canadian agent for service, a disclosure to the client and an annual notice of reliance; not for Canadian securities, retail clients or advice.
Permitted client: The institutional and large clients the Canadian securities rules let the exempt foreign dealers serve: the banks, the insurers, the pension funds, the registered advisers, the governments and the companies and individuals above the net asset thresholds (C$25,000,000 for a company).
Investment dealer: A Canadian dealer registered with the provincial securities regulators and a member of CIRO, the only kind of firm that may trade Canadian securities with Canadian clients, underwrite Canadian issues and serve retail; the Canadian banks’ dealers, with a few foreign-owned ones.
Government securities distributor: A dealer or bank allowed to bid at Government of Canada auctions; the primary dealers among them have bidding and market making obligations with the Bank of Canada.
Primary dealer (Canada): A government securities distributor with larger bidding limits at the Government of Canada auctions and market-making obligations in the secondary market, under the Bank of Canada’s terms as fiscal agent; the Canadian banks’ dealers and a few others; a foreign bank without a Canadian dealer cannot be one.
CORRA: The Canadian Overnight Repo Rate Average, the Bank of Canada’s overnight benchmark that replaced CDOR in June 2024; the reference for repo, floating rate notes and derivatives.
Term CORRA: The forward-looking one- and three-month term rates derived from the CORRA futures and published by CanDeal Benchmark Solutions since 2023, used for the loans that priced on CDOR until June 2024.
CDOR: The Canadian Dollar Offered Rate, the bankers’ acceptance benchmark that ended in June 2024 and was replaced by CORRA.
Bankers’ acceptance: The short-term paper a Canadian bank accepted (guaranteed) for its corporate borrowers under their credit facilities and sold into the money market, priced on CDOR; the main way a Canadian corporate drew its revolver until the market closed with CDOR’s cessation in June 2024.
Bearer deposit note: A Canadian bank’s or branch’s short-term wholesale deposit instrument in bearer form, sold through the dealers to the money market funds and the corporate treasuries; the replacement of the bankers’ acceptances as the banks’ short-term paper since 2024.
Inter-branch account: The due to and due from positions between two branches of one bank (the Toronto and New York branches of a French bank), internal to one legal entity and not a loan, priced at the group’s funds transfer price and reported in each branch’s returns as its funding from or to the group.
Funds transfer pricing: The internal rate at which treasury charges the businesses for funding and credits them for deposits; for a foreign branch it carries the swap-implied dollar cost (SOFR plus the basis plus the term and liquidity premiums), so a loan’s margin is measured against it.
FX swap: A spot exchange of two currencies with an agreed reverse exchange at a forward date; the instrument through which a bank long in one currency borrows another; the forward points carry the rate differential and the cross-currency basis.
Cross-currency basis: The spread added to the non-USD leg of a cross-currency swap so that it prices at par; a measure of how expensive USD is to borrow through the swap market.
Policy rate: The Bank of Canada’s target for the overnight rate, set at eight fixed announcement dates a year; the rate the Canadian-dollar money market and the loans on CORRA are priced from.
Deposit rate: The rate the Bank of Canada pays on the Lynx participants’ settlement balances, 5bp below the policy rate since January 2025, the floor of the overnight market; reachable by a foreign bank branch only through its correspondent unless it is a participant.
Standing liquidity facility: The Bank of Canada’s overnight collateralized lending to Lynx participants at the bank rate, the Canadian discount window.
Mandatory clearing (NI 94-101): National Instrument 94-101: the interest rate swaps in CAD, USD, EUR and GBP (and the related basis swaps, FRAs and OIS) between the clearing participants of a regulated clearing agency and the large counterparties must be cleared at a regulated clearing agency (LCH, CME, CDCC); the end users below the thresholds trade bilaterally.
Trade reporting rules: The provincial rules requiring the OTC derivatives to be reported to a designated trade repository (OSC Rule 91-507 in Ontario, the AMF’s regulation in Québec, Multilateral Instrument 96-101 elsewhere), by the reporting counterparty under a hierarchy with the dealers first, with the lifecycle events and the valuations.
NI 93-101: The CSA’s derivatives business conduct rule (2024): know-your-counterparty, suitability for non-eligible parties, fair dealing and conflicts for derivatives dealers and advisers.
Guideline E-22: OSFI’s margin requirements for non-centrally cleared derivatives, applying the Basel-IOSCO standard (variation margin daily, initial margin above the thresholds) to the federally regulated financial institutions, foreign bank branches included.
Guideline B-15: OSFI’s guideline on climate risk management (2023): the federally regulated financial institutions, foreign bank branches included, manage the climate-related risks through governance, risk management and scenario analysis, and disclose them from 2024.
Liquidity Adequacy Requirements: OSFI’s liquidity guideline for the banks and bank holding companies: the LCR, the NSFR, the Net Cumulative Cash Flow metric and the monitoring tools; it does not apply to the foreign bank branches, which OSFI supervises on the home regime and their own returns.
Winding-up and Restructuring Act: The federal statute for the liquidation of the banks and the Canadian business of the authorized foreign banks, on the Superintendent’s application; for a foreign bank branch the assets in Canada are applied first to the creditors of the Canadian business, and the eligible financial contracts have their safe harbors.
Canadian creditors’ priority: The Winding-up and Restructuring Act’s rule that the assets in Canada of an authorized foreign bank are applied to the claims of the creditors of its Canadian business before any claim of the head office or the foreign creditors; the ring-fence that the capital equivalency deposit secures.
Single point of entry: The resolution strategy in which losses are absorbed at the group’s holding company by writing down or converting its TLAC while the operating entities keep running; the strategy of the Japanese, US and most European G-SIBs.
MREL: The minimum requirement for own funds and eligible liabilities set by the resolution authority under the BRRD: the loss-absorbing capacity a bank must hold so that it can be resolved without public money; internal MREL for a subsidiary that is not a resolution entity.
BRRD: The Bank Recovery and Resolution Directive: the EU framework of recovery plans, resolution plans, resolution tools (bail-in, sale, bridge bank, asset separation), MREL, the resolution stays and the recognition of third-country resolutions.
Resolution stay: The resolution authority’s power to suspend termination rights and payment obligations for a short period during a resolution; EU banks must have the stay recognized in their non-EU-law contracts.
Crisis management group: The home and host authorities of a G-SIB meeting under the home authorities’ chair to agree and test the group’s resolution strategy: the JFSA for a Japanese bank, the Fed and the FDIC for a US bank, the SRB and the national authority for a euro area bank, with the host supervisors and resolution authorities around the table.
Part XIV branch tax: The Income Tax Act’s tax on a non-resident corporation’s after-tax Canadian branch profit not reinvested in Canada, at 25% reduced by the treaties (5% under the Canada-France treaty); the counterpart of the withholding tax on a subsidiary’s dividends.
Canada-France tax treaty: The tax convention that allocates the taxing rights between Canada and France: the business profits article for the branch’s attributed profit, the reduced withholding rates (5% on dividends to a parent, 10% on interest and royalties with exemptions), the 5% branch tax, and France’s exemption of the Canadian branch profit.
Territoriality principle: The French corporate tax principle that France taxes the profits of the businesses carried on in France and exempts the profits of a French company’s foreign permanent establishments; a French bank’s Canadian branch profit is taxed in Canada only, with no French credit to compute.
Treaty withholding: The reduced rates of Canadian withholding tax on the payments to a treaty country’s residents: under the Canada-France treaty 5% on dividends to a parent holding 10% or more, 10% on interest and royalties, with Canada’s domestic exemption for arm’s length interest and government bond interest.
UCP 600: The ICC’s Uniform Customs and Practice for Documentary Credits, the rules incorporated in almost every letter of credit: the banks deal in documents, the undertaking is independent of the sale, examination within five banking days.
CETA: The Comprehensive Economic and Trade Agreement between Canada and the EU, applied provisionally since 2017: the tariff preferences on a certificate of origin, the public procurement and services chapters, and the financial services chapter that frames the EU banks’ access to Canada.
Export Control List: Canada’s list of the goods and technology whose export needs a permit from Global Affairs Canada under the Export and Import Permits Act (the military and dual-use items among them); a bank screens the goods of its trade finance against it beside the sanctions lists.
Physical pooling: A cash pooling arrangement that sweeps the subsidiaries’ balances to a header account under intercompany loan agreements, the usual structure in Canada, where notional pooling is rare and expensive for the banks.
Charter of the French Language: Québec’s language law (Bill 101, strengthened by Bill 96 in 2022): the businesses in Québec serve their customers and employees in French, so a bank’s Montreal office documents its Québec clients in French beside the English forms used elsewhere in Canada.
Reports and filings
OSFI returns: The regulatory returns OSFI requires of the foreign bank branches: the monthly balance sheet, the quarterly returns on the loans and allowances, the deposits, the derivatives and the off-balance-sheet items, the CED compliance certificate, the annual return with the audited statements; no capital, leverage or liquidity ratio return for a branch.
CED compliance certificate: The quarterly certificate a Schedule III branch files with OSFI showing the capital equivalency deposit at the custodian against 5% of its liabilities, signed by the principal officer.
Annual return (branch): The annual return of an authorized foreign bank to OSFI with the audited financial statements of its Canadian business (audited by a Canadian auditor as the Bank Act requires), the principal officer’s attestations and the corporate governance report.
Bank of Canada statistics: The monthly statistical returns the banks and branches file through the shared OSFI and Bank of Canada system, from which the Bank publishes the banking and financial statistics.
FINTRAC reports: The reports under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act: the large cash transactions and the international electronic funds transfers of C$10,000 and up within five days, the suspicious transactions as soon as practicable, the terrorist property; filed by the banks and the foreign bank branches alike.
Frozen assets return: The monthly return to OSFI of the assets frozen under the Canadian sanctions regulations (the Special Economic Measures Act, the United Nations Act and the Justice for Victims of Corrupt Foreign Officials Act), with the sanctions hits reported to the RCMP.
Trade repository: A designated trade repository (DTCC’s DDR, CME’s or ICE’s) to which Canadian derivatives trades are reported under the provincial trade reporting rules (OSC Rule 91-507 and its equivalents), by the dealer side where one of the parties is a dealer.
