July 16, 2018

OSFI released a discussion paper titled on the implementation of the final Basel III reforms in Canada. The paper sets out the preliminary views of OSFI on the scope and timing of the domestic implementation of the final Basel III reforms, which BCBS published in December 2017. The proposals in the discussion paper apply to all deposit-taking institutions. OSFI invites stakeholder comments by October 19, 2018.

The paper includes a series of questions seeking feedback from stakeholders on specific issues, including where OSFI is proposing modifications to better fit the Canadian market. The final Basel III reforms will be used as a starting point, although modifications may be made to take into account the unique characteristics of the Canadian market. Key areas where OSFI is considering modifications to the final Basel III reforms include the treatment of residential mortgages, the treatment of credit cards, and the transition period for the capital floor. However, OSFI will propose future changes to the domestic capital framework to ensure requirements are reflective of the risks faced by institutions that do not use internal models for regulatory capital purposes. Industry feedback on these changes will be sought through a separate consultation process.

The final Basel III reforms include changes to the credit risk, operational risk, leverage ratio, and credit valuation adjustment frameworks as well as to the capital floor. Although the internationally agreed implementation dates for these changes are several years away, OSFI has already received questions from industry stakeholders. Hence, OSFI is starting the consultation process to allow for a more detailed dialog on implementation issues as well as to finalize guidance as early as possible.

 

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Comment Due Date: October 19, 2018

Keywords: Americas, Canada, Banking, Basel III, Final Basel III Reforms, Capital Framework, OSFI