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
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
ISDA Publishes Statement on FRTB Implementation in Emerging MarketsRelated Articles
Regulators Fine Goldman Sachs for Risk Management Failures
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
ISDA Launches IBOR Fallbacks Supplement and Protocol
ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021.
Canada Hosts International Conference of Banking Supervisors
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA Proposes More Measures to Help Insurance Customers Amid Crisis
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA Issues Opinion to Address Risk Stemming from Legacy Instruments
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury Publishes Policy Statement Amending Benchmarks Regulation
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA Initiates Action Against a Bank for Liquidity Compliance Breach
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies Finalize Rule to Reduce Impact of Large Bank Failures
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