MTRS 2.0: CIRO’s debt trade reporting system: every dealer reports its fixed income trades, with the counterparty type and the price, by the next business day; used for surveillance and market transparency.
Form 31-103F2: The submission to jurisdiction and appointment of an agent for service a foreign dealer files with each provincial regulator to rely on the international dealer exemption.
Notice of reliance: The annual notice (by December 1 in most provinces) a foreign dealer files with the provincial regulators to confirm its continued reliance on the international dealer exemption, with the jurisdictions it serves.
COREP: The EBA’s common reporting framework for the banks’ capital, liquidity and large exposures (with FINREP for the financial statements and ALMM for the liquidity metrics), filed with the ECB or the NCA.
FINREP: The EBA’s financial reporting framework: the banks’ financial statements on IFRS, reported quarterly to the supervisor alongside COREP.
AnaCredit: The Eurosystem’s loan-by-loan credit register since 2018: every euro area credit institution and branch reports monthly its loans to legal entities of EUR 25,000 and above, with the counterparty, instrument, collateral and risk data.
LDR: The liability data report: the annual template the SRB collects from each bank for the MREL calibration and the resolution plan.
EMIR: The European Market Infrastructure Regulation: the clearing obligation for standardized OTC derivatives, the margin rules for uncleared trades, the reporting of every derivative to a trade repository, and the CCP rules; EMIR 3.0 (2024) adds the active account requirement at an EU CCP.
MiFIR: The regulation beside MiFID II: pre- and post-trade transparency, transaction reporting to the NCAs, the trading obligations for shares and derivatives, and the 2024 review that bans payment for order flow from June 2026 and sets up the consolidated tapes.
Infrastructure, agencies and authorities
OSFI: The Office of the Superintendent of Financial Institutions: the federal prudential regulator of the Canadian banks and insurers, which sets their capital (CAR), liquidity (LAR) and margin (E-22) rules.
Minister of Finance (Canada): The federal minister who grants, on OSFI’s recommendation, the order authorizing a foreign bank to carry on business in Canada through a branch, sets its conditions and may vary or revoke it.
Bank of Canada: Canada’s central bank: sets the target for the overnight rate, runs Lynx’s settlement balances and the standing liquidity facility, acts as the government’s fiscal agent for the auctions, and oversees CDS, CDCC and Lynx as systemically important.
Payments Canada: The organization that owns and operates the national payment systems (Lynx, the ACSS, the Real-Time Rail in development) under the Canadian Payments Act; the banks, the authorized foreign banks and the other eligible institutions are its members, and the Lynx participants a subset.
Lynx: Canada’s high-value payment system, operated by Payments Canada since 2021 (the successor to LVTS): real-time settlement in Bank of Canada funds; the dealers’ settlement banks pay CDS obligations through it.
ACSS: The Automated Clearing Settlement System: Payments Canada’s retail system that nets the cheques, the direct debits and credits and the bill payments for settlement at the Bank of Canada the next morning; the direct clearers settle it, the indirect clearers through them.
CDS: CDS Clearing and Depository Services, the TMX company that is Canada’s depository and the clearing house for its equities and bonds; participants are dealers, banks and custodians; overseen by the Bank of Canada and the provincial regulators.
CDCC: The Canadian Derivatives Clearing Corporation, the TMX company that clears the Montréal Exchange’s options and futures and, since 2012, repo on Government of Canada securities; the Canadian OCC and FICC in one.
Montreal Exchange: Canada’s derivatives exchange (the TMX group): the CORRA futures (the successor of the BAX), the Government of Canada bond futures, the index and equity options, cleared at CDCC.
CanDeal: The Canadian multi-dealer fixed income platform for institutional RFQs in Government of Canada, provincial and corporate bonds and money markets, owned by the bank-owned dealers and TMX.
CIRO: The Canadian Investment Regulatory Organization: the self-regulatory organization for investment dealers, mutual fund dealers and marketplace trading since the 2023 merger of IIROC and the MFDA; its Investment Dealer and Partially Consolidated (IDPC) Rules and UMIR are the dealer rulebook.
OSC: The Ontario Securities Commission: the principal regulator for most Canadian dealers and managers, acting with the other provincial regulators through the CSA (the Canadian Securities Administrators); the Canadian counterpart of the SEC for an Ontario firm.
AMF (Québec): The Autorité des marchés financiers, Québec’s securities and financial regulator, one of the CSA: the dealers’ exemption notices for their Québec clients, the Québec derivatives rules, the supervision of the Québec-chartered institutions.
CSA: The Canadian Securities Administrators: the umbrella of the provincial and territorial securities regulators (the OSC, the AMF, the BCSC, the ASC and the others), which write the National Instruments and oversee CIRO; there is no federal securities regulator.
FINTRAC: Canada’s financial intelligence unit under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act: dealers file suspicious transaction reports, large cash transaction reports and electronic funds transfer reports to it.
CDIC: The Canada Deposit Insurance Corporation: insures deposits at member banks up to CAD 100,000 per insured category, including deposits held in trust by a dealer for its clients.
CRA: The Canada Revenue Agency, the federal tax authority: the corporate income tax on the branch’s attributed profit, the Part XIV branch tax, the withholding on the payments abroad, the transfer pricing audits; Revenu Québec administers the Québec taxes beside it.
EDC: Export Development Canada, the federal export credit agency and crown corporation: loans, guarantees and insurance in support of the Canadian exporters and the projects whose output is exported, co-lending with the banks.
Canada Infrastructure Bank: The federal crown corporation (2017) that invests on concessional terms in the infrastructure projects the private lenders would not finance alone, with a critical minerals infrastructure mandate since 2022, crowding in the commercial banks.
Bpifrance Assurance Export: The French export credit agency since 2017 (in Coface’s place), operating the state’s export credit guarantees on behalf of the French Treasury on the financing of the French exports.
Global Affairs Canada: The federal department for foreign affairs and trade, which issues the export permits under the Export and Import Permits Act and administers the Canadian sanctions with the RCMP and OSFI.
ECB: The European Central Bank in Frankfurt: the monetary authority of the euro area and, since 2014, the supervisor of the significant banks under the SSM; the two functions are separated internally.
ACPR: The Autorité de contrôle prudentiel et de résolution, the French prudential supervisor and national resolution authority, attached to the Banque de France: the national competent authority in the ECB’s joint supervisory teams for the French significant institutions, the supervisor of the less significant ones, and the executor of the SRB’s resolution decisions in France.
SRB: The Single Resolution Board in Brussels, the resolution authority for the banking union’s significant banks and cross-border groups, working with the national resolution authorities; it sets MREL, draws up the resolution plans and runs the Single Resolution Fund.
AMF (France): The Autorité des marchés financiers, the French markets and conduct regulator: the investment firms’ conduct and the markets business, the MiFIR transaction reports, the market abuse surveillance, the listed companies’ disclosure and the universal registration documents.
Agence France Trésor: The French debt agency: it runs the OAT and BTF auctions and the SVT network.
SVT: Spécialiste en valeurs du Trésor: one of the fifteen primary dealers in French government securities under Agence France Trésor’s charter, with quoting and placement obligations and an annual ranking.
Euroclear: The Brussels-based group: Euroclear Bank is the international CSD for Eurobonds and cross-border holdings (with its triparty and collateral services), and Euroclear’s ESES CSDs (France, Belgium, the Netherlands) are domestic CSDs on T2S.
T2: The Eurosystem’s real-time gross settlement system for euro central bank money since March 2023 (the successor to TARGET2), with TIPS for instant payments; the banks’ settlement accounts and the CSDs’ cash legs run through it.
LCH: London clearing house; LCH SwapClear clears most interest rate swaps in the world.
CLS: CLS Bank settles both sides of a currency trade at the same moment (payment versus payment) so neither party pays without receiving.
Inside the bank: systems and documents
Head office account: The branch’s ledger account with its parent through which the interbranch funding, the back-to-back trades and the service charges pass; an internal system, not a payment rail.
CED account: The segregated account at the approved custodian where a Schedule III branch holds its capital equivalency deposit, pledged to OSFI’s satisfaction and reported quarterly.
Lynx correspondent: The Schedule I bank that settles a foreign bank branch’s Canadian-dollar payments on Lynx and the ACSS from its own settlement account at the Bank of Canada, under an intraday limit and a correspondent agreement; the branch’s route to the Canadian payment systems unless it becomes a participant.
Sanctions screening: The filter that checks every payment, party and trade document against the OFAC and other sanctions lists before release; a hit is held for the sanctions team.
Transaction monitoring: The system that flags unusual payment patterns for the AML team to investigate and, where warranted, report to FinCEN; certified yearly under DFS Part 504.
Stress test engine: The models and data that project the balance sheet, capital and liquidity under the supervisory and internal scenarios.
Loan system: The system of record for the loan book: facilities, draws, rates, fees, covenants and the agent interfaces.
Trade finance system: The system that issues, advises, examines and pays documentary credits, guarantees and collections, and generates the SWIFT trade messages.
Credit memo: The credit department’s written analysis and recommendation on which a credit committee approves an exposure; for a branch it travels to the head office above the local authority.
Cash management portal: The bank’s online banking platform for corporate clients: balances, payments, reporting, pooling.
Agent portal: The administrative agent’s portal through which lenders in a syndicated loan receive notices, rate sets and the borrower’s compliance certificates.
Reporting hub: The engine that turns bookings into regulatory reports (TRACE, CAT, SDR, SBSDR, RTRS, FR 2052a) and tracks acknowledgments and rejects (DTCC Report Hub, AxiomSL, in-house).
Liquidity dashboard: Treasury’s view of funding needs and sources for the day and the coming weeks, including collateral calls and the buffer.
FTP engine: Funds transfer pricing: charges every position the bank’s cost of funding for its tenor and liquidity, and credits stable deposits, so each desk sees its true cost of balance sheet.
Consolidation system: The group’s system at the head office into which each entity and branch submits its monthly package for the consolidated accounts and the management reporting.
Document management: The bank’s system for the deal documents: the facility agreements, the security, the legal opinions, the conditions precedent, versioned and signed.
Data room: The virtual data room where the sponsors and their advisers post the project’s or the borrower’s documents for the lenders’ due diligence.
