O.C. 360/2002

A.R. 164/2002

July 23, 2002

   

    A P P E N D I X

    Alberta Treasury Branches Act

    ALBERTA TREASURY BRANCHES

    AMENDMENT REGULATION

1   The Alberta Treasury Branches Regulation (AR 187/97) is amended by this Regulation.

2   Section 1(2) is amended

    (a) by repealing clause (c) and substituting the following:

        (c) "financial leasing corporation" means a corporation that enters into or acquires agreements as defined in section 5.1;

    (b) by repealing clause (d) and substituting the following:

        (d) "information management corporation" means a corporation whose activities are limited to

            (i) the collection, manipulation and transmission of information,

            (ii) the design, development, marketing and sale of computer software,

            (iii) the provision of advisory and other services related to the design and development of information management systems,

            (iv) the design, development, marketing and sale of equipment integral to information management systems, and

            (v) the design, development, management, manufacturing, marketing and sale of data transmission services, information sites, communication devices and information platforms or portals,

          in respect of information that is primarily financial or economic in nature or information that relates to the business of Alberta Treasury Branches or of a corporation in which Alberta Treasury Branches beneficially owns shares pursuant to section 19(4) of the Act;

3   The following is added after section 2:

Prescribed corporation

 

        2.1  A financial leasing corporation is a prescribed corporation for the purposes of section 19(4)(l) of the Act.

4  The following is added after section 5:

Leasing and related agreements

 

        5.1(1)  In this section,

                  (a) "agreement" means

                      (i) a security agreement as defined in the Personal Property Security Act, or

                      (ii) a financial lease agreement, being an agreement for a lease of personal property in which credit is extended by the lessor to the lessee for the purpose of enabling the lessee to meet the lessee's obligations under the lease;

                  (b) "property" means the personal property to which an agreement relates.

        (2)  Alberta Treasury Branches may not beneficially own shares in a financial leasing corporation unless

                  (a) the aggregate of

                      (i) the book value of all of the property that is subject to agreements held by the corporation, and

                      (ii) all amounts owing as receivables in respect of such agreements

          is equal to at least 80% of the assets of the corporation, and

                  (b) the corporation meets the requirements of the agreements. (3)  A financial leasing corporation may enter into or acquire agreements only if the following requirements are met:

                  (a) the corporation shall not direct its customers or potential customers to particular dealers in the property;

                  (b) at no time may the aggregate of the estimated residual values of all the property of the corporation, excluding motor vehicles, leased under the financial lease agreements exceed 10% of the aggregate of the costs of acquisition of that leased property to the corporation;

                  (c) the estimated residual value of property leased under a financial lease agreement must not exceed 20% of its cost of acquisition to the corporation;

                  (d) the agreement must be entered into or acquired for the purpose of extending credit to the lessee or purchaser;

                  (e) the property that is the subject of the agreement must be selected by the lessee or buyer and

                      (i) must be acquired by the corporation at the request of the lessee or buyer, or

                      (ii) must have been acquired by the corporation through the operation of an earlier agreement;

                  (f) the agreement must yield a return that

                      (i) will compensate the corporation for not less than its full investment in the property,

                      (ii) is reasonable, taking into account

                      (A) the term of agreement and the other terms and conditions of it,

                      (B) the technological obsolescence of the property, and

                      (C) the rate of return sought by the other lessors in respect of similar agreements in respect of similar property and under the same terms and conditions,

          and

                      (iii) is calculated by taking into account

                      (A) rental charges paid by the lessee or purchaser,

                      (B) estimated tax benefits of the agreement to the corporation, including tax credits and capital cost allowance claims, and

                      (C) the amount of,

                      (I) where the lessee or purchaser or a third party who is dealing at arm's length with the corporation has, on or before the commencement of the agreement, contracted to purchase the property or unconditionally guaranteed the resale value of the property at the date of expiry of the agreement, the purchase price or the resale value so guaranteed, or

                      (II) in any other case, but subject to clause (c), the estimated residual value of the property;

                  (g) the agreement must contain a provision

                      (i) assigning and conveying to the lessee or purchaser the benefit of all warranties, guarantees or other undertakings made by a manufacturer or supplier relating to property, or

                      (ii) setting out the responsibilities of the corporation with regard to the warranties, guarantees or other undertakings referred to in subclause (i);

                  (h) the agreement must substantially transfer to the lessee or purchaser the benefits and risks incidental to the operation of the property and must not place responsibility on the part of the corporation to install, promote, service, clean, maintain or repair the property;

                  (i) where the lessee or purchaser defaults in the manner set out in the agreement and the default is not waived or the agreement, including any renewals or extensions of it, expires, the corporation shall

                      (i) liquidate its interest in the property, or

                      (ii) enter into a new agreement in respect of that property within 2 years of that default or expiry or, where proceedings in respect of that property have prevented the corporation from complying with that requirement within that period, within 2 years of the completion of those proceedings.

        (4)  An agreement may be renewed on its expiry and may be extended during its terms.

        (5)  The financial leasing corporation shall not enter into an agreement in respect of

                  (a) a motor vehicle having a gross vehicle weight of less than 21 tonnes, or

                  (b) personal household property.

        (6)  For the purposes of subsection (5),

                  (a) "gross vehicle weight" means, in respect of a motor vehicle, the gross vehicle weight that is specified by the manufacturer of the motor vehicle as the loaded weight of the motor vehicle, or in the case of a motor vehicle designed to pull a trailer, the motor vehicle with the trailer;

                  (b) "personal household property" means personal property that is leased by an individual pursuant to a financial lease agreement or purchased by an individual pursuant to a conditional sales agreement and intended primarily for the personal use or enjoyment of the lessee or purchaser or of an individual who is not dealing at arm's length with the lessee or purchaser.

