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
Previous ArticleFIN-FSA Examines Capital Position of Banking Sector Amid Pandemic
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.
FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.