Term sheet: The summary of the terms of a financing agreed between the borrower or the sponsors and the arrangers before the documentation: amounts, pricing, tenor, security, covenants.
SWIFT message types used in the diagrams
MT300: SWIFT confirmation of an FX trade.
MT305: SWIFT confirmation of an FX option.
MT320: SWIFT confirmation of a fixed-term loan or deposit.
MT950: SWIFT account statement from a correspondent bank.
camt.053: ISO 20022 end-of-day bank account statement, the successor to MT950.
MT535: SWIFT statement of securities holdings from a custodian.
MT541: SWIFT instruction to receive securities against payment.
MT543: SWIFT instruction to deliver securities against payment.
camt.057: ISO 20022 notice to the account holding bank or custodian to expect an incoming payment, the successor of the MT210.
MT900: SWIFT debit confirmation from a bank.
MT304: SWIFT advice of an FX trade from a manager to its custodian, so the custodian can settle it.
MT545: SWIFT confirmation from the custodian that securities were received against payment.
MT547: SWIFT confirmation from the custodian that securities were delivered against payment.
MT548: SWIFT settlement status from the custodian: pending, matched, failed, with the reason.
MT566: SWIFT corporate action confirmation: the cash or securities credited for an event.
MT540-543: SWIFT instructions to receive or deliver securities, with or without payment; used to move collateral.
MT515: SWIFT client confirmation of a securities trade.
MT527: SWIFT triparty collateral instruction.
MT600: SWIFT confirmation of a precious metals trade.
MT604: SWIFT precious metals transfer or allocation instruction.
MT670: SWIFT standing settlement instruction update: how a counterparty notifies its SSIs by authenticated message.
MT340: SWIFT confirmation of a forward rate agreement.
MT564: SWIFT corporate action notification from a custodian or depository: the event, the options and the deadline.
MT502: SWIFT order to buy or sell securities, sent by a client to its broker or manager.
MT509: SWIFT trade status message from a broker or custodian.
MT101: The SWIFT request for transfer a corporate sends its bank, or a bank sends another, to move funds from the customer’s account.
MT700: The SWIFT message by which a bank issues a documentary credit to the advising bank.
MT710: The SWIFT advice of a documentary credit issued by a third bank, sent by the advising bank onward.
MT742: The SWIFT reimbursement claim a paying or negotiating bank sends the reimbursing bank under a documentary credit.
MT754: The SWIFT advice of payment, acceptance or negotiation sent by the paying bank to the issuing bank under a documentary credit.
MT799: The SWIFT free-format message between banks, used for trade finance correspondence and bank-to-bank undertakings.
MT940: The SWIFT customer statement message a bank sends an account holder (or its other bank) with the day’s entries and balances.
MT540: The SWIFT instruction to receive securities free of payment, used for the stock loans and the collateral deliveries.
MT306: The Swift confirmation of the FX options the MT305 cannot describe: average rate (Asian) options and forwards, barriers, digitals and other exotic structures, with their averaging or observation dates.
MT380: The Swift FX order: an investment manager instructs its custodian to buy or sell a currency for a fund; the custodian confirms the execution with an MT381.
MT606: The Swift precious metal debit advice: the account keeper tells the account owner its metal account was debited, with the bar list when the metal moves into allocated bars.
MT607: The Swift precious metal credit advice: the account keeper tells the account owner its metal account was credited, in fine troy ounces.
MT608: The Swift statement of a metal account: the opening and closing balances in ounces and the movements of the period, or the bars held in an allocated account.
Structure and Booking›Entity Map
Where a Client’s Business Books: the Toronto Branch, the Dealers Abroad and the New York Branch Next Door
One client, the Canadian books: an Ontario mining company takes a term loan, operating accounts and an FX and rates hedging program from the Toronto branch of a French bank, a euro bond from the group’s Paris dealer under the international dealer exemption, and its dollar facility from the New York branch of the same bank; the branch holds a capital equivalency deposit instead of capital, the C$150,000 floor keeps retail out, OSFI supervises the branch on reliance with the ECB and the ACPR behind, and the OSC receives the dealers’ exemption notices.
Worked example, illustrative:client an Ontario mining company with a US mine; the Canadian subsidiaries of French groupsbranch a Schedule III full-service branch: the C$300,000,000 loan, deposits of C$150,000 and up, EUR/CAD and CORRA hedgesdealers the EUR 500,000,000 bond led from Paris under the international dealer exemption; no Canadian dealerNew York the dollar facility and the branch’s dollars, by book entry inside one legal entityhead office the group credit line, the CRR capital behind the branch, the funding; the CED in Canadaregulators OSFI, the OSC and the AMF, FINTRAC; the ECB, the ACPR and the SRB at home
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Canada is the branch model with a deposit and a floor: the French bank’s own branch, with the parent’s capital behind it, a capital equivalency deposit in Canada and no deposit below C$150,000. The securities business stays abroad under an exemption, the dollars are next door in the same bank, and OSFI supervises what it can see.
Schedule III: since 1999 a foreign bank may operate in Canada through a branch (an authorized foreign bank under Part XII.1 of the Bank Act) rather than a Schedule II subsidiary; a full-service branch lends and takes deposits of C$150,000 and up without CDIC membership, a lending branch lends without taking deposits; both hold a capital equivalency deposit and are supervised by OSFI; most of the foreign banks in Canada (the US, European and Japanese banks) run branches, a few keep Schedule II subsidiaries for retail and CDIC-insured deposits.
The international dealer exemption: section 8.18 of National Instrument 31-103 lets a dealer registered in its home jurisdiction trade foreign securities (and foreign-issued debt) with Canadian permitted clients (the institutions, the pension funds, the large corporates) without Canadian registration, on a notice to each provincial regulator and a consent from each client; Canadian securities need a Canadian investment dealer, a CIRO member, which the French banks mostly do not keep.
One legal entity across the border: the Toronto and New York branches are both offices of the French société anonyme, so the dollars move between them by book entry and the credit to a client’s US and Canadian operations is one bank’s; the US operations are supervised by the Fed and the NYDFS or the OCC with the IHC beside the branch (see the US page of this set, where a Japanese bank plays the same role), the Canadian ones by OSFI, and the ECB sees both inside the French bank.
What OSFI relies on: the French bank is a significant institution under the Single Supervisory Mechanism, supervised by a joint supervisory team of the ECB and the ACPR with the SRB as resolution authority; OSFI’s approach to foreign bank branches rests on the home regime, the branch’s own returns and the assets in Canada (the CED and what OSFI may add), with the Superintendent’s powers over the Canadian assets if the bank fails.
Structure and Booking›Back to Back
Back to Back With Paris: a Client Swap in the Branch, the Risk in the Group’s Book, One Legal Entity
An Ontario utility’s C$200,000,000 CORRA swap dealt by the Toronto branch and moved to the group’s rates book in Paris by internal transfer, the group’s hedge in the market cleared at LCH or on the Montreal Exchange, the margin under OSFI’s guideline and the trade reporting under the provincial rules with EMIR on the other side, the booking model OSFI and the CSA read, and the transfer pricing for two tax authorities; no intragroup contract, since there is no second legal entity.
Worked example, illustrative:client swap 10-year CORRA payer swap of C$200,000,000; the client faces the French bank through the branchback to back the risk moved to Paris by internal transfer, as New York does with Tokyo; no contracthedge a cleared CORRA swap at LCH; CORRA and GoC bond futures on the Montreal Exchangerules the business conduct rule, the trade reporting to a designated TR, OSFI’s E-22 on the margin; EMIR on the bankcontrol the branch’s trading book in OSFI’s returns; the group’s limits; the ECB’s market risk capitaltax the profit attributed under the treaty; the Part XIV branch tax at 5%; one transfer pricing study for two authorities
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The Toronto branch and the Paris head office are one bank, so the back-to-back is a booking, not a trade: the risk moves by transfer and nothing intragroup is reported or margined. The client trade carries two rulebooks, Canada’s on the branch and EMIR on the bank.
The Canadian derivatives rules: the trade reporting rules of the provinces (the OSC’s Rule 91-507 in Ontario, the harmonized Multilateral Instrument 96-101 in most other provinces, the AMF’s regulation in Québec) require the reporting of OTC derivatives to a designated trade repository with the dealer as reporting counterparty; the mandatory clearing rule (NI 94-101) covers the CAD, USD, EUR and GBP interest rate swaps between the clearing participants and the large counterparties; the business conduct rule (NI 93-101, in force since September 2024) sets the dealers’ duties to their counterparties.
OSFI’s margin guideline: Guideline E-22 applies the Basel margin requirements for non-centrally cleared derivatives to the federally regulated financial institutions, foreign bank branches included, so the branch exchanges variation margin with its covered counterparties and initial margin above the thresholds; the French bank applies EMIR’s margin rules to the same trades, and the two regimes are aligned on the Basel standard.
A booking, not a contract: a branch is an office of its bank, so a risk transfer between Toronto and Paris is an internal position with no legal counterparty, no reporting obligation, no clearing and no margin; a Schedule II subsidiary would face its parent by contract, reported under the Canadian rules and EMIR and exempt from clearing and margin as an intragroup trade where the regulators allow it.
Clearing in Canada: the Canadian dealers clear CAD swaps at CDCC (the Montreal Exchange’s clearing house) and at LCH SwapClear; the foreign banks mostly use their LCH memberships, which NI 94-101 recognizes; the Montreal Exchange lists the CORRA futures (the successor of the BAX since CDOR’s end in June 2024) and the Government of Canada bond futures the dealers hedge with.
Structure and Booking›Follow the Sun
The Canadian Hours: the CAD Book at Home in Toronto, the Dollar Book Next Door, Paris Behind
The group’s books around the clock with the Canadian-dollar book at home in Toronto: Asia, the handoff to Paris and the European hours where the CAD positions are quoted from Paris, the Americas handoff to Toronto and New York together inside one legal entity, settlement through the correspondent on Lynx, CLS and the New York branch’s dollar access, the Americas close with the CAD book staying in Toronto, one risk system with limits by desk and by entity, and the P&L closed by region for three regulators and three tax authorities.
