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
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.