Vol. 149, No. 12 — June 17, 2015


SOR/2015-131 June 5, 2015


Canadian Payments Association Election of Directors Regulations

P.C. 2015-758 June 4, 2015

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 35(1) (see footnote a) of the Canadian Payments Act (see footnote b), makes the annexed Canadian Payments Association Election of Directors Regulations.




1. The following definitions apply in these Regulations.


Qualified candidates

2. (1) The nominating committee must, in preparing a list of qualified candidates for the election as directors, ensure that

Particular case — independent director

(2) In regard to the directors referred to in paragraph 8(1)(d) of the Act, if the nominating committee is unable to prepare a list of qualified candidates in accordance with paragraph (1)(a) because of the time requirement referred to in paragraph 3(1)(a), (f), (g), (h) or (i), that time requirement is reduced to “within the last year”.

Independent director

3. (1) For the purposes of paragraph 8(1)(d) of the Act, “independent” means a person other than


(2) The nominating committee must provide guidance with respect to the documents or information that it considers relevant to verify the independence of a candidate or director in regard to any circumstance referred to in paragraphs (1)(e) to (i).


Majority voting

4. A candidate that receives the greatest number of votes in an election of directors for which they have been nominated is elected as a director. If only one candidate is nominated as a director, they are elected as a director when they receive a greater number of votes than the number of votes withheld.



5. (1) The nominating committee must confirm to the Board before the preparation of the report referred to in section 24 of the Act that each director referred to in paragraph 8(1)(d) of the Act is independent.

Annual report

(2) The Board must indicate in the report

Change in circumstance

(3) A director referred to in paragraph 8(1)(d) of the Act must advise the Chairperson without delay of any change in their circumstance that is likely to affect their ability to meet the requirement to be independent.


6. The Canadian Payments Association Election of Directors Regulations (see footnote 1) are repealed.


S.C. 2014, c. 39

7. These Regulations come into force on the day on which subsection 356(1) of the Economic Action Plan 2014 Act, No. 2 comes into force but if they are registered after that day, they come into force on the day on which they are registered.

(Paragraph 2(1)(c))


(This statement is not part of the Regulations.)


Legislative amendments to the Canadian Payments Act replaced the governance structure of the Canadian Payments Association (CPA) with a new structure overseen by a Board of Directors that will have a majority of independent directors (i.e. directors who are free of conflict of interest with CPA members) and that will be led by an independent Chairperson. In order to implement these changes, amendments to the Canadian Payments Association Election of Directors Regulations are required to establish the criteria for determining the independence of directors and to clarify other aspects of the new governance framework.


The CPA is a statutory body with a mandate to establish and operate national systems for the exchange, clearing, and settlement of payments between banks, credit unions, and other CPA members. Two systems operated by the CPA are the Automated Clearing Settlement System (ACSS) and the Large Value Transfer System (LVTS).

While the CPA is a capable operator of Canada’s core national payments clearing and settlement infrastructure and the infrastructure has proven reliable, the infrastructure is ageing, and stakeholders have raised questions about whether it adequately meets the needs of end-users.

Two successive reviews of the payments system (1998 and 2012) have found deficiencies in the CPA’s governance structure.

Prior to its amendment, the Canadian Payments Act prescribed that the Board of Directors must consist of 16 directors, 13 of whom were CPA members and 3 were independent directors appointed by the Minister of Finance. The law also required the appointment of 16 alternate directors and designated the representative of the Bank of Canada as the Chairperson of the Board.

The statutory structure and composition of the Board have changed as a result of recent legislative amendments. The Economic Action Plan 2014 Act, No. 2 (the Act) received royal assent on December 16, 2014. The Act implements a series of amendments to the Canadian Payments Act that change the governance structure of the CPA. Specifically, the amendments reduce the size of the Board of Directors and transform it into a 13-member, majority-independent Board; increase the number of independent directors from 3 to 7 (they will be elected by members rather than appointed by the Minister of Finance); reduce the number of member directors from 12 to 5 (who will continue to be elected by CPA members); and specify that the President of the CPA is ex officio director. In addition, there no longer are alternate directors, and the Bank of Canada (who used to chair the Board) is no longer represented on the Board of Directors; the Board is instead to be chaired by an independent director.

Amendments to the Canadian Payments Association Election of Directors Regulations under the Canadian Payments Act are required to implement this new governance framework. These amendments establish the criteria for selecting independent directors and update the Regulations that are currently in force to reflect the broader changes to CPA governance implemented through the Act. Section 35 of the amended Canadian Payments Act explicitly delegates responsibility for defining independence to the Governor in Council and allows the Governor in Council to issue guidelines for the election of directors.

The amendments also provide additional direction on the composition of the member directors of the CPA Board. Specifically, the Regulations are amended to ensure a balanced representation on the Board of Directors of the largest financial institutions, which are the largest contributors and users (by volume and value) of the CPA’s clearing and settlement systems and bear the highest proportion of the risk.

In March 2013, the Superintendent of Financial Institutions identified six of the largest financial institutions in Canada as “domestic systemically important banks” (D-SIBs), and it was recognized in policy that should one of these institutions become unstable, it could affect the stability of the financial system. The Regulations are amended to ensure a balanced level of representation on the Board between D-SIBs and other CPA member institutions.

The amendments also provide guidance on other criteria for selecting nominees. For example, the Regulations require that the nominating committee strive to ensure the nominees represent a sufficient range of skills, expertise, and experience to ensure that the Board can carry out its responsibilities effectively. The amendments also require that member directors be senior executives within their organizations.