5   Section 8(5) is amended

        (a) by repealing clause (k) and substituting the following:

                  (k) demand loans at book value, other than loans to an individual, that are fully secured by any of the following securities:

                      (i) at market value, Treasury Bills of the Government of Canada or of a province;

                      (ii) at book value, term deposits or other similar instruments issued by an eligible financial institution that mature within 100 days after the applicable date;

                      (iii) at market value, bankers acceptances that mature within one year from the date of issue and bearer deposit notes;

                      (iv) at market value, commercial paper that matures within 90 days from the date of issue and has at least one of the short-term ratings referred to in the table in section 10(3);

                      (v) at market value, securities, other than securities referred to in clause (i), that are issued or guaranteed by the Government of Canada, the government of a province or a municipality;

        (b) by adding the following after clause (k):

                  (l) a line of credit to a participant in the Large Value Transfer System that has at least one of the commercial paper credit ratings referred to in the table in section 10(3).

6   The following is added after section 9.1:

Extra-provincial syndicated loan agreements

 

        9.2(1)  In this section, "Canadian corporation" means a corporation

                  (a) incorporated or continued in a jurisdiction in Canada, outside of Alberta, and (b) whose head office is outside of Alberta.

        (2)  Subject to subsection (3), Alberta Treasury Branches may enter into a syndicated loan agreement with one or more financial institutions in respect of a Canadian corporation if the corporation operates in Alberta.

        (3)  Alberta Treasury Branches's participation in syndicated loan agreements under subsection (2) must not exceed in the aggregate 10% of the total amount of commercial loans made by Alberta Treasury Branches at any one time.

7   Section 10 is amended

        (a) in subsection (1)

                  (i) by adding "derivative contracts, including" after "into";

                  (ii) by striking out "or rate" and substituting "and rate";

        (b) by repealing subsection (2) and substituting the following:

        (2)  Alberta Treasury Branches may enter into a transaction listed in subsection (1) with an existing customer of Alberta Treasury Branches only where

                  (a) the purpose of the transaction is to hedge against risks of the customer relating to interest rates, commodity prices or exchange rates, and

                  (b) if the purpose of the transaction is to hedge against risks of the customer relating to commodity prices, Alberta Treasury Branches takes an opposite position in the market to offset the risk it assumes under the transaction.

        (c) by adding the following after subsection (2.1):

        (2.2)  Alberta Treasury Branches may, for asset-liability management purposes, negotiate the replacing or unwinding of existing derivative contracts.

        (2.3)  Alberta Treasury Branches may enter into credit derivative contracts with financial institutions in Canada that have at least one of the credit ratings referred to in the table in subsection (3) in respect of residential mortgage loans made under section 9 for the purpose of diversifying its geographic concentration risk.

        (d) in subsection (3)

                  (i) by striking out "a rating in accordance with" and substituting "at least one of the ratings referred to in";

                  (ii) by repealing the table and substituting the following:

    Table of Securities Ratings

Rating Organization Long-term Rating Short-term Rating

Standard and Poor's AA- A-1(High)

Moody's Investors Service Aa3 P-1

Dominion Bond Rating Service AA(Low) R-1(Mid)

8   Section 11 is amended by adding the following after subsection (4):

        (5)  Notwithstanding subsection (1), once Alberta Treasury Branches becomes fully capitalized in the opinion of the Minister, the base fee with respect to a particular fiscal year is

        (a) in the case of deposits not greater than $60 000, the lesser of

            (i) an amount equal to the total of those deposits held by Alberta Treasury Branches at the end of the fiscal year, as shown in Alberta Treasury Branches' audited financial statements, multiplied by Canada Deposit Insurance Corporation's rate for a deposit-taking institution with a similar risk profile as Alberta Treasury Branches, as determined by the Minister, and

            (ii) an amount equal to 1/6 of 1% of all those deposits held by Alberta Treasury Branches at the end of the fiscal year, as shown in Alberta Treasury Branches' audited financial statements;

        (b) in the case of deposits greater than $60 000, an amount equal to 1/6 of 1% of all those deposits held by Alberta Treasury Branches at the end of the fiscal year, as shown in Alberta Treasury Branches' audited financial statements.

        (6)  For the purposes of applying the rates in subsection (5), the Minister may accept an estimate prepared by Alberta Treasury Branches of the amount of deposits greater than $60 000 if that amount is not reported in Alberta Treasury Branches' audited financial statements.

9   The following is added after section 23:

Compliance with guidelines

 

        23.1(1)  The board shall establish guidelines, satisfactory to the Minister, related to investments, lending and capital adequacy.

        (2)  Alberta Treasury Branches shall provide to the Minister annually on or before the date on which it submits its annual financial statements to the Minister under section 23 of the Act, an audited report on its compliance with the guidelines referred to in subsection (1), in the form prescribed by the Minister.

10   Section 29 is repealed and the following is substituted:

Liquidity investments

 

        29   Alberta Treasury Branches shall have and keep available unencumbered liquid assets in accordance with the guidelines referred to in section 23.1.

11   Section 30 is amended

        (a) in subsection (2) by striking out "5 years" and substituting "15 years";

        (b) by adding the following after subsection (2):

        (3)  For the purposes of subsection (2), "retain" includes the conversion of a guarantee, given by Alberta Treasury Branches, into a loan.