OSFI decided to maintain the Domestic Stability Buffer (DSB) for banks at 1% of the total risk-weighted assets. The buffer remains unchanged from the level set in March 2020 and maintained in June 2020, as part of the response of OSFI to the COVID-19 crisis. OSFI also published the departmental results report for 2019-2020, outlining the key developments in regulation and supervision of banks and insurers. During 2019-20, OSFI led a number of initiatives to respond to financial and non-financial risks in the areas of regulatory capital, accounting and insurance (including IFRS 17), governance, and crisis management. OSFI also introduced a number of measures in response to the COVID-19 pandemic.
The results report mentions that OSFI introduced flexibility through capital treatment adjustments for Canadian financial institutions that introduced payment deferral programs as a result of the COVID-19 crisis. OSFI supported access of banks to the Bank of Canada funding support by increasing the covered bond limit to 10% from 5.5% of bank assets for a one-year period. To reduce burden on regulated institutions, OSFI suspended all of its consultations and policy development on new or revised guidance to allow institutions to prioritize operational resilience until conditions stabilized. During 2019-20, other measures taken by OSFI to support regime effectiveness included the following:
- Enhanced guidance to federally regulated financial institutions through the release of various guidelines including the guidelines on liquidity adequacy requirements, large exposure limits for domestic systemically important banks, liquidity principles, net stable funding ratio disclosure requirements, and interest rate risk management.
- Enhanced capabilities to address technology risks and culture and conduct risks.
- Implemented phase 1 of a new system for performing core supervisory activities designed to modernize supervisory technology of OSFI
During 2019-20, OSFI also consulted the industry on specific elements of its capital adequacy requirements and conducted domestic quantitative impact studies to assess the impact of certain changes (including for IFRS 17 on insurance contracts, Segregated Funds requirements, and the implementation of Basel III). OSFI improved the monitoring of models of domestic systemically important banks (D-SIBs) by developing an enterprise-wide model risk dashboard, enhanced the assessment of governance and oversight controls for regulatory capital models, and leveraged its approval approach for development of a broader model risk assessment framework. OSFI strengthened its Liquidity Adequacy Ratio guideline as it pertains to retail deposits that may be subject to sudden withdrawal in a stressed environment. OSFI also engaged industry stakeholders on future capital and liquidity requirements for small and medium-size deposit-taking institutions. It revised the liquidity risk management expectations to ensure they are current and relevant as well as appropriate for the scale and complexity of financial institutions.
In the area of accounting, OSFI consulted industry stakeholders on the BCBS Pillar 3/phase II and III disclosure requirements in advance of a draft guideline for public consultation. To ensure OSFI maintains effective supervision of federally regulated financial institutions following the implementation of IFRS 17, work advanced toward the development of an effective regulatory policy framework through the transition. While IASB eventually announced the deferral of the effective date of IFRS 17 to January 1, 2023, OSFI regularly communicated with, and engaged the industry on implications to accounting guidelines and capital frameworks caused by the standard. Additionally, OSFI deepened its assessment of the impact of climate-related risks on financial institutions and undertook supervisory practices benchmarking in this area. OSFI contributed to the climate risk initiatives by international bodies such as IAIS, BCBS, FSB, and the Sustainable Insurance Forum (SIF). As part of its technology risk work, OSFI promoted and shared best practices in cyber risk management with financial institutions.
Keywords: Americas, Canada, Banking, Insurance, COVID-19, Domestic Stability Buffer, Basel, IFRS 17, Climate Change Risk, ESG, Governance, Technology Risk, Regulatory Capital, Liquidity Risk, OSFI
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The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.