OSFI Sets Domestic Stability Buffer for D-SIBs at 1.75%
OSFI set the level for the Domestic Stability Buffer at 1.75% of total risk-weighted assets, as calculated under the Capital Adequacy Requirements (CAR) Guideline. The buffer has been set at this level, with effect from April 30, 2019. The Domestic Stability Buffer applies only to the federally regulated financial institutions that have been designated as domestic systemically important banks (D-SIBs).
While Canada is in the midst of a favorable credit environment with a stable domestic economy, household debt levels continue to be high relative to incomes and uncertainty persists in some housing markets. Corporate indebtedness is also growing, representing a potential future risk. Recently, in discussing vulnerabilities in the global financial system, FSB remarked that financial supervisors, such as OSFI, should “consider using the current window of opportunity to build resilience, particularly macro-prudential buffers where appropriate.” OSFI is of the view that increased transparency will support banks’ ability to use this capital buffer in times of stress by increasing understanding of the purpose of the buffer and how it should be used. This reflects OSFI’s assessment that, on balance, the identified systemic vulnerabilities remain elevated while economic conditions continue to be accommodative. Specific vulnerabilities covered by the buffer continue to include:
- Canadian consumer indebtedness
- Asset imbalances in the Canadian market
- Canadian institutional indebtedness
The Domestic Stability Buffer supplements the Pillar 1 buffers (Capital Conservation Buffer, D-SIB surcharge and the Countercyclical Buffer) outlined in Chapter 1 of the Capital Adequacy Requirements guideline. OSFI reviews and sets the level of the Domestic Stability Buffer in June and December of each year based on its ongoing monitoring of the Canadian financial system and the entities it regulates and in consultation with its federal regulatory partners.
Related Links
- News Release
- Notification to Banks
- Overview of Domestic Stability Buffer
- FSB Report Discussing Macro-Prudential Buffers
Keywords: Americas, Canada, Banking, D-SIBs, Domestic Stability Buffer, CAR, Systemic Risk, OSFI
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
BoE Updates XBRL Filing Manual for Reporting Under Solvency IIRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards