CDIC expands EFC exemptions

Summary#

Canada Deposit Insurance Corporation (CDIC) is proposing the By-law Amending the Canada Deposit Insurance Corporation Eligible Financial Contracts By-law. The change would widen exemptions for certain counterparties to eligible financial contracts and move the deadline to comply to October 1, 2028. This is a proposal published for comment in the Canada Gazette, Part I on November 1, 2025.

What it does#

• Adds definitions for central counterparty and clearing and settlement system so those entities can be treated separately from other counterparties.
• Expands exemptions so that the class of contracts excluded from the By-law now covers:
  • central counterparties (as newly defined),
  • the departments or agencies of the government of a foreign country (not just the foreign government itself),
  • multilateral development banks (described as banks owned and funded by the governments of two or more countries and created for economic development).
• Removes the old legal link to the Payment Clearing and Settlement Act and replaces it with the new internal definitions.
• Changes the compliance timing for contracts so the earlier cutoff of October 1, 2024 is replaced with October 1, 2028, giving institutions time to adjust.
• Updates contract wording requirements so federal member institutions must still include language recognizing the CDIC Act’s stay provisions, but not for the newly exempted groups.

Note: This is a proposed Amending By-law and CDIC is seeking comments for 30 days after publication.

Who's affected#

• Federal member institutions of CDIC (for example, banks and other deposit-taking institutions) will see less administrative work when dealing with the newly exempted counterparties.
• The newly exempted groups include central counterparties, the departments and agencies of foreign governments, and multilateral development banks. They would no longer need the specific contractual language required by the original By-law.
• Counterparties to eligible financial contracts and legal teams that draft or review those contracts will notice the change.
• If unclear: the notice does not name every type of institution that is a CDIC member, so some smaller or unusual member types could also be affected.

Why it matters#

• The change reduces paperwork and contractual housekeeping for Canadian member institutions and for the newly exempted foreign or international counterparties.
• CDIC says the expanded exemptions align with how other authorities treat these entities and that the change should not weaken its ability to manage a failing member institution in an orderly way.
• For people who negotiate or sign eligible financial contracts, the practical effect is fewer required contract changes when dealing with central counterparties, foreign government agencies, or multilateral development banks.
• This is still a proposal. Interested parties can comment during the public consult period before the Amending By-law can be finalized.