November 29, 2017

OSFI is releasing the final version of the Capital Adequacy Requirements (CAR) Guideline for implementation in the first quarter of 2018. The revisions relate primarily to the capital treatment of allowances as a result of the adoption of IFRS 9 by deposit-taking institutions in 2018. The final changes to CAR to implement the regulatory capital adjustments for holdings of instruments (other than regulatory capital instruments) issued by global systemically important banks (G-SIBs) and Canadian domestic systemically important banks (D-SIBs), to meet their total loss-absorbing capacity (TLAC) requirements, will be issued at a later date.

To inform OSFI’s decision on the need for a transition (or phase-in) of the impact of IFRS 9, OSFI asked any institutions that project IFRS 9 to have a material impact on their capital position to provide estimated impacts to OSFI. Based on the estimates provided by institutions, OSFI did not see projections of widespread material impact on capital from the implementation of IFRS 9. Therefore, OSFI has determined that transitioning (or phase-in) of the impact of IFRS 9 is not warranted. In addition to the above changes related to IFRS 9 implementation, OSFI has also provided clarifications throughout the CAR guideline in response to questions received from the industry during the public consultation process. The table in Annex 1 summarizes comments received and provides an explanation of how the comments have been addressed in the guideline. Additionally, OSFI has extended the implementation timeline for the domestic implementation of the following:

  • Standardized approach to counterparty credit risk (SA-CCR) and the revisions to the capital requirements for bank exposures to central counterparties (CCPs). OSFI intends to implement these rules in the first quarter of 2019. Although OSFI is not implementing the SA-CCR as a minimum standard, it requires institutions to start reporting amounts under SA-CCR beginning in the first quarter of 2018. This information will be collected as part of the BCAR regulatory return through the introduction of an additional schedule.
  • Revised securitization framework. OSFI expects to implement this framework in the first quarter of 2019. This extended timeline will allow us to reflect the treatment related to simple, transparent, and comparable (STC) criteria for short-term securitization exposures, which has yet to be finalized by the BCBS. Consequently, the existing securitization treatment specified in the CAR Guideline will remain in place through the end of the 2018 fiscal year.

 

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Keywords: Americas, Canada, Banking, Capital Adequacy, IFRS 9, STC Securitization, SA CCR, OSFI

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