Featured Product

    IMF Reports Assess Financial Sectors in Canada and Peru

    January 24, 2020

    IMF published several technical notes under the Financial Sector Assessment Program (FSAP) on Canada. The technical notes cover various topics, including regulation and supervision of deposit-taking and insurance sector, bank resolution and crisis management, stress testing and financial stability analysis, systemic risk oversight and macro-prudential policy, oversight of financial market infrastructures and fintech development, and systemic liquidity. Additionally, IMF published its staff report and selected issues report under the 2019 Article IV consultation with Peru. While commending the authorities’ actions to strengthen financial-sector supervision, including through progress in implementing the 2018 FSAP recommendations, the IMF Directors encouraged further efforts to deepen the legislative and regulatory agenda.

    The banking sector in Canada has enjoyed solid profitability and sizable capital buffers. The insurance sector has remained financially sound even in the low interest rate environment. Other non-bank sectors have grown considerably, with pension funds and mutual funds dominating the institutional and retail asset management landscape. Major deposit-taking institutions would be able to manage severe macro-financial shocks, but mortgage insurers would probably need additional capital. Large life insurers appear somewhat exposed to financial market stress and lower interest rates. The solvency of some major life insurers could be under pressure during severe financial market stress, largely due to the impact of widening credit spreads and falling equity prices. The report recommends that the top-down stress testing capacity for banks and insurers should be enhanced. 

    The FSAP conducted a focused review that primarily assessed the regulatory and supervisory frameworks through the lens of housing market-related risks. The review evaluated oversight of deposit-taking institutions and followed up on the main recommendations of the 2014 Basel Core Principles (BCP) for effective banking supervision assessment. The 2014 FSAP findings that OSFI’s supervision of banks is effective, with a high level of compliance with BCP, remain valid. A number of areas still fall short of full compliance with the BCP. These include an incomplete fit and proper process for new Board appointments (BCP 5) and limited monitoring of large exposures and related parties (BCPs 19 and 20). The FSAP also conducted a focused review on domestic systemically important financial market infrastructures. Canadian authorities have been proactive in monitoring fintech developments. Furthermore, the bank resolution regime and crisis management framework are the subjects of continuous improvements. 

    The assessment highlights that expected credit losses, under IFRS 9, may not be adequate from a prudential perspective, as they are based on contractual maturity and do not take into account the amortization period and possible related renewal risk; for this, a Pillar 2 add-on could be appropriate. For the life and health insurance, the OSFI and AMF, in preparation for IFRS 17, should carefully consider how risk margins interact with the regulatory solvency framework for life insurers. Implementation of Own Risk and Solvency Assessment (ORSA) is still developing. OSFI and AMF should work with the insurance industry to ensure that ORSA reflects appropriate considerations for risk diversification, risk sharing with life insurance policyholders, and risk appetite with respect to potential ratings downgrades. 

     

    Related Links

    Technical Notes on FSAP on Canada

    Reports on Article IV Consultation with Peru

    Keywords: Americas, Canada, Peru, Banking, Insurance, Stress Testing, Macro-Prudential Policy, FSAP, Systemic Risk, Article IV, IFRS 9, IFRS 17, ORSA, Resolution Framework, OSFI, AMF, IMF

    Featured Experts
    Related Articles
    News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8701