Worked example, illustrative:Asia Hong Kong from 08:00 HKT; the CAD book quoted thinly; the handoff to Paris at 16:00 HKTEurope Paris and London run the main books; the CAD positions quoted from Paris until Toronto opensAmericas Toronto takes the CAD book at 07:00 ET with New York on the dollars; the Bank of Canada at 09:45, the auctions at noonsettlement Lynx through the correspondent 00:30 to 18:30 ET; CLS; the dollars by book entry through New Yorkrisk one VaR across the desks; the branch’s book for OSFI; the whole bank for the ECBclose three closes; the Canadian ledger, the US branch, the French consolidation
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A French bank’s Canadian-dollar book lives in Toronto and is quoted from Paris and Asia while Toronto sleeps, inside one legal entity whose dollar book is next door in New York. The regulators each see their hours and their entity, and the closes turn one book into three ledgers.
The Canadian-dollar day: the CAD trades in every time zone as a G10 currency, but its depth is in the Americas hours, with the Bank of Canada’s announcements at 09:45 ET and the Government of Canada auctions at noon; a foreign bank’s CAD book lives in Toronto and is quoted from its European and Asian desks overnight within the Toronto limits, where the dollar book is a true relay between three centers.
One legal entity, four offices: the Hong Kong, Toronto and New York branches and the Paris head office are the same French bank, so the books move by handover and internal transfer, with the positions in one trade capture system and one risk system; the group’s dealers (the Paris and New York securities companies) are separate entities, and their positions move by contracts with the bank.
The entity views: OSFI reads the Toronto branch’s trading book in its returns and the branch’s reliance on the group’s risk management; the ECB and the ACPR read the French bank’s whole under the CRR’s market risk rules (the fundamental review of the trading book since 2025 in the EU for the reporting, with the capital charge to follow); the Fed and the NYDFS read the New York branch’s; the regulators compare notes in the college the ECB chairs.
Three closes: Toronto closes the branch’s Canadian ledger (the corporate tax at the federal and Ontario rates, the Part XIV branch tax, OSFI’s returns), New York closes the US branch’s, and Paris consolidates both into the French bank’s accounts under IFRS; the global books’ P&L is split by desk for the transfer pricing; Canada and France both report under IFRS, so the branch keeps one accounting basis with the local presentation.
The Canadian Dollar Through the Dollar: the FX Swaps, the Inter-Branch Account and the Wholesale Deposits
Where a French bank’s Canadian dollars come from: euros swapped into dollars at the EUR/USD basis and dollars into Canadian dollars at the USD/CAD basis, placed with the Toronto branch from New York over the inter-branch account at the funds transfer price, beside the wholesale deposits of C$150,000 and up and the bearer notes the branch raises in Toronto; the loans priced on CORRA at the CAD FTP since the end of CDOR, the swaps and the ladder rolled, the Canadian dollar inside the French bank’s LCR by currency at the ECB, and OSFI’s reading of a branch funded by its group.
Worked example, illustrative:need C$15,000,000,000 of Canadian-dollar loans and liquidity for a euro bank with a dollar hubswaps EUR/USD at 15bp for three months (a cost); USD/CAD at CORRA minus 6bp (a pickup); C$1,000,000,000 through CLSinter-branch placed from New York by book entry at the FTP; the same legal entity, one layer further from the eurodeposits wholesale deposits of C$150,000 and up, not CDIC-insured; bearer deposit notes to the money fundsloans CORRA plus the term spread, the swap cost and a liquidity premium; Term CORRA since June 2024views the ECB’s LCR by currency and the ILAAP; OSFI’s returns and the reliance on the home regime
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A euro bank buys its Canadian dollars twice over, first in dollars and then in Canadian dollars, and lends them through a branch that may take no deposit below C$150,000. The ECB counts the currency inside the bank; OSFI counts the branch and asks what the group would do in a stress.
The two bases: the EUR/USD cross-currency basis is negative for the dollar borrower (the euro bank pays to turn euros into dollars, the structural cost of the European banks’ dollar books), the USD/CAD basis is small and slightly negative for the CAD borrower who brings dollars (a pickup for the dollar lender); a French bank reaches the Canadian dollar through both, and its CAD liquidity premium is the sum.
The C$150,000 floor: the Bank Act forbids a full-service foreign bank branch to take a deposit of less than C$150,000 (and a lending branch any deposit), because the branch is not a CDIC member and its depositors are not insured; the branch must disclose it to every depositor; the Canadian subsidiaries of the foreign banks (Schedule II) are CDIC members and take retail deposits, so a few groups keep one.
CORRA and the end of CDOR: the Canadian Dollar Offered Rate and the bankers’ acceptances it priced ended in June 2024; the loans now float on Term CORRA (the forward-looking term rate published by CanDeal for one and three months) or on daily compounded CORRA (the overnight repo rate the Bank of Canada publishes), and the CORRA futures on the Montreal Exchange replaced the BAX; a foreign bank’s Canadian loans and swaps moved with the market.
Liquidity at a branch: OSFI’s Liquidity Adequacy Requirements guideline (the LCR, the NSFR and the Net Cumulative Cash Flow metric) applies to the banks and bank holding companies, not to the foreign bank branches, which OSFI supervises on the home regime and their own returns with the power to require liquid assets in Canada; the ECB’s LCR by currency and the French bank’s ILAAP cover the Canadian dollar at home.
The Bank of Canada Beside the Correspondent: the Policy Rate, CORRA and the Facilities a Branch Can Reach
A French bank’s Toronto branch and the Bank of Canada: the floor system with the policy rate and the deposit rate on the Lynx participants’ balances, the branch’s Canadian-dollar account at a Schedule I correspondent and its overnight placements in the market, the correspondent’s settlement balances and the Standing Liquidity Facility at the Bank, the Bank’s operations and the facilities a branch can reach, the payment day through the correspondent on Lynx and the ACSS, OSFI’s reading of the correspondent dependence, and the cost of Canadian-dollar liquidity in the FTP.
Worked example, illustrative:framework policy rate 2.25%, deposit rate 5bp below; CORRA 2.24%; no settlement account for the branchcorrespondent a Schedule I bank settles the branch on Lynx, the ACSS and CDS; an intraday limit; the overnight marketthe Bank the correspondent earns the deposit rate and has the Standing Liquidity Facility; the branch at one removefacilities the Bank’s operations with the primary dealers; the term and contingent facilities in a stress for the eligiblepayment day Lynx 00:30 to 18:30 ET through the correspondent; the ACSS; CLS in the European morningcost the correspondent’s price, the overnight market and the two swaps; the liquid assets in GoC bonds and bills
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The central bank of the branch’s currency is one bank away: a Schedule I correspondent holds the settlement account, earns the deposit rate and has the Standing Liquidity Facility, and the branch pays for the distance. The largest foreign branches join Lynx directly; the others keep a correspondent and a group behind it.
The Bank of Canada’s framework: the target for the overnight rate is the policy rate, the deposit rate on the Lynx participants’ settlement balances is 5bp below it since January 2025 (it was equal to the target during the floor system’s first years), the bank rate 25bp above it is the rate of the Standing Liquidity Facility; CORRA is the overnight repo rate the Bank publishes as the Canadian-dollar benchmark; the Bank steers CORRA toward the target with overnight repo and reverse repo operations.
Lynx participants: Lynx (the RTGS that replaced the LVTS in 2021) settles across the participants’ accounts at the Bank of Canada with the Bank’s intraday liquidity against pledged collateral; the participants are the large Canadian banks, a few foreign bank branches and other members of Payments Canada that meet the requirements; the other financial institutions, foreign branches among them, clear through a participant as their correspondent.
The Standing Liquidity Facility: the Bank of Canada’s overnight loan to the Lynx participants at the bank rate against eligible collateral, to cover an end-of-day shortfall; the facility is for the participants, so a branch that clears through a correspondent reaches it only through its correspondent’s balance sheet; the Bank’s wider facilities (term repo, the Contingent Term Repo Facility in a stress) have their own eligibility.
The Canadian bank abroad: a Canadian bank’s branch in Paris or London reaches the Eurosystem or the Bank of England the same way a French bank’s branch reaches the Bank of Canada, through a correspondent or a direct participation it must qualify for; the Canada page of the sell-side set shows the Canadian bank at home with its own settlement account and its own CCP memberships.
Canadian-Dollar Clearing›CAD Payments
Canadian-Dollar Payments for the Branch and the Group: the Correspondent on Lynx, the ACSS and CDS
The Toronto branch as the group’s Canadian-dollar clearer through a Schedule I correspondent: the instructions from the head office and the New York branch on their internal CAD accounts and from the Toronto clients, validated, screened against the Canadian, EU and US lists and routed, paid by the correspondent on Lynx and the ACSS within its intraday limit, settled at Payments Canada and CDS, reconciled on the statements; the dollars through New York and the euros through Paris inside one bank; FINTRAC, the sanctions returns and the Bank of Canada’s oversight; and the direct participation the largest foreign branches choose.
Worked example, illustrative:volume 6,000 payments a day for C$4,000,000,000; the group’s CAD nostro in Toronto by internal accountinstructions the head office and New York by internal instruction; the clients through the portal; the CLS pay-insscreening SEMA and the UN Act lists; the EU list for the bank; OFAC for the dollar legssettlement the correspondent on Lynx 00:30 to 18:30 ET and the ACSS overnight; CDS on T+1; an intraday limitother currencies dollars through the New York branch’s Fedwire and CHIPS; euros through the head office’s T2 accountcontrol FINTRAC for the EFTs of C$10,000 and up and the STRs; the frozen assets return to OSFI; the Bank of Canada over Lynx
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A French bank clears Canadian dollars for its whole group through one Toronto branch and one Canadian correspondent: the group’s CAD sits in Toronto by internal account, the branch sits at a Schedule I bank on Lynx. The dollars and the euros stay in the family; the Canadian dollar is the currency it must buy from a local bank, unless it joins Lynx itself.
Lynx and the ACSS: Lynx is Payments Canada’s RTGS (since 2021, replacing the LVTS), settling the large-value and time-critical payments across the participants’ accounts at the Bank of Canada; the ACSS is the retail system that nets the cheques, the direct debits and credits and the bill payments for settlement the next morning; Interac e-Transfer carries the small real-time payments; the Real-Time Rail is Payments Canada’s long-delayed real-time system.
