OSFI Lowers Domestic Stability Buffer for Banks to 1%
OSFI announced a number of actions aimed to build resilience of federally regulated financial institutions and improve the stability of the Canadian financial system, in response to the challenges posed by COVID-19 and current market conditions. One of these measures is the reduction the Domestic Stability Buffer to 1.0%, with immediate effect. The Domestic Stability Buffer was earlier set at 2.25% of risk-weighted assets and was to be effective as at April 30, 2020.
The release of the Domestic Stability Buffer will support more than $300 billion in additional lending capacity by the domestic systemically important banks or D-SIBs. OSFI expects that banks will use the additional lending capacity to support Canadian businesses and households and should not use this measure to increase distributions to shareholders or employees or to undertake share buybacks. Consistent with this, OSFI has set the expectation for all federally regulated financial institutions that dividend increases and share buybacks should be halted for the time being. OSFI also commits that any increases to the buffer will not take effect for at least 18 months from March 13, 2020.
In view of the current developments, OSFI is suspending all of its consultations and policy development on new or revised guidance until conditions stabilize. This includes the new proposed B-20 benchmark rate for uninsured mortgages and the consultation on the minimum qualifying rate for uninsured mortgages. The benchmark rate as currently published by the Bank of Canada will remain in force until further notice. The Minister of Finance also announced the suspension of April 06, 2020 coming-into-force of the new benchmark rate for determining the minimum qualifying rate for insured mortgages. OSFI is reviewing its supervisory and regulatory priorities to align with current conditions and will re-prioritize supervisory work as needed.
Related Link: News Release
Keywords: Americas, Canada, Banking, COVID-19, Domestic Stability Buffer, Benchmark Rate, Regulatory Capital, Basel III, OSFI
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
IAIS Issues Level 2 Document for ICS Version 2.0Next Article
PRA Reviews Capital Regime for Credit Unions in UKRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.