OSFI announced that it is considering a new benchmark rate for determining the minimum qualifying rate for uninsured mortgages. OSFI also published the frequently asked questions on the new benchmark rate, along with remarks of Ben Gully, the Assistant Superintendent of Regulation Sector at OSFI, who sets the new benchmark rate for determining the minimum qualifying rate for uninsured mortgages. OSFI is considering replacing the current benchmark rate, which is set by the mortgage underwriting guideline (Guideline B-20), with the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus a 2% buffer. OSFI is seeking input on this proposal before March 17, 2020. OSFI will communicate final amendments to the benchmark rate for uninsured mortgages by April 01, 2020, with the changes being proposed to become effective on April 06, 2020.
OSFI had, on January 24, 2020, indicated that it was reviewing the benchmark rate (or floor) used for qualifying uninsured mortgages. The Department of Finance, in consultation with OSFI and other federal agencies, has also reviewed the benchmark rate in the context of its minimum qualifying rate for insured mortgages. The Minister of Finance announced that the current benchmark rate used in the minimum qualifying rate for insured mortgages will be replaced by the following new benchmark rate, effective April 06, 2020:
- The weekly median five-year fixed insured mortgage rate as calculated by the Bank of Canada from mortgage insurance applications adjudicated by federally backed mortgage insurers, plus
- A buffer of 200 basis points to be set by the Minister of Finance on the coming into force
The Bank of Canada will publish the new benchmark rate every Wednesday, with the rate coming into effect the following Monday. If, on any given week, there are any delays in updating the new benchmark rate, the previous week’s published rate will stand until a new rate is published. OSFI is proposing to adopt this same rate in the calculation of the minimum qualifying rate for uninsured mortgages. The new benchmark rate would replace the five-year conventional rate and would be more representative of the broader market and responsive to fluctuations in actual contract rates. In addition to introducing a more accurate floor, the OSFI proposal maintains cohesion between the benchmark rates used to qualify both uninsured and insured mortgages. To facilitate implementation, OSFI is also proposing that this new benchmark rate be effective from April 06, 2020, to coincide with the changes to the minimum qualifying rate for insured mortgages.
Comment Due Date: March 17, 2020
Effective Date: April 06, 2020 (proposed)
Previous ArticleOFR Publishes Tool for Monitoring Systemic Risk of Banks
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.