Direct or indirect: a foreign bank branch may become a member of Payments Canada and a Lynx participant (with a settlement account at the Bank of Canada, pledged collateral and the operational requirements) or clear through a participant as its correspondent; the largest foreign branches in Toronto are direct participants, the others keep a correspondent whose intraday limit, pricing and resilience OSFI expects the branch to manage.
Three sanctions regimes on one branch: the Canadian sanctions (the Special Economic Measures Act, the United Nations Act, the Justice for Victims of Corrupt Foreign Officials Act) apply to the branch as a Canadian business with a monthly return of frozen assets to OSFI; the EU sanctions apply to the French bank wherever it operates; OFAC reaches the dollar legs through New York; the screening is one system with three lists.
FINTRAC: Canada’s financial intelligence unit receives the reports the Proceeds of Crime (Money Laundering) and Terrorist Financing Act requires from the banks and the foreign bank branches: the large cash transactions and the international electronic funds transfers of C$10,000 or more, the suspicious transactions, the terrorist property; FINTRAC examines the branch’s program and can penalize it, and OSFI reads the program in its supervision.
Syndicated Loan Participation Under Canadian Law, Priced on CORRA, Booked in the Branch of a French Bank
A French bank’s Toronto branch takes C$100,000,000 of an Ontario mining company’s C$1,500,000,000 revolver under Ontario law: the invitation as a relationship lender on both sides of the border, the credit approval under a group line that counts the Canadian and the US facilities together, the credit agreement on Term CORRA since the end of the bankers’ acceptances with the EU lender’s sanctions clauses, the draws funded through the correspondent at the CAD FTP, the life of the loan through the agent, the loan in the French bank’s COREP, AnaCredit and large exposures, and OSFI’s reading of the branch’s book beside the CED.
Worked example, illustrative:facility C$1,500,000,000 five-year RCF under Ontario law; the branch takes C$100,000,000approval the group credit line in Paris counts the Canadian revolver and the US dollar facility togetherterms Term CORRA plus the margin since June 2024; two-thirds majority; the EU sanctions clausesfunding C$33,333,333 of a C$500,000,000 draw paid on Lynx through the correspondent at the CAD FTPhome view the French bank’s asset in COREP at the CRR weights; AnaCredit monthly; the ECB’s stress testhost view OSFI’s returns; the CED sized on the liabilities; no Canadian capital or large exposure limit on a branch
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The loan is Ontario law, CORRA and Canadian dollars, and the lender is a French bank acting through its Toronto branch: approved in Paris beside its dollar twin, funded in Toronto two swaps from the euro, weighted by the ECB and read by OSFI. The Canadian and the European credit markets meet inside one bank.
The Canadian loan market: the syndicated loans are agented by the Schedule I banks under Ontario (or Alberta, or Québec) law on the market’s own precedents, closer to the LSTA’s forms than to the LMA’s; the foreign banks lend through their Schedule III branches as relationship lenders, taking a share of the facilities of the companies they bank elsewhere, and the secondary market is thinner than New York’s or London’s.
The end of the bankers’ acceptances: until June 2024 a Canadian corporate drew its revolver by having the bank accept a bankers’ acceptance priced on CDOR and sold into the money market; with CDOR’s cessation the loans moved to Term CORRA (the forward-looking rate published by CanDeal) or daily compounded CORRA, the BA market closed and the money funds moved to the banks’ bearer deposit notes; a foreign bank’s Canadian loans moved with it.
The EU lender’s clauses: the French bank brings into the Canadian credit agreements the representations and covenants it needs under the EU regime, the EU sanctions clauses (no use of proceeds in sanctioned business, no sanctioned persons in the borrower’s group) and the anti-corruption clauses under the Sapin II law; the Canadian banks have their own under the Canadian regime, and the agreement carries both.
A branch has no Canadian capital on its loans: the risk weight is the CRR’s in the French bank’s ratios, the stress loss is the ECB’s, and the large exposure limit is the CRR’s 25% applied to the whole bank; OSFI sizes the capital equivalency deposit on the branch’s liabilities (5% under Guideline A-10) and reads the loan book in the branch’s returns, with no Canadian ratio to apply to a branch.
Project Finance: a Critical Minerals Mine With EDC, the Canada Infrastructure Bank and the French ECA
A French bank as lender and hedge bank to a nickel and cobalt mine in northern Ontario for the battery supply chain: the mandate and the group’s mining finance team, the structuring and the Paris credit approval, the lender club with Export Development Canada, the Canada Infrastructure Bank and Bpifrance, financial close under Ontario law with the security, the offtakes and the First Nations agreements, the drawdowns over construction through the correspondent at the CAD FTP, the operations with the offtakes, the waterfall and the hedges, the ECB’s view of project finance in the French bank’s book and OSFI’s reading of the branch’s exposures and climate risk.
Worked example, illustrative:project a nickel and cobalt mine in northern Ontario; C$2,500,000,000 financing; offtakes with the automakersthe bank’s role lender for C$250,000,000 and hedge provider; structured by the mining and metals finance teamlenders ten banks; EDC as lender and guarantor; the Canada Infrastructure Bank; Bpifrance cover on the French equipmentclosing and draws Ontario law common terms and security; the First Nations agreements; C$7,000,000 a month through the correspondenthedges CORRA swaps and nickel hedges in the branch under the Canadian rules and EMIRcontrol the CRR’s project finance weights and the ECB’s stress test; OSFI’s Guideline B-15 on climate; the branch returns
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A French bank finances an Ontario mine the way it finances a mine in Chile, with a global team and a Paris approval, and books the Canadian-dollar loan and the hedges in its Toronto branch under Ontario law with EDC, the CIB and its own country’s ECA at the table. The ECB sees a project loan in the bank’s book; OSFI sees a branch exposure and a climate risk it supervises on reliance.
The Canadian agencies: Export Development Canada lends, guarantees and insures in support of the Canadian exporters and the projects whose output is exported, and co-lends with the banks; the Canada Infrastructure Bank invests on concessional terms in the infrastructure the private lenders would not finance alone, with a critical minerals mandate since 2022; both sit beside the commercial banks in the Canadian project financings.
Bpifrance Assurance Export: the French export credit agency (operating the state’s export credit guarantees since 2017, in Coface’s place) covers the financing of the French exports, here the processing equipment, with the French state’s risk; the covered tranche carries the sovereign risk weight in the CRR, and the French bank is the natural lender of the covered tranche in a project its own country’s suppliers equip.
The French banks in Canadian project finance: the French banks are among the largest project finance lenders in the world and lend to the Canadian mining, energy and infrastructure projects from their Toronto branches with global sector teams in Paris, bringing the EU rules with them (the CRR’s slotting, the ECB’s stress test, the EU taxonomy and the sanctions clauses) and counting the deals in their sustainable finance commitments.
Climate risk at OSFI: Guideline B-15 (2023) expects the federally regulated financial institutions, foreign bank branches included, to manage the climate-related risks through their governance, risk management and scenario analysis and to disclose them from 2024; OSFI reads the branch’s project book and its transition plans in that light and relies on the ECB for the credit quality, while the ECB’s own climate expectations apply to the French bank as a whole.
Corporate Banking›Letter of Credit
Trade Finance: a Letter of Credit Issued in Paris, Confirmed in Montreal, Inside One Bank
A letter of credit issued by the French bank’s Paris head office for a Toulouse buyer and advised and confirmed by its Toronto branch’s Montreal office for a Québec aerospace exporter: the MT700 inside one legal entity, the branch’s review with the export controls on aerospace parts, the documents examined and paid at sight in Montreal under UCP 600 with the CETA certificate of origin, the reimbursement by book entry on the inter-branch account, the exporter’s euros, the FX and EDC, the screening against three sanctions lists and two export control regimes, and the contingent counted once in the French bank’s COREP.
Worked example, illustrative:credit EUR 4,000,000 irrevocable documentary credit under UCP 600; issued in Paris for a Toulouse buyerone bank advised and confirmed by the Toronto branch’s Montreal office: the same legal entity as the issuerdocuments the air waybill, the CETA certificate of origin; examined and paid at sight in Montreal within five banking daysreimbursement a book entry on the inter-branch account; the exporter sells the euros at 1.4750screening SEMA and the UN Act, the EU list, OFAC; the Export Control List and the EU dual-use regulationcontrol a 20% credit conversion factor once in the CRR; the branch’s contingent on its own head office in the OSFI returns
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The credit never leaves the bank: Paris issues, Montreal advises, confirms and pays, and the reimbursement is a book entry. The exporter and the importer each see their own bank, the regulators each see their half, and the euros never cross a nostro; a subsidiary would need one.
UCP 600: the ICC’s Uniform Customs and Practice for Documentary Credits (2007), the rules every letter of credit incorporates; the banks deal in documents, not goods, the issuing bank’s undertaking is independent of the sale contract, and the documents must comply on their face; the examination within five banking days, the discrepancies and the waivers are the trade in practice.
Advising and confirming inside one bank: a foreign bank’s branch and its head office are one legal entity, so a credit issued in Paris and confirmed in Montreal carries one bank’s undertaking; the exporter gains a bank in its own country and a place of payment at home, not a second credit; a Schedule II subsidiary confirming its parent’s credit would add its own undertaking and carry a nostro and a second set of books.
Export controls on aerospace: the parts fall under the Canadian Export Control List (Group 2 and the dual-use items) and the EU dual-use regulation, with permits from Global Affairs Canada where the goods are controlled; the branch screens the goods, the parties, the carrier and the destination against the lists and the trade-based money laundering indicators FINTRAC publishes.
The contingent in the capital rules: a trade-related contingent carries a 20% credit conversion factor in the CRR and in OSFI’s capital rules alike; the branch has no Canadian capital, so the CRR applies through the French bank’s ratios once for the issuance and the confirmation together, and OSFI reads the contingents in the branch’s returns beside the CED it sizes on the liabilities.
