OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately. On March 27, 2020, as a COVID-19 support measure, OSFI had allowed a temporary increase to the covered bond limit to facilitate greater access to the Bank of Canada facilities. OSFI normally limits a bank's issuance of covered bonds to 5.5% of the bank's total assets. However, during the period of relief, total assets pledged for covered bonds were permitted to be up to 10% of the total assets of a deposit-taking institution, including instruments issued to the market and those pledged to the Bank of Canada.
The temporary increase in the limit targeted covered bonds pledged directly to the Bank of Canada, with the limit relating to market instruments (covered bonds sold into the market) still set at 5.5%. When OSFI announced the temporary increase to the covered bond limit in March 2020, it was noted that the increase would be provided for at least one year, but could be extended beyond this if needed. Throughout the past year, OSFI has continued to monitor banks' liquidity and access to term funding, which have stabilized considerably since measures were initially put in place. Additionally, on October 15, 2020, the Bank of Canada removed own-name covered bonds from the list of eligible securities for regular term repo operations. As such, the temporary increase to the covered bond limit by OSFI is no longer necessary. Covered bonds are debt securities issued by a financial institution that are collateralized against a pool of assets designed to cover claims, should an issuer fail.
Related Links
Keywords: Americas, Canada, Banking, Covered Bonds, COVID-19, ALM, Regulatory Capital, Basel, OSFI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26Related Articles
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
HKMA Endorses Industry Guidance to Support LIBOR Transition
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
OCC Issues Booklet on Supervision of Problem Banks
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.
