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

Dieter Van der Stock
IFRS subject matter expert; accounting authority; risk management specialist
Previous Article
PRA Updates the Policy on Approach to Systemic Risk BufferNext Article
IASB to Propose Narrow-Scope Amendment to IFRS 17Related Articles
News
APRA Finalizes Prudential Standard for Credit Risk Management of BanksAPRA updated the prudential standard on credit risk management requirements (APG 220) for authorized deposit-taking institutions, post a public consultation.
December 12, 2019
WebPage
Regulatory News
|
News
APRA Issues Operational Risk Rules, Consults on Reporting RequirementsAPRA published an updated prudential standard APS 115 that sets out operational risk requirements for authorized deposit-taking institutions in Australia.
December 11, 2019
WebPage
Regulatory News
|
News
ESMA Updates Q&A on European Benchmarks Regulation in December 2019ESMA updated the question and answers (Q&A) document on the European Benchmarks Regulation.
December 11, 2019
WebPage
Regulatory News
|
News
APRA Decides to Keep Countercyclical Capital Buffer for Banks at 0%APRA announced its decision to keep the countercyclical capital buffer (CCyB) for authorized deposit-taking institutions on hold at zero percent.
December 11, 2019
WebPage
Regulatory News
|
News
FED Extends Consultation Period for Capital Requirements for InsurersFED is extending comment period for the proposed rule establishing risk-based capital requirements for depository institution holding companies that are significantly engaged in insurance activities.
December 10, 2019
WebPage
Regulatory News
|
News
OSFI Sets Domestic Stability Buffer Level at 2.25%OSFI has set the Domestic Stability Buffer, or DSB, at 2.25% of total risk-weighted assets, with effect from April 30, 2020.
December 10, 2019
WebPage
Regulatory News
|
News
EBA Issues Revised List of Validation Rules for Reporting by BanksEBA published a revised list of validation rules in its implementing technical standards on supervisory reporting.
December 10, 2019
WebPage
Regulatory News
|
News
SRB Holds Annual Conference, Reflects on Turning Policy into ActionSRB published a report on its fourth annual conference that was held on October 10, 2019 in Brussels.
December 10, 2019
WebPage
Regulatory News
|
News
APRA Specifies Capital Treatment of Equity Investments in ABGFAPRA published a letter to the authorized deposit-taking institutions outlining the regulatory capital treatment of their equity investments in the Australian Business Growth Fund (ABGF).
December 09, 2019
WebPage
Regulatory News
|
News
EBA Updates Guidelines on Reporting of Funding Plans of BanksEBA updated the guidelines on harmonized definitions and templates for the reporting of funding plans of credit institutions.
December 09, 2019
WebPage
Regulatory News
|