Corporate Banking›French Subsidiaries
The Canadian Subsidiaries of the French Groups: Cash Management, Pooling and FX From Toronto and Montreal
The Canadian subsidiaries of three French groups served by their parents’ bank: the mandate for one bank at home and abroad, the account opening and the KYC across the group with the Québec subsidiaries served in French, the payments and collections in Canadian dollars through the branch’s correspondent, euros through the head office and dollars through the New York branch, the sweeping, pooling and the in-house bank, the FX and the intercompany flows under the Canadian rules and EMIR, the parent’s view on one portal with the dividends and the treaty withholding, the C$150,000 floor and the two conduct regimes on the branch’s deposits, and the bank’s view of global cash management as one business.
Worked example, illustrative:clients the Canadian subsidiaries of a French aerospace group, a rail group and a consumer goods groupsetup Canadian-dollar accounts at the branch and its Montreal office; euros at the head office; dollars in New Yorkflows 20,000 payments a month on Lynx and the ACSS through the correspondent, SEPA at home, Fedwire in New YorkFX forwards under an ISDA with the French bank through the branch; the end-user exemptions; CLSparent one portal from Paris; the dividends at 5% and the interest at the treaty rates, by book entrycontrol deposits of C$150,000 and up, not CDIC-insured; OSFI and FINTRAC; the ECB and the French bank’s LCR
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A French group’s Canadian subsidiary banks with its parent’s bank because the euros, the dollars and the Canadian dollars then sit in one bank it already knows, seen on one portal from Paris. The branch does the Canadian dollars above the floor and through a correspondent, the head office the euros, New York the dollars, and the regulators each see their currency.
The French groups in Canada: the French industrial groups run large Canadian subsidiaries (aerospace and rail in Québec, energy, consumer goods, engineering) and bank them with the French banks’ Toronto and Montreal offices for the Canadian-dollar cash management, the FX and the credit, with the Canadian banks for the retail and the branch network the foreign branches do not have.
The C$150,000 floor and the corporates: a full-service branch may take no deposit below C$150,000 and must disclose that its deposits are not CDIC-insured; a corporate treasury’s accounts clear the floor, so the restriction keeps the retail and small business deposits at the Canadian banks and the subsidiaries’ operating accounts at the branch; the Canadian subsidiaries of the foreign banks (Schedule II) are CDIC members and take the smaller deposits.
Pooling in Canada: physical pooling sweeps the balances to a header account under intercompany loans and is the usual structure; notional pooling is rare, since the Canadian banks’ capital and the Bank Act’s set-off rules make it expensive; a French group pools its Canadian dollars in Toronto and sweeps the surplus to its euro pool in Paris through the bank’s FX desk and its inter-branch account, inside one bank.
The treaty: the Canada-France tax treaty reduces the Canadian withholding tax on dividends to a French parent to 5%, on interest to 10% (and Canada exempts arm’s length interest in its domestic law), on royalties to 10% with exemptions; the Part XIV branch tax on the branch’s own repatriated profit is 5% under the same treaty; the subsidiaries’ payments to France move through the bank’s books by book entry.
Markets: Abroad and Through the Branch›Euro Bonds
Euro Bonds for the Canadian Institutions: the Paris Dealer Under the International Dealer Exemption
A Canadian pension plan’s OATs and euro corporate bonds bought from the French bank’s Paris dealer under the international dealer exemption: the order through the Toronto coverage team, the exemption in practice (the notice, the consent, the limits), the execution in Paris on the SVT seat and the euro credit book, the settlement in Euroclear on T+2 with the euros from the Toronto branch’s FX desk, the coupons without withholding and the EUR/CAD basis swap with the branch, the annual notice to the OSC and the AMF, and the group’s view of the Canadian institutions as a coverage market served without a Canadian dealer.
Worked example, illustrative:order EUR 200,000,000 of the 10-year OAT and EUR 50,000,000 of a French utility’s bond for an Ontario pension planexemption section 8.18 of NI 31-103: foreign securities, permitted clients, a notice to the OSC and the AMF, a consentexecution from the Paris dealer’s SVT position and its euro credit book; MiFIR to the AMF in Parissettlement Euroclear France on T2S on T+2; the euros from the branch at 1.4750 through CLSlife OAT coupons without withholding; the EUR/CAD basis swap with the branch under the Canadian rulescontrol the annual notice of reliance; foreign securities only; no advice; a coverage fee to the branch
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The French bank sells Europe to Canada from Paris under an exemption, with the Toronto branch opening the door and selling the euros: no Canadian dealer, no Canadian trade report, the home market’s price and the home regulator’s rules. The Canadian regulators ask for a notice, a consent and a boundary at the Canadian securities.
The international dealer exemption: section 8.18 of National Instrument 31-103 lets a dealer registered in its home jurisdiction trade foreign securities (and foreign-issued debt during and after its distribution) with Canadian permitted clients without registration, on a notice to each provincial regulator (Form 31-103F2), a Canadian agent for service, a disclosure to the client and an annual notice of reliance; the exemption does not cover Canadian securities, retail clients or advice.
Permitted clients: the institutions the Canadian rules let the foreign dealers serve: the banks, the insurers, the pension funds, the registered advisers, the governments, and the companies and individuals above the net asset thresholds (C$25,000,000 for a company, C$5,000,000 of net financial assets for an individual); the pension plans and the insurers are the Canadian buyers of the world’s bonds.
The Canadian institutions abroad: the Canadian pension plans (the Maple Eight: CPP Investments, the Caisse de dépôt, Ontario Teachers’, OMERS, PSP, AIMCo, BCI, HOOPP) and the life insurers hold large euro and dollar portfolios and are covered by every global dealer under the exemption; the French bank’s advantage is the French and euro paper it makes markets in as an SVT and a euro credit house.
Why no Canadian dealer: a Canadian investment dealer (a CIRO member registered with the provinces) is needed to trade Canadian securities, underwrite Canadian issues and serve retail; the French banks mostly serve the Canadian market from abroad under the exemption and leave the Canadian-dollar bond market to the Canadian banks’ dealers, where a US or Japanese bank may keep a small Canadian dealer for the Canadian securities.
Canadian Bonds for the Group and the French Investors: Through a Canadian Investment Dealer, Settled at CDS
Government of Canada and provincial bonds bought by the French bank’s Paris dealer for a French insurer and by the Toronto branch for its own liquidity book: the order, the execution through a Canadian investment dealer that bid in the Bank of Canada’s auction, the settlement at CDS on T+1 with the Canadian dollars from the group’s FX desks, the coupons without withholding and the EUR/CAD basis swap the other way round, the branch’s GoC bonds and bills as liquid assets and CED financed in the repo market, the Canadian obligations carried by the Canadian dealer, and the group’s view of the Canadian dollar as an allocation rather than a franchise.
Worked example, illustrative:order C$150,000,000 of the 10-year Government of Canada bond and C$50,000,000 of an Ontario bond for a French insurerexecution through a Canadian investment dealer on CanDeal; the auction at noon ET by yield belongs to the primary dealerssettlement CDS on T+1 since May 2024; the Canadian dollars through CLS; the custodian’s CDS participationlife coupons without Canadian withholding; the CAD/EUR basis swap, the group’s funding basis the other wayown book C$2,000,000,000 of GoC bonds and bills as liquid assets and CED; financed in the repo market through the Canadian dealerscontrol the Canadian dealer’s CIRO and MTRS 2.0 obligations; the basis swap to the trade repository; no Canadian report for the purchase
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The French bank buys Canada through a Canadian dealer: the auctions and the provincial syndicates belong to the Canadian banks, and the foreign bank with no Canadian dealer buys in the secondary market, settles at CDS and holds the bonds for its clients and its own liquidity. The Canadian dollar is an allocation the group serves, not a market it makes.
The Government of Canada auctions: the Bank of Canada runs the auctions as the government’s fiscal agent (the treasury bills on Tuesdays, the bonds by yield at noon ET), with the government securities distributors bidding and the primary dealers (a subset with larger bidding limits and market-making obligations) at the core; the distributors are the Canadian banks’ dealers and a few foreign-owned Canadian dealers; a foreign bank without a Canadian dealer cannot bid.
CDS and T+1: CDS Clearing and Depository Services (the TMX group) is the Canadian CSD and settles the Canadian bonds and equities on T+1 since May 2024, in step with the US; the participants are the Canadian dealers, banks and custodians; a foreign bank’s branch settles through a participant (its correspondent or its custodian) unless it becomes one; CDCC, the Montreal Exchange’s clearing house, clears the repo and the futures.
Withholding on Canadian bonds: Canada exempts from withholding tax the interest paid to non-residents on government bonds and on arm’s length debt generally (since 2008), so a French insurer’s Government of Canada and provincial coupons are paid gross; the dividends and the non-arm’s length interest carry the treaty rates; the French bank’s Paris dealer handles the tax documentation for its clients.
MTRS 2.0: CIRO’s debt trade reporting system, to which the Canadian dealers report their debt securities trades (including the government securities distributors’ trades) for market surveillance and the post-trade transparency the Canadian regulators publish; the Canadian dealer reports its trade with the foreign bank, and the foreign bank reports nothing in Canada for the purchase.
Canadian-Dollar Swaps From the Branch: Mandatory Clearing, OSFI’s Margin Guideline and the Trade Repository
The Toronto branch’s Canadian-dollar swap business under the Canadian derivatives rules: a pension fund’s swap cleared at LCH or CDCC under the mandatory clearing rule and a utility’s bilateral one under the CSA, the margin under OSFI’s Guideline E-22 and EMIR at once, the trade reporting to a designated repository by the branch and to an EU one by the bank, the business conduct rule since 2024, the risk moved to Paris and New York by booking inside one entity and hedged on the Montreal Exchange and at LCH, and the views of OSFI, the CSA and the ECB on the same trades.
Worked example, illustrative:book C$40,000,000,000 of notional: CORRA swaps, cross-currency swaps, FX; booked in the branch as the French bank’s tradestwo clients a pension fund’s C$300,000,000 30-year swap, cleared; a utility’s C$200,000,000 payer swap, bilateralclearing and margin LCH through the bank’s membership or CDCC through a member; E-22 and EMIR on the bilateral marginreporting a designated TR under the Ontario rule and the harmonized instrument; EMIR by the bankconduct NI 93-101 since September 2024: fair dealing, KYC, valuations; the Bank Act and OSFI on the branchrisk to Paris and New York by internal transfer; hedged at LCH and on the Montreal Exchange
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A swap with a French bank’s Toronto branch carries two rulebooks and one legal entity: Canada’s clearing, margin, reporting and conduct rules on the branch, EMIR on the bank, and a risk transfer to Paris that is a booking, not a trade. The regulators each see the client trade, and only the bank sees the whole.
