Canada’s big banks are going to face higher capital requirements and will have to plan for “bail-ins” rather than bailouts, as part of the government’s efforts to dispel the notion that they are too big to fail, according to the 2013 federal budget.

None of the large Canadian banks has been deemed to be systemically significant on a global scale — a designation that brings higher capital requirements and enhanced oversight measures under the new Basel III capital adequacy regime. However, it’s expected that they would be considered systemically important to the domestic system, and Thursday’s budget spells out a couple of the consequences of that likely label.

That means the banks will face higher capital requirements. The budget doesn’t spell out the exact charge they will face, leaving that to their regulator, the Office of the Superintendent of Financial Institutions (OSFI).

The government notes that it will also be proposing to implement a “bail-in” regime for Canada’s systemically important banks. That means if a bank fails, instead of a taxpayer bailout, their creditors would be expected to take a hit in order to prop it up.

“This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital,” the budget document says. The details of the bail-in plan are to be left to forthcoming consultations on how to best implement such a regime in Canada.

Additionally, the budget notes that systemically important banks will continue to be subject to enhanced supervision and recovery and resolution plans.

These measures, the budget document says, “will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are too big to fail.”