OSFI Issues Advisory on MICAT Total Requirements for FTHBI Mortgages
OSFI issued an advisory, along with an impact analysis statement for mortgage insurers, defining the capital requirements for insured mortgages under the new First-Time Home Buyer Incentive insured (FTHBI) program. The advisory, in conjunction with the Mortgage Insurer Capital Adequacy Test (MICAT) guideline, sets out the regulatory framework within which OSFI assesses whether a mortgage insurance company maintains adequate capital for FTHBI insured mortgages. The advisory will become effective from November 01, 2019. OSFI also published a guideline impact statement. OSFI will monitor the effectiveness of the new advisory and make any necessary modifications.
At present, the MICAT is not designed to capture the mortgage insurance risk associated with FTHBI mortgages compared to non-FTHBI mortgages with the same risk drivers such as loan-to-value and outstanding balance. OSFI took the following steps to develop an approach to capture the risks associated with FTHBI mortgages and calculate their total requirements in the MICAT:
- Identified the risks associated with FTHBI mortgages
- Measured the risks using the methodology that is used to determine the total requirement formulas in the MICAT
- Designed an approach to calculate total requirements for FTHBI mortgages that uses the existing total requirement formulae
- Determined a suitable calibration for recommended approach consistent with measurement of the risk
Related Links
Effective Date: November 01, 2019
Keywords: Americas, Canada, Insurance, FTHBI Mortgages, Capital Adequacy, Mortgage Insurers, First Time Home Buyers, Credit Risk, OSFI
Previous Article
MAS Clarifies Decision of EC to Repeal Equivalence Status for CRAsRelated Articles
PRA to Elaborate on Approach to Transposition of CRD5 by Mid-December
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB Sets Out Work Program for 2021-2023
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA Consults on KPIs on Sustainability for Non-Financial Reporting
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
US Agencies Issue Statement on LIBOR Transition
US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, to facilitate an orderly LIBOR transition.
GHOS Endorses Coordinated Approach to Mitigate COVID Risks for Banks
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system.
HM Treasury Extends Consultation Dates for FRF and Solvency II Reviews
HM Treasury extended the consultation period on Phase II of the Future Regulatory Framework (FRF) Review, from January 19, 2021 to February 19, 2021.
ECB Publishes Guide on Management of Climate and Environmental Risks
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS Amends Capital Treatment of Non-Performing Loan Securitizations
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
PRA Policy on Stressed VaR and RNIV Calculations Under Market Risk
PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework.
BoE to Move Statistical Data Collection to BEEDs Portal
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