The objectives of the regulatory measures are to

  1. facilitate independent decision making by the CPA Board by setting criteria for determining if independent directors are free of conflict of interest with CPA members;
  2. ensure that the largest users of and contributors to CPA systems (i.e. D-SIBs) are represented in a balanced manner on the CPA Board;
  3. provide guidelines for the selection of nominees for director positions; and
  4. remove outdated regulatory provisions that are no longer applicable given the new voting structure and Board composition imposed through the legislative amendments.


The Canadian Payments Association Election of Directors Regulations are repealed and replaced with new Canadian Payments Association Election of Directors Regulations (the Regulations) which

  1. add a definition of independence that establishes criteria used to identify nominees to stand for election as independent directors. The criteria are an adaptation of the thresholds of the widely used Canadian Securities Administrators National Instrument 52-110. Under this standard, a director is independent if he or she has no direct material relationship with a CPA member (e.g. employed as an officer or director of a CPA member financial institution) and no appearance of an indirect material relationship with a CPA member (e.g. is a spouse or common-law partner or household member of an officer of a CPA member financial institution). Therefore, adopting a definition adapted from this standard ensures that any nominee for an independent director position does not have any professional, business or personal relationship that could reasonably be expected to interfere with the exercise of that director’s independent judgment. Specific criteria are established in the Regulations, modelled on the criteria in National Instrument 52-110, to guide the CPA Board in determining whether a director or a director nominee meets the standard for independence.
  2. require that two out of the three Board seats allocated to direct participants in CPA clearing and settlement systems must be held by banks that have been designated as domestic systemically important banks (D-SIBs) by the Superintendent of Financial Institutions, which are those listed in the schedule of the Regulations.
  3. require that CPA member directors be senior executive officers in their organizations.
  4. remove provisions of the former Canadian Payments Association Election of Directors Regulations that are no longer applicable in light of the legislative amendments to the Canadian Payments Act (e.g. abolishing references to an all-member Board of Directors, voting formulas, and the Executive Committee).

“One-for-One” Rule

The “One-for-One” Rule does not apply, as the regulatory changes do not impose new administrative burden costs on business.

Small business lens

The small business lens does not apply to the regulatory changes, as there are no costs to small business.


The Canadian Payments Association was consulted in the spring of 2014 on these measures and was also provided the opportunity to comment on drafts of the Regulations. The Regulations were published in the Canada Gazette, Part I, for a period of 30 days, during which the public could comment.

The CPA supports the Regulations. The Canadian Bankers Association (CBA) commented that not all financial institutions uses the same terminology when referring to executive officers, and that the terms “senior vice president” or “executive vice president” are not always used. The CBA suggested that the Regulations could be amended to say that executives appointed by a financial institution’s Board of Directors or Chief Executive Officer are considered to be equivalent to the terms “senior vice president” or “executive vice president.” The Regulations have not been amended as the language already provides for an equivalency for those financial institutions that use a different terminology.

In addition, comments by the CBA suggested that there was ambiguity regarding whether the Regulations stipulated at least two out of three seats allocated to direct participants are to be held by D-SIBs or only two out of the three seats. The provision in question has not been amended as it accurately captures the intent as drafted.

Desjardins commented that the Regulations should require the Board seats allocated to direct participants in the CPA systems be held by domestic systematically important financial institutions instead of D-SIBs in order to reflect users who process the largest volume of transactions on the CPA systems. The Regulations have not been amended as the intention for the provision is to limit the risk borne by the largest participants, which is best represented by the total value of the transactions processed by the participant and aligns with D-SIB designations.

Desjardins further commented that in order to better reflect the diversity of the payment sector, the Regulations should stipulate a minimum level of representation of credit unions on the CPA Board. The Regulations have not been amended, as the Canadian Payments Act legislates that diversity in the payment system be represented by allowing 5 of the 13 directors to be CPA members. Given this provision, credit unions have ample opportunity to seek a seat on the CPA Board.

Finally, a minor amendment has been made to subsection 2(2), paragraphs 3(1)(e), (f), (g), (h), (i), and paragraph 5(1)(b) to better align them with the responsibilities of the nominating committee of the Board of Directors as outlined in the Act.


The Regulations are needed to establish a majority-independent Board of Directors. The Regulations deliver this outcome by setting out a transparent and objective set of criteria for determining which nominees qualify as independent directors.

By establishing these criteria, the Regulations ensure that a majority of the Board of Directors remains free from any professional, business or personal relationship that could result in a conflict of interest with CPA members. Achieving this level of independence, in turn, should help the Board to better govern the CPA in the public interest, for example by assuring the safety and soundness of the CPA’s systems and ensuring that the systems are efficient and that the interests of end-users (such as consumers and businesses) are taken into consideration in both the operation of the CPA’s current systems and the design of the CPA’s next generation system.

Ensuring a minimal level of representation for domestic systemically important banks on the CPA Board will provide a safeguard to guarantee that the largest participants in the CPA’s systems and hence, those most exposed to risk, will continue to have representation on the Board.

The new requirements for the nominating committee, i.e. to consider the balance of core competencies required at the Board level when identifying candidates and to ensure that member directors are senior executives within their organizations, should result in more efficient decision-making at the Board level.

Implementation, enforcement and service standards

Compliance with the Regulations will be monitored by the Department of Finance Canada. In the event of non-compliance, the Minister of Finance can issue a directive to the Association, requiring compliance with the Regulations.


Lisa Pezzack
Financial Sector Division
Department of Finance Canada
90 Elgin Street, 13th Floor
Ottawa, Ontario
K1A 0G5
Email: Lisa.Pezzack@fin.gc.ca