OSFI published three targeted industry letters that announce a series of regulatory adjustments to support the financial and operational resilience of federally regulated banks, insurers, and private pension plans in the light of COVID-19. This includes adjusting a number of regulatory capital, liquidity, and reporting requirements. These measures, along with the delays in previously planned regulatory changes, are designed to help reduce some of the operational stress on institutions. They are also intended to ensure that the OSFI guidance is appropriate for these extraordinary circumstances while remaining risk-focused and forward-looking.
Key measures for banks involve
- Adjusting capital and liquidity measures so that they are suited for unprecedented circumstances
- Delaying implementation of measures of the Basel III international capital standard until 2023 consistent with the decision of BCBS oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS)
- Determining under regulatory capital requirements, that bank loans subject to payment deferrals, such as mortgage loans, small business loans and retail loans, will continue to be treated as performing loans
- Delaying the implementation of revised minimum capital and liquidity requirements for small and medium-size banks until 2023
- Providing guidance on applying IFRS 9 during this extraordinary period, including addressing the significant increase in credit risk and sufficient and timely disclosures
- Lowering the Domestic Stability Buffer by 1.25 percentage points to 1%
Key measures for insurers involve
- Specifying that under regulatory capital requirements, payment deferrals will not cause insured mortgages to be treated as delinquent or in arrears, consistent with expectations for financial institutions
- Suspending semi-annual progress reporting on the implementation of new accounting standards, notably, IFRS 17
- Suspending all of its consultations and policy development on new or revised guidance until conditions stabilize
Key measures for private pension plans include
- Temporarily freezing portability transfers and annuity purchases to protect the benefits of plan members and beneficiaries
- Extending deadlines for certain actions and annual filings to allow plans more flexibility to focus on issues at hand
Keywords: Americas, Canada, Banking, Insurance, Pensions, COVID-19, Operational Resilience, Regulatory Capital, Credit Risk, IFRS 9, IFRS 17, Domestic Stability Buffer, OSFI
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