Whereas the Canada Economic Plan 2014 and Bill C-15 2016 enact legislation for a bail-in regime for domestic systemically important banks DSIBs providing power to the Canada Deposit Insurance Corporation to convert prescribed debt of a non-viable bank into common shares bail-in; And whereas local governments in British Columbia accumulate large financial reserves through taxation to hold for future infrastructure development both directly with banks and through the Municipal Finance Authority investment program, the loss of which through a bail-in program would widely harm all local governments: Therefore be it resolved that the provincial government take measures to reduce the risk of local government reserves being used for bail-in conversion, either by promoting changes to federal legislation to specifically exclude local government reserves from bail-in or by promoting legislation such as Glass-Steagall rules; or if unable to do this, by creation of a secure repository for reserve funds, andor by providing advice to local governments to avoid bail-in risk.
Ministry of Municipal Affairs and Housing The Province of British Columbia supports the accumulation of reserve funds by local governments. Reserve funds enable efficient infrastructure development while maintaining property tax stability. Staff of the Ministry of Municipal Affairs and Housing are happy to advise local governments on methods to effectively create and manage reserve funds. The Government of Canada is party to international agreements that require Canadas major banks to have buffers against their failure and need for government support. One of these buffers is the recapitalization of a vulnerable bank by bail-in. The exclusion of local governments, a significant holder of DSIB debt, from the terms of the agreements is not feasible given the commitments made by Canada. The risk of bail-in is small, however local governments will need to use their professional judgement and be aware of the potential for some debt obligations to be subject to bail-in rules. Local governments must decide whether the level of risk is acceptable from a business and asset management perspective given the returns being offered. If the level of risk from these debt obligations is deemed too great, the Community Charter permits investment in secure instruments that are not susceptible to bail-in. These include Federal, Provincial and local government bonds and the pooled investment funds of the Municipal Finance Authority.