OSFI Proposes Changes to Guideline on Large Exposure Limits
OSFI proposed revisions to the Guideline B-2 on Large Exposure Limits, for implementation in the first quarter of 2020. The revisions are intended for Canadian domestic systemically important banks (D-SIBs) and their OSFI regulated deposit-taking institution subsidiaries. Comment period on the consultation closes on February 01, 2019. OSFI aims to issue a final version of Guideline B-2 for D-SIBs and their OSFI regulated DTI subsidiaries in Spring 2019, with an effective date of November 01, 2019.
The draft guideline applies to D-SIBs on a consolidated basis. The application of this guideline at the consolidated level means that an institution is expected to consider all exposures to third parties across the relevant regulatory consolidated group and compare the aggregate of those exposures to the group’s eligible capital base, defined in this guideline as Tier 1 Capital as specified in Chapter 2 of the Capital Adequacy Requirements (CAR) Guideline. The capital measure used for this guideline is the Tier 1 Capital measure applying at that time under the risk-based capital framework. The guideline and specifies a number of revisions to the large exposure limit calculation, including the following:
- Moving the eligible capital base from Total capital to Tier 1 capital
- Introducing tighter limits for exposures to systemically important banks
- Providing for the recognition of eligible credit risk mitigation techniques—that is, exposures are measured on a net basis rather than a gross basis
- Offering additional guidance for determining groups of connected counterparties
The guideline, which was issued in 1994, establishes limits for exposures of a bank to a single counterparty (including connected counterparties), measured as a percentage of capital. BCBS had published its standard on large exposure risk management in 2014. This draft guideline incorporates the BCBS guidance to reflect current risk management sound practices and provides additional guidance on methods OSFI expects D-SIBs to use for identifying, measuring, managing, and monitoring large exposures. OSFI expects to issue the final guideline in Spring 2019, along with a non-attributed summary of comments received and OSFI’s response to these comments.
Related Links
Comment Due Date: February 01, 2019
Keywords: Americas, Canada, Banking, Large Exposures, Basel III, Guideline B-2, D-SIBs, Concentration Risk, 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.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Next Article
FED Revises and Extends Form FR Y-9C for Three YearsRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
