OSFI Finalizes Guidelines on Liquidity Adequacy and NSFR Disclosures
OSFI published the final Liquidity Adequacy Requirements (LAR) guideline and the net stable funding ratio (NSFR) disclosure requirements guideline. All deposit-taking institutions are expected to comply with liquidity coverage ratio (LCR), net cumulative cash flow (NCCF) metrics, and Liquidity Monitoring Tools parts of the revised guideline by January 01, 2020. Additionally, designated domestic systemically important banks (D-SIBs) are expected to comply with NSFR requirements of the guideline by January 01, 2020.
The revised LAR guideline will help financial institutions enhance their resilience to short-term liquidity stresses and will ensure that they maintain stable funding profile over the longer-term. The environment in which Canadian financial institutions operate has evolved considerably since the LCR and the NCCF metrics were issued in 2014. Some institutions increasingly rely on deposit funding that may experience higher risk of withdrawals in periods of stress. Such funding models can amplify risks for both individual institutions and for the financial system at large. To help mitigate this risk, OSFI has introduced targeted changes to the LAR’s LCR and NCCF metrics that better reflect the increased risks posed by different types of retail deposits that may be subject to sudden withdrawals.
Additionally, Chapter 3 of the revised LAR guideline implements NSFR in Canada for D-SIBs. Following a public consultation in February 2019, OSFI issued the final version of the NSFR guideline. This guideline sets out the NSFR disclosure requirements for D-SIBs. The disclosures for funding risk will complement NSFR requirement of OSFI and encourage transparency, comparability, and market discipline related to this key liquidity measure. The Annex summarizes the material comments received and the respective responses of OSFI. The guideline takes effect with the quarterly reporting period ending January 31, 2021.
Related Links
Effective Date: January 01, 2020
Keywords: Americas, Canada, Banking, Liquidity Risk, LAR Guideline, NSFR, Basel III, Disclosures, D-SIBs, OSFI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Related Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.
