Jamey Hubbs of OSFI Announces Bi-Annual Review of Buffer for D-SIBs

He highlighted that the real test of a capital regime is whether and how that capital is used in times of stress to support stability. OSFI believes that an adjustable capital buffer, well communicated and understood, and responsive to conditions in the financial system is the way to achieve this objective. That is why, in June of 2018, OSFI publicly disclosed the Domestic Stability Buffer for the six largest banks in Canada, also known as the domestic systemically important banks, or D-SIBs. He said: "What that means is that we build up the Domestic Stability Buffer when vulnerabilities are high but conditions are more stable, and we release the buffer when needed so that banks can use that capital cushion in order to continue to provide loans and services to Canadians. As a result, the primary feature of the Domestic Stability Buffer is that it may very well increase during stable economic times and, specifically before the risks actually materialize." This only works in the context of regular transparent communication. As a result, twice a year, after assessing the prevailing economic conditions, OSFI will communicate publicly whether it will raise, maintain, or lower the Domestic Stability Buffer. This public announcement is a commitment to transparency OSFI has made regarding the capital being held by the largest banks in Canada.

Related Link: Speech

Keywords: Americas, Canada, Banking, D-SIBs, Systemic Risk, Domestic Stability Buffer, OSFI