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July 20, 2017

OSFI revised the timeline for implementation of the minimum capital requirements for market risk in Canada. The minimum capital requirements for market risk are also known as the Fundamental Review of the Trading Book (FRTB) rules and were agreed to by the Basel Committee countries in January 2016. OSFI is advising the Canadian deposit-taking institutions that the first regulatory reporting under the FRTB rules will commence no earlier than in the first quarter of 2021. In the interim, OSFI expects institutions currently subject to market risk capital rules to develop internal strategic plans to implement FRTB.

OSFI is extending the domestic implementation of these rules, as there are a series of implementation complexities associated both with the text language of rules as well as with the IT system changes required by institutions to comply with these rules. It is not clear whether implementation of these requirements by the majority of key competitors in foreign markets will be done by the stated Basel implementation date. Under the Basel Committee’s timetable, national supervisors are expected to finalize their domestic FRTB rules by January 2019 and to start new regulatory reporting as at end-December 2019 (or, for Canadian banks, fiscal quarter 1, 2020). In its letter, OSFI reiterated that it remains committed to implementing the FRTB standards in its Capital Adequacy Requirements (CAR) Guideline. The FRTB rules represent an important improvement in the overall design and coherence of the capital standard for market risk and ensure the delivery of credible capital outcomes.

 

Related Links

Letter (PDF)

CAR Guideline 2017

Keywords: Americas, Canada, Banking, FRTB, CAR, Basel III, OSFI

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