Jamey Hubbs of OSFI spoke in Toronto about the role of Domestic Stability Buffer and about positioning capital regime as part of the solution for stress situations, through transparency, prudent action, and "usability of capital." By making the Domestic Stability Buffer more transparent and its purpose and functioning more widely understood, he hopes that future increases or decreases to the buffer are seen as normal course of business and stabilizing actions, rather than market events unto themselves.
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
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 ArticleHKMA Publishes CoP on Loss-Absorbing Capacity Requirements of Banks
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.