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The Canada Mortgage and Housing Corporation complex in Ottawa.

Sean Kilpatrick/The Globe and Mail

Canada's national housing agency gave Maple Bank GmbH's Canadian branch the green light during a financial review, just one month before the federal banking watchdog seized the company's assets amid a German tax investigation, documents show.

Documents obtained by The Canadian Press through an access-to-information request show that the Canada Mortgage and Housing Corporation reviewed Maple Bank GmbH's status as an issuer of mortgage-backed securities and a seller of Canada Mortgage Bonds in January 2016.

At the time, CMHC's so-called operations support division said it was "comfortable" maintaining Maple Bank's status, the documents show.

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The housing agency was aware of the German bank's dispute with authorities, which had been ongoing for about four years, according to the documents.

A month after the financial review, Canada's federal banking regulator announced it was taking temporary control of the Canadian branch's assets in light of the news that German banking regulator BaFin was shuttering the bank after a tax dispute threatened its financial stability.

Frankfurt-based Maple Bank is a subsidiary of Toronto-based Maple Financial Group Inc. The German bank's Canadian unit operated as a foreign bank branch in this country and was focused on securitization, securities financing and structured secured wholesale lending.

Neither the Canadian branch nor the parent firm's Canadian minority investors, which include National Bank of Canada and the Ontario Teachers' Pension Plan, have been accused of any wrongdoing in the German probe.

On Feb. 11, an insolvency administrator was appointed in Germany to handle the windup of the bank's operations.

Canada's banking watchdog, the Office of the Superintendent of Financial Institutions, announced on Feb. 15 that it was making its temporary control of Maple Bank's assets permanent.

The following day, the Ontario Superior Court granted a winding-up order with respect to Maple's Canadian branch and appointed KPMG as the liquidator. A winding-up order is a court order that forces an insolvent company into compulsory liquidation.

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When asked why CMHC was comfortable with maintaining Maple Bank's status as an issuer of securities even though it was aware of the ongoing German tax probe, the federal agency said it does not disclose details of its internal assessments.

"CMHC has a rigorous process to assess participants in its securitization programs," the agency said in an emailed statement.

"This includes the daily monitoring and evaluation of both public and non-public information to assess its risks, including the risk of loss due to the failure of any counterparty. CMHC's securitization programs are structured to minimize the risk of loss if a party were to fail."

A spokesperson added that CMHC does not expect to incur any losses stemming from Maple Bank's wind down.

Maple Bank did not return requests for comment.

The insolvency of Maple Bank GmbH also prompted CMHC to undertake a review of another issuer, according to the documents, although the entity's name is redacted.

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When asked for more details on that review, CMHC said it "regularly reviews all issuers and assesses any events that may impact them."

The federal agency declined to identify the entity under review or provide any further details.

With files from The Globe and Mail

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