OSFI to Phase Out Special Capital Treatment of COVID-19 Loans at Banks
OSFI announced that it is gradually phasing out the special capital treatment of loan and insurance premium payment deferrals that was provided to banks and insurers at the start of the COVID-19 pandemic. The OSFI decision to discontinue the special regulatory capital treatment of deferrals, which permit loan and insurance premium payment deferrals to be treated as performing, reflects the temporary nature of these measures and will ensure that reporting requirements remain accurate in reflecting credit risk. OSFI has published additional details regarding this in a letter that was issued to federally regulated deposit-taking institutions and in the updated frequently asked questions (FAQs) on pandemic-related regulatory measures.
OSFI is announcing the following updates to the special capital treatment of loans subject to payment deferrals:
- Loans granted payment deferrals before August 31 will continue to be treated as performing loans under the Capital Adequacy Requirements (CAR) Guideline for the duration of the deferral, up to a maximum of six calendar months from the effective date of the deferral.
- Loans granted new payment deferrals after August 30 and on or before September 30 will be treated as performing loans under the CAR Guideline for the duration of the deferral, up to a maximum of three calendar months from the approval date of the deferral.
- Loans granted payment deferrals with approval dates after September 30, 2020 will not be eligible for the special capital treatment.
This change supports the accurate measurement of the capital needs of deposit-taking institutions and the long-term integrity of the OSFI capital framework. While the special capital treatment and regulatory flexibility related to payment deferrals was warranted at the onset of COVID-19, as both lenders and borrowers adapted to the extraordinary circumstances and unprecedented disruptions related to the pandemic, banks are now in a better position to employ their business-as-usual alternatives to support troubled borrowers. Thus, the special capital treatment for loans with payment deferrals is no longer warranted and is being phased out through the changes being announced.
Related Links
Keywords: Americas, Canada, Banking, COVID-19, Payment Deferrals, Regulatory Capital, Basel, Credit Risk, FAQ, 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
Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
BIS Bulletins Discuss DeFi Lending and Aspects of Crypto-Assets
The Bank for International Settlements (BIS) published bulletins on lending in decentralized finance (DeFi) system, on blockchain scalability and fragmentation of crypto, and on extractable value and market manipulation in crypto and decentralized finance.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.