OSFI Proposes Revisions to Liquidity Adequacy Requirements Guideline

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. 

Related Links

• 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