Mandatory clearing in Canada: National Instrument 94-101 requires the clearing of the CAD, USD, EUR and GBP interest rate swaps (and the basis swaps, the forward rate agreements and the overnight index swaps in those currencies) between the clearing participants of a regulated clearing agency and their affiliates with large notional, at a regulated clearing agency (LCH, CME, CDCC for the Canadian swaps); the end users below the thresholds trade bilaterally.
The trade reporting rules: the OSC’s Rule 91-507 (Ontario), the AMF’s regulation (Québec) and Multilateral Instrument 96-101 (the other provinces) require the OTC derivatives to be reported to a designated trade repository by the reporting counterparty under a hierarchy (the derivatives dealers first), with the lifecycle events and the valuations; the rules were amended in 2024 and 2025 to align the data fields with the CFTC’s and the global standards.
The business conduct and registration rules: NI 93-101 (in force since September 28, 2024) sets the dealers’ duties to their derivatives counterparties, with lighter duties toward the eligible derivatives parties; the registration rule (the proposed NI 93-102) would register the derivatives dealers with the provinces, with the banks expected to be exempt on the strength of the Bank Act and OSFI; a foreign bank branch is a bank under the Bank Act for this purpose.
OSFI’s Guideline E-22: the margin requirements for non-centrally cleared derivatives for the federally regulated financial institutions, foreign bank branches included, implementing the Basel-IOSCO standard (variation margin daily, initial margin above the thresholds with the standard model or the schedule); the French bank applies EMIR’s margin rules to the same trades, aligned on the same standard, and the branch’s CSA documents both.
The CED, Liquidity and Resolution›The CED
The Capital Equivalency Deposit and the Home Capital: OSFI’s Guideline A-10, the CRR in Paris, Reliance
How OSFI supervises a French bank’s branch without capital: the capital equivalency deposit of 5% of the liabilities at an approved Canadian custodian under Guideline A-10, OSFI’s powers to raise it, condition the branch and take the assets in Canada, the parent’s CRR capital and the SREP in Paris with the branch inside, OSFI’s reliance through the memorandum with the ACPR and the college the ECB chairs, the branch’s returns and OSFI’s assessment, the principal officer and the governance of a branch, and the tools when the parent is under strain.
Worked example, illustrative:branch no capital of its own; an office of the French bank; the CED insteadCED C$1,000,000,000 of GoC bonds and bills, 5% of C$20,000,000,000 of liabilities, at an approved custodian; OSFI can raise itpowers conditions on the order; liquid assets in Canada; control of the assets in Canada if the bank failshome capital CET1 13% under the CRR with the SREP’s Pillar 2; the ECB and the ACPR; the SRB’s single point of entryreports the monthly and quarterly returns; the CED compliance; the annual audited return; no capital returngovernance a principal officer resident in Canada; the parent’s oversight; OSFI’s governance guideline as adapted
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A branch is capitalized in Paris and secured in Canada: OSFI asks for no capital but for a deposit it can raise, relies on the ECB and the ACPR for the solvency, and keeps the power to take the assets in Canada. The accountability is the principal officer’s, and the deposit is the host’s one lever on a bank it does not supervise.
Guideline A-10: OSFI’s guideline on the capital equivalency deposit of the foreign bank branches: unencumbered securities (government bonds and bills, other approved assets) worth at least 5% of the branch’s liabilities as reported to OSFI and at least C$5,000,000, held at a Canadian financial institution OSFI approves as custodian, with OSFI’s consent to any withdrawal; the Superintendent may require a higher deposit.
A deposit, not capital, not a pledge: the CED is the Canadian answer to the question New York answers with the asset pledge and the EU with endowment capital under CRD VI, and the UK with nothing; the deposit is the branch’s own liquid assets segregated for the Canadian creditors, costing the branch the spread between the bonds and the loans; it absorbs no loss in the ordinary course, since the parent’s capital does that, and cushions the Canadian creditors when the Superintendent takes the assets in Canada.
OSFI and the foreign bank branches: OSFI supervises the authorized foreign banks under the Bank Act with its supervisory framework (updated in 2024) adapted to branches, relying on the home supervisor for the bank’s solvency and reading the branch’s returns, its risk profile and its controls; the Minister of Finance grants the order to carry on business in Canada, with OSFI’s recommendation, and may revoke it; the principal officer answers to OSFI.
Compared with the other hosts: the US branch pledges assets and holds a buffer under Regulation YY with the IHC beside it; the EU branch holds endowment capital and local liquidity under CRD VI with the subsidiary beside it; the UK branch holds nothing locally and is supervised on reliance with the designated firm beside it; the Canadian branch holds a deposit the Superintendent can raise and take, with no local entity beside it; four hosts, four answers to the same question.
The CED, Liquidity and Resolution›Liquidity
Liquidity at the Branch: No Canadian Ratio, a Buffer With the CED Inside It, the Group and the Bank of Canada Behind
The liquidity of a French bank’s Toronto branch: none of OSFI’s ratios, the home regime at the ECB with the branch inside, the branch’s buffer of Government of Canada bonds and bills with the capital equivalency deposit inside it, the stress tests inside the French bank’s ILAAP, the LCR by currency and the SREP at the ECB, OSFI’s returns and the liquidity data on request, the contingency funding plan with the group, the correspondent and the Bank of Canada’s facilities, and the transfer pricing of the buffer and the CED into the Canadian loan pricing.
Worked example, illustrative:rules no OSFI liquidity ratio on a branch; the CRR’s LCR and NSFR at the French bank; OSFI may require liquid assets in Canadabuffer C$2,000,000,000 of GoC bonds and bills by policy; half pledged as the CED, half freestress tests the branch’s tests inside the French bank’s ILAAP by entity and currency; the swap dependence shownhome the ECB’s LCR by currency; the SREP’s liquidity block; the daily monitoringreports OSFI’s monthly and quarterly returns; the liquidity data on request; the Bank of Canada’s statisticsbackstop and cost the inter-branch account, the correspondent, the repo market, the Bank’s facilities at one remove; the FTP
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The branch holds a buffer by policy and a deposit by law, counts its liquidity through Paris and reaches its central bank through a correspondent. OSFI relies and watches, the ECB counts, and the cost of the Canadian dollar for a euro bank ends up in the loan pricing.
OSFI’s liquidity rules and the branches: the Liquidity Adequacy Requirements guideline (the LCR at 100%, the NSFR, the Net Cumulative Cash Flow metric and the liquidity monitoring tools) applies to the banks, the bank holding companies and the federal trust and loan companies, not to the foreign bank branches, which OSFI supervises on the home regime and their own returns under its framework for branches, with the power to require liquid assets in Canada.
The home rules: the CRR’s LCR and NSFR apply to the French bank consolidated with the branches inside, the ECB monitors the LCR by significant currency and reviews the ILAAP in the SREP; the Canadian dollar is a small currency for a French bank but a swapped one, so the ILAAP shows the dependence on the FX swap market and the contingency plan names the group’s response.
The CED as liquidity: the capital equivalency deposit is made of the branch’s own liquid assets, so it counts in the branch’s buffer for the ordinary purposes and in the French bank’s LCR at home (where the pledge does not matter), but it cannot be sold or repoed in a stress without OSFI’s consent to a withdrawal; the branch keeps a free buffer beside it, and the two together are what OSFI reads.
The cost of the branch model in Canada: a Canadian bank funds its loans with insured retail deposits and reaches the Bank of Canada directly; a foreign bank’s branch funds them with wholesale deposits above C$150,000 and swaps two currencies deep, holds a deposit it cannot lend and reaches the central bank through a correspondent; the difference is in the FTP and in the margin the branch needs, so the foreign branches lend to the large corporates and leave the retail to the Canadian banks.
The CED, Liquidity and Resolution›Resolution
Resolution: the SRB’s Single Point of Entry in Paris, the Assets in Canada and the Canadian Creditors’ Priority
How a French bank’s Canadian branch is meant to come apart, or not: the parent’s single point of entry under the BRRD with the SRB and the ACPR, the branch inside the home resolution with OSFI’s powers in reserve, the assets in Canada applied first to the Canadian creditors under the Winding-up and Restructuring Act with the CED at the center, no CDIC and the C$150,000 floor, the critical functions (the Canadian-dollar payments and the swaps) and the FMI access mapped, the BRRD’s stays and the Canadian safe harbors reconciled, the crisis management group and the resolvability assessment, and the resolution liquidity and the assets in Canada.
Worked example, illustrative:home strategy single point of entry at the French parent under the BRRD; the SRB and the ACPR; the bail-in of MREL; the branch stays openCanadian plan no branch resolution regime; the Superintendent’s control of the assets in Canada; the Winding-up and Restructuring Actpriority the assets in Canada applied first to the creditors of the Canadian business; the CED at the centerdepositors no CDIC; the C$150,000 floor keeps the retail out; the deposits rank above the bail-inable debt at homecritical functions the Canadian-dollar payments through the correspondent; the swaps at LCH, CDCC and bilateral; the stayshome-host the crisis management group chaired by the SRB and the ACPR; OSFI and the Department of Finance as hosts; the resolvability assessment
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Resolution in Canada is built on a ring-fence and a deposit: the branch follows its parent into the SRB’s single point of entry and stays open, and if that fails the Superintendent takes the assets in Canada and pays the Canadian creditors first, the CED at the center. No CDIC and no Canadian entity, which is what the C$150,000 floor is for.
The Winding-up and Restructuring Act and the authorized foreign banks: the Act governs the liquidation of the Canadian business of an authorized foreign bank, on the Superintendent’s application after taking control of the assets in Canada under the Bank Act; the assets in Canada are applied first to the claims of the creditors of the Canadian business, so the Canadian creditors are ring-fenced from the foreign ones in a liquidation, and the CED (which only OSFI can release) is the assured part of the pool.
