April 18, 2018

OSFI released its final Total Loss Absorbing Capacity (TLAC) guideline for the domestic systemically important banks (D-SIBs) in Canada. OSFI also revised Chapters 1, 2, and 9 of the Capital Adequacy Requirements (CAR) guideline, which will be implemented effective April 18, 2018. TLAC requirements come into effect on September 23, 2018 and D-SIBs will have until November 01, 2021 to meet them.

The revisions supplement changes to the CAR guideline implemented in first quarter of 2018, as described in the OSFI letter dated November 29, 2017. OSFI had consulted on these changes in June 2017, in conjunction with public consultations on the TLAC guideline. Annex 1 summarizes material comments received during public consultations and provides an explanation of how the comments have been addressed in the guideline. The changes to the CAR guideline, which consist primarily of revisions to Chapter 2, implement the amendments to Basel III finalized by the BCBS in October 2016 in respect of the holdings of Other TLAC instruments issued by global systemically important banks (G-SIBs) that qualify toward their TLAC requirements and instruments ranking pari passu with those instruments. The regulatory capital adjustments for TLAC holdings are being implemented through revisions to the CAR guideline. These changes will be effective for the 2019 fiscal year for all deposit-taking institutions: November 01, 2018 for institutions with a year-ending of October 31 and January 01, 2019 for institutions with a year-ending of December 31.

TLAC requirements are designed to ensure that a D-SIB has sufficient loss-absorbing capacity to support its recapitalization in the unlikely event of a failure. This additional loss-absorbing capacity would facilitate an orderly resolution of a bank and allow it to remain open and operating without requiring public funds, or threatening financial stability. Under the Bank Act, OSFI is responsible for setting, monitoring, and enforcing TLAC requirements for Canadian D-SIBs. 

 

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Effective Date: April 18, 2018 (CAR Guideline); September 23, 2018 (TLAC Guideline)

Keywords: Americas, Canada, Banking, Capital Adequacy, TLAC, Basel III, OSFI

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