OSFI announced that it is considering a new benchmark rate for determining the minimum qualifying rate for uninsured mortgages. OSFI also published the frequently asked questions on the new benchmark rate, along with remarks of Ben Gully, the Assistant Superintendent of Regulation Sector at OSFI, who sets the new benchmark rate for determining the minimum qualifying rate for uninsured mortgages. OSFI is considering replacing the current benchmark rate, which is set by the mortgage underwriting guideline (Guideline B-20), with the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus a 2% buffer. OSFI is seeking input on this proposal before March 17, 2020. OSFI will communicate final amendments to the benchmark rate for uninsured mortgages by April 01, 2020, with the changes being proposed to become effective on April 06, 2020.
OSFI had, on January 24, 2020, indicated that it was reviewing the benchmark rate (or floor) used for qualifying uninsured mortgages. The Department of Finance, in consultation with OSFI and other federal agencies, has also reviewed the benchmark rate in the context of its minimum qualifying rate for insured mortgages. The Minister of Finance announced that the current benchmark rate used in the minimum qualifying rate for insured mortgages will be replaced by the following new benchmark rate, effective April 06, 2020:
- The weekly median five-year fixed insured mortgage rate as calculated by the Bank of Canada from mortgage insurance applications adjudicated by federally backed mortgage insurers, plus
- A buffer of 200 basis points to be set by the Minister of Finance on the coming into force
The Bank of Canada will publish the new benchmark rate every Wednesday, with the rate coming into effect the following Monday. If, on any given week, there are any delays in updating the new benchmark rate, the previous week’s published rate will stand until a new rate is published. OSFI is proposing to adopt this same rate in the calculation of the minimum qualifying rate for uninsured mortgages. The new benchmark rate would replace the five-year conventional rate and would be more representative of the broader market and responsive to fluctuations in actual contract rates. In addition to introducing a more accurate floor, the OSFI proposal maintains cohesion between the benchmark rates used to qualify both uninsured and insured mortgages. To facilitate implementation, OSFI is also proposing that this new benchmark rate be effective from April 06, 2020, to coincide with the changes to the minimum qualifying rate for insured mortgages.
Comment Due Date: March 17, 2020
Effective Date: April 06, 2020 (proposed)
Previous ArticleOFR Publishes Tool for Monitoring Systemic Risk of Banks
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.