The BRRD and the SRB for the Canadian creditors: the French bank’s resolution is the SRB’s under the Single Resolution Mechanism, with the ACPR executing: the single point of entry at the parent, the bail-in of the MREL, the depositors ranking above the senior debt under the EU creditor hierarchy; the Canadian counterparties’ contracts carry the recognition of the BRRD’s stays as the French bank’s non-EU contracts must (Article 55 for the bail-in, the contractual stays for the suspension powers).
No CDIC and no Canadian entity: a Schedule III branch is not a CDIC member and has no resolution regime of its own beyond the liquidation; a Schedule II subsidiary would be a CDIC member with insured deposits to C$100,000 and CDIC as its resolution authority (the bail-in regime applying to the domestic systemically important banks only); the Bank Act’s C$150,000 floor is the price of the branch model for the depositors.
Compared with the other hosts: the US branch has a pledge, an IHC with internal TLAC and the recognition of the home resolution; the EU branch has endowment capital and the BRRD’s recognition; the UK branch has recognition and the FSCS; the Canadian branch has a ring-fence in liquidation, a deposit and no insurance; the crisis management group is where the four hosts and the home authority agree what each will do.
Reporting and Control›The Calendar
The Reporting Calendar: OSFI’s Returns, the Bank of Canada, FINTRAC, the Exemption Notices and the Taxes
The reporting calendar of a French bank’s Canadian branch: the daily trade repository, FINTRAC and sanctions reports beside EMIR at home, the monthly balance sheet and the quarterly returns to OSFI with the CED compliance and no capital return, the annual audited return with the principal officer’s attestations and the dealers’ exemption notices, the Canadian taxes (corporate tax on the attributed profit, the Part XIV branch tax at the treaty rate of 5%, the withholding), the French side where the branch profit is exempt, and the data behind the returns in one IFRS ledger under OSFI’s data expectations.
Worked example, illustrative:daily the trade repository by T+1; FINTRAC within five days; the frozen assets to OSFI monthly; EMIR at homemonthly and quarterly the balance sheet to OSFI and the Bank of Canada; the loans, the deposits, the derivatives, the CED certificate quarterlyannual the audited return; the principal officer’s attestations; the AML effectiveness review; the exemption noticesCanadian tax corporate tax at 26.5% on the attributed profit; Part XIV branch tax at 5% under the treaty; the withholdingFrench tax the branch profit exempt in France under the treaty and the territoriality principle; one transfer pricing filedata one IFRS ledger for OSFI and Paris; OSFI’s data expectations; the principal officer’s attestation
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A French bank reports its Canadian branch twice from one IFRS ledger: to Canada as a branch with no capital, to the ECB as a part of the bank. The taxes follow the same split, with a treaty exemption rather than a credit in the middle, and the principal officer signs for Canada.
OSFI’s returns for foreign bank branches: the monthly balance sheet and the quarterly returns on the loans, the allowances, the deposits, the derivatives and the off-balance-sheet items, the CED compliance certificate, the annual return with the audited financial statements and the principal officer’s attestations; the returns are filed through the Bank of Canada’s and OSFI’s shared system and feed the Bank’s banking statistics; no capital, leverage or liquidity return applies to a branch.
The Part XIV branch tax: the Income Tax Act taxes a non-resident corporation carrying on business in Canada through a branch on its after-tax Canadian profit not reinvested in Canada at 25%, the counterpart of the withholding tax on a subsidiary’s dividends; the treaties reduce it (5% under the Canada-France treaty, the same as the treaty rate on dividends to a parent), with an allowance for the investment in Canadian property the branch keeps.
The French territoriality principle: France taxes the profits of the businesses carried on in France and exempts the profits of the foreign permanent establishments of a French company (the Canada-France treaty confirms it), so a French bank’s Canadian branch profit is taxed in Canada only and no foreign tax credit is computed; a US bank’s London branch is in the opposite system, taxed at home with a credit; the attribution of the profit to the branch is what both authorities audit.
The exemption notices: the group’s dealers that serve the Canadian permitted clients under the international dealer exemption file their notice of reliance with the OSC and the AMF annually (by December 1 in most provinces), keep a Canadian agent for service and give the clients the required disclosure; the branch itself, as a bank, files no securities returns, and its derivatives business is reported to the trade repository under the provincial rules.
Reporting and Control›The Paris Line
The Paris Line: One IFRS Ledger, OSFI’s Returns, the ECB’s Templates and One Year-End
How a French bank’s Toronto books reach Paris: the daily close in IFRS into the French bank’s ledger with the branch as a segment, one basis with two presentations, the monthly close feeding OSFI’s balance sheet and the French bank’s liquidity templates, AnaCredit, COREP and FINREP, the ECB’s stress test, the ILAAP and the SRB’s data with the branch inside, the December 31 year-end with a Canadian audit of the branch and the French audit of the bank, the profit attribution under the treaty and the group’s transfer pricing, and the Canadian and home views of the same books.
Worked example, illustrative:daily the Toronto P&L into the French bank’s ledger by the evening; the branch as a segment; the inter-branch account squaredone basis IFRS for OSFI and for Paris; a presentation mapping, not a basis reconciliation; the group’s IFRS 9 modelsmonthly and quarterly OSFI’s balance sheet; the liquidity templates and AnaCredit; COREP and FINREP; the SRB’s liability datayear-end December 31 on both sides; the branch’s audited return to OSFI; the French bank’s accounts and the URD in Parisattribution the treaty’s business profits article; the head office funding and costs; the local file and the master fileviews OSFI, the CRA and FINTRAC on the branch; the ECB, the SRB, the ACPR and the AMF on the bank; two audits
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The Toronto books are French books kept once: closed in IFRS for Paris every evening and presented for OSFI on the same basis, with one year-end and two audits. The branch is a segment of the bank’s ledger, taxed in Canada and exempt in France, and the ECB sees it inside the bank every month.
IFRS on both sides: Canada adopted IFRS for the publicly accountable enterprises in 2011 and OSFI requires it of the federally regulated financial institutions, foreign bank branches included, for their returns; the French bank consolidates under IFRS as adopted by the EU; the Toronto branch keeps one basis with OSFI’s presentation, where a US bank’s London branch keeps US GAAP for New York and IFRS or UK GAAP for London.
The branch audit: the Bank Act requires an authorized foreign bank to have its Canadian business audited annually by a Canadian auditor who reports to OSFI on the branch’s annual return, beside the French statutory audit of the whole bank (two auditors, as French law requires of the large banks) that covers the branch inside the consolidation; the two auditors coordinate on the Canadian books.
Profit attribution for a branch in Canada: the Income Tax Act taxes a non-resident on its profit from the business carried on in Canada, attributed under the treaty’s business profits article and the CRA’s rules for branches (the interest on the head office funding deductible within limits, the head office expenses allocated, the notional capital where the OECD’s authorized approach applies); the Part XIV branch tax follows on the repatriated profit; the French side exempts it.
The SRB’s view of a branch: the French bank’s liability data report and resolution plan show the Toronto branch’s liabilities by governing law, ranking and counterparty type (the Canadian deposits, the swaps under the Canadian CSAs, the correspondent) and its FMI access (the correspondent on Lynx, the CCPs through the bank’s memberships), which is what the SRB and OSFI reconcile in the crisis management group.
Reporting and Control›Supervision
Supervision: OSFI’s Framework for Branches, FINTRAC, the OSC, the ECB’s Joint Supervisory Team and the College
The supervisory year of a French bank’s Canadian branch: OSFI’s supervisory letter and overall risk rating under its framework for branches, FINTRAC’s AML examinations and the OSC’s and the AMF’s oversight of the dealers’ exemption, the ECB’s joint supervisory team seeing the branch inside the French bank with the ACPR’s inspectors reaching Toronto, the findings with the CED and the order’s conditions as OSFI’s levers reconciled with the JST’s, the college, the memoranda and the crisis management group, and the accountability of the principal officer beside the parent’s board.
Worked example, illustrative:OSFI continuous supervision under the 2024 framework; the annual letter; the overall risk rating and the tier; on-site reviewsFINTRAC and the OSC the AML examination with administrative penalties; the exemption notices and the Canadian activity of the dealersECB the joint supervisory team’s SREP and inspections with the branch inside the bank; the SRB’s resolvability assessmentlevers OSFI’s findings tracked to closure; the CED raised; conditions on the order; the Minister’s revocation in reservehome-host the college chaired by the ECB; the memoranda with the ACPR and the ECB; the crisis management groupaccountability the principal officer resident in Canada; no board, no senior managers regime; the parent’s board to the ECB
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A French bank in Canada is supervised four times on one set of books: by OSFI on reliance with a deposit and an order in hand, by FINTRAC on the money laundering, by the OSC on its dealers’ exemption, and by the ECB for the whole bank with the branch inside. The branch turns the programs into one remediation, and the principal officer answers for Canada.
OSFI’s supervisory framework (2024): OSFI assesses every federally regulated institution, the foreign bank branches included, on its business risk and its risk management and assigns an overall risk rating and a tier that set the intensity of the supervision, with a supervisory letter each year and on-site reviews on a cycle; for a branch the assessment rests on the home regime, the branch’s own returns and controls, the CED and the assets in Canada, and the reliance OSFI places on the parent.
FINTRAC: Canada’s financial intelligence unit receives the reports and examines the compliance programs of the reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, with administrative monetary penalties made public; OSFI reads the AML program in its own supervision and the two coordinate; a foreign bank branch is a reporting entity like a bank.
The ECB’s supervision of the foreign branches of a significant institution: the joint supervisory team sees the branches inside the bank’s risk and the SREP, the on-site inspections can cover the foreign branches with the national authority’s inspectors, and the ECB’s expectations on booking, risk management and governance reach the branches as parts of the bank; the host supervisors join the college the ECB chairs and the crisis management group the SRB chairs.
Accountability without a board: a Canadian branch of a foreign bank has no board and the Bank Act asks for a principal officer resident in Canada, accountable to OSFI, with OSFI’s corporate governance guideline applied as adapted (the management committee, the parent’s oversight, the internal audit); the UK’s senior managers regime and the US examination of the branch’s own management have no Canadian counterpart beyond the principal officer and the order’s conditions.
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