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
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
HKMA Endorses Industry Guidance to Support LIBOR Transition
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
OCC Issues Booklet on Supervision of Problem Banks
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.
