OSFI is proposing revisions to the Liquidity Adequacy Requirements (LAR) Guideline, the comment period for which ends on February 01, 2019. OSFI issued for consultation Chapter 3 on Net Stable Funding Ratio (NSFR) and proposed revisions to Chapter 1 on Overview of the LAR guideline. OSFI also published the impact analysis for the LAR guideline. The guideline will come into effect on January 01, 2020 and will apply to the domestic systemically important banks (D-SIBs). OSFI has designated six institutions as D-SIBs—namely, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank of Canada. An assessment of the approach for small and medium-size institutions is being undertaken and further guidance will be provided going forward.
Chapter 3 of LAR guideline transposes into domestic guidance the NSFR rules of BCBS, which were issued in October 2014. NSFR requires institutions to maintain a stable funding profile in relation to their on- and off-balance sheet activities, thus reducing the likelihood that disruptions to an institution's regular sources of funding will erode its liquidity position in a way that could increase the risk of its failure and potentially lead to broader systemic stress. NSFR limits over reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes a more stable funding profile. The LAR guideline (Chapter 3 and corresponding amendments to Chapter 1 Overview) is to be updated to incorporate the NSFR standard, which focuses on the stability of an institution's funding profile over a longer term (one-year) horizon. Chapter 3 incorporates the NSFR rules issued by BCBS in October 2014 into the LAR Guideline. NSFR, along with the short-term stress-focused liquidity coverage ratio, set minimum liquidity standards for banks, bank holding companies, federally regulated trust and loan companies, and cooperative retail associations.
- OSFI Letter
- Draft Changes to Chapter 1 of LAR Guideline
- Chapter 3 of LAR Guideline
- Guideline Impact Analysis
Comment Due Date: February 01, 2019
Effective Date: January 01, 2020 (NSFR for D-SIBs)
Keywords: Americas, Canada, Banking, Basel III, LAR, NSFR, Liquidity Risk, OSFI
Previous ArticleAMF Announces Due Dates for Filing of Returns by Insurers in Quebec
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).