The release of proposed bail-in rules for Canada's big banks are largely as expected and will not impact their credit ratings, according to a new report from Standard & Poor's Financial Services LLC's (S&P) global ratings division.
Specifically, the draft regulations published on June 16 are in line with the federal government's consultation paper on the issue from August 2014 and they are also consistent with expectations, the credit-rating agency's report says.
"In particular, we believe that Friday's releases do not imply a near-term reduction in the likelihood of extraordinary government support for systemically important banks (SIBs)," the S&P report says.
Canadian officials haven't put legislative or administrative constraints on their authority to bail out a failing bank, which represents a "notable difference" from policy approaches in the U.S. or Europe, the S&P report notes, and the proposed rules don't change that view.
"We continue to believe Canadian officials will examine all policy options in the unlikely event that an SIB is nearing non-viability, particularly in advance of the full implementation of the bail-in framework," the S&P report says.
In the meantime, the proposed rules "represent substantial progress" toward an effective resolution framework, according to the S&P report, which says that the credit-rating agency doesn't plan on any immediate rating action. Rather, S&P says it will review the situation as Canadian policy is finalized and implemented.