Featured Product

    Superintendent of OSFI Speaks on Covered Bonds Framework in Canada

    April 18, 2018

    The OSFI Superintendent Jeremy Rudin addressed the European Covered Bond Council about the role of OSFI in supporting the integrity of the covered bonds framework in Canada. He highlighted that the issuance of covered bonds can help diversify a bank’s funding sources, making the bank more resilient in times of stress.

    Mr. Rudin explained that issuing covered bonds can significantly diversify a bank’s sources of funding, as these instruments differ from both bank senior debt and securitized assets in ways that can be quite important to investors. Canadian banks only began issuing covered bonds in 2007. Since issuing the first Canadian covered bond, total issuance has exceeded USD 200 billion and the level of outstanding debt has been steadily increasing. He emphasized that providing a legislative framework for covered bonds would further diversify the investor pool, as some investors choose, or are required, to hold only the covered bonds that are issued under a legislative regime. Moreover, there was a risk that relying on an untested contractual approach would make it less likely that funding would be available when most needed, in times of stress. The Canadian legal framework increased resilience by providing statutory protection for investors, enhancing disclosure requirements, and prescribing both eligible issuers and cover pool collateral. Under this framework, the national housing agency, Canada Mortgage and Housing Corporation, takes the lead role in administering the framework and maintaining a covered bond registry.

    He also mentioned that OSFI supports the integrity of the covered bond framework in three ways. The first element is the broad supervision of the issuers. Currently, there are seven covered bond issuers in Canada. These issuers are subject to more intense supervisory scrutiny, higher capital requirements, stricter recovery and resolution planning requirements, and enhanced disclosure requirements. The second element is the prudential limit on the amount of covered bonds each bank can issue. Mr. Rudin mentioned that covered bonds can contribute to financial stability; however, this benefit can be undermined if the issuer sells too many covered bonds. To ensure that the financial stability benefits of covered bonds are not dissipated by excessive issuance, OSFI has applied a cap on issuance of 4% of a bank’s total assets. The third element, according him, is the cover pool assets and the role of OSFI in supervising the underwriting standards used by issuing banks. OSFI plays an important role in ensuring the soundness of the cover assets through the close supervisory scrutiny of mortgage underwriting standards in Canada. In conclusion, he highlighted that OSFI realizes the contribution that covered bonds can make to the overall stability of the banking system and will continue to support the integrity of the covered bonds framework in Canada.


    Related Link: Speech

    Keywords: Americas, Canada, Banking, Covered Bonds, Financial Stability, Mortgage Underwriting, OSFI

    Related Articles
    News

    BoE Provides Reporting Update on Form AS and Form FV

    BoE updated the known issues document for the statistical reporting Forms AS and FV.

    August 10, 2020 WebPage Regulatory News
    News

    EBA Provides Clarity on Implementation of Guidance on COVID Reporting

    EBA updated the report on the implementation of selected COVID-19 policies.

    August 07, 2020 WebPage Regulatory News
    News

    OSFI Provides Update on Implementation of IFRS 17 in Canada

    OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.

    August 07, 2020 WebPage Regulatory News
    News

    FSI Note Discusses Challenges Associated with COVID Relief Measures

    The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.

    August 06, 2020 WebPage Regulatory News
    News

    BCBS Consults on Principles for Operational Risk and Resilience

    BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.

    August 06, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    News

    MAS Announces Key Initiatives to Support Adoption of SORA

    MAS announced several initiatives to support adoption of the Singapore Overnight Rate Average (SORA), which is administered by MAS.

    August 05, 2020 WebPage Regulatory News
    News

    HKMA Announces Repayment Deferment Under Payment Holiday Scheme

    HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.

    August 05, 2020 WebPage Regulatory News
    News

    ESRB Paper Presents Alternative Approach to EBA Stress Test Proposal

    The Advisory Scientific Committee of ESRB published a response, in the form of an Insights Paper, to the EBA proposals for reforms to the stress testing framework in EU.

    August 05, 2020 WebPage Regulatory News
    News

    FASB Simplifies Accounting for Certain Financial Instruments

    FASB issued a new Accounting Standards Update (2020-06) to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity.

    August 05, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5642