OSFI is proposing revisions to the Liquidity Adequacy Requirements (LAR) Guideline, the comment period for which ends on February 01, 2019. OSFI issued for consultation Chapter 3 on Net Stable Funding Ratio (NSFR) and proposed revisions to Chapter 1 on Overview of the LAR guideline. OSFI also published the impact analysis for the LAR guideline. The guideline will come into effect on January 01, 2020 and will apply to the domestic systemically important banks (D-SIBs). OSFI has designated six institutions as D-SIBs—namely, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank of Canada. An assessment of the approach for small and medium-size institutions is being undertaken and further guidance will be provided going forward.
Chapter 3 of LAR guideline transposes into domestic guidance the NSFR rules of BCBS, which were issued in October 2014. NSFR requires institutions to maintain a stable funding profile in relation to their on- and off-balance sheet activities, thus reducing the likelihood that disruptions to an institution's regular sources of funding will erode its liquidity position in a way that could increase the risk of its failure and potentially lead to broader systemic stress. NSFR limits over reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes a more stable funding profile. The LAR guideline (Chapter 3 and corresponding amendments to Chapter 1 Overview) is to be updated to incorporate the NSFR standard, which focuses on the stability of an institution's funding profile over a longer term (one-year) horizon. Chapter 3 incorporates the NSFR rules issued by BCBS in October 2014 into the LAR Guideline. NSFR, along with the short-term stress-focused liquidity coverage ratio, set minimum liquidity standards for banks, bank holding companies, federally regulated trust and loan companies, and cooperative retail associations.
- OSFI Letter
- Draft Changes to Chapter 1 of LAR Guideline
- Chapter 3 of LAR Guideline
- Guideline Impact Analysis
Comment Due Date: February 01, 2019
Effective Date: January 01, 2020 (NSFR for D-SIBs)
Keywords: Americas, Canada, Banking, Basel III, LAR, NSFR, Liquidity Risk, OSFI
Previous ArticleAMF Announces Due Dates for Filing of Returns by Insurers in Quebec
EBA published a report on the implementation of selected COVID-19 policies within the prudential framework for banking sector.
BCBS published the eighteenth progress report on implementation of the Basel III regulatory framework in member jurisdictions.
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.