OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023. OSFI is also delaying, to the second quarter of 2023, the implementation of capital and liquidity framework for small and medium-size deposit-taking institutions (SMSB) as well as changes to the Pillar 3 disclosure requirements guidelines for all institutions. Additionally, revisions to the Liquidity Adequacy Requirements guideline will be implemented as of April 01, 2023 for all institutions.
In particular, OSFI announced the details of its final policy positions on a series of key topics associated with the following guidelines that were the subject of extensive consultations in the Spring of 2021:
- Capital Adequacy Requirements Guideline. In association with this guideline, the key topics on which OSFI specified its final policy positions include risk-based capital requirements, definition of capital, operational risk, standardized approach, internal ratings-based approach, securitization, settlement and counterparty credit risk, credit valuation adjustment risk, and market risk. OSFI also published the updated mocked-up versions of the eight existing disclosure templates to align with 2023 Capital Adequacy Requirements Guideline implementation.
- Leverage Requirements Guideline. In association with this guideline, OSFI has specified its final policy position with respect to exposure measurement of cash pooling arrangements.
- Liquidity Adequacy Requirements Guideline. The key topics on which OSFI has specified its final policy positions are related to frequency and timeliness of reporting, net stable funding ratio, and net cumulative cash flow.
- SMSB Capital and Liquidity Requirements Guideline. In association with this guideline, OSFI has specified its final policy position with respect to "Category III segmentation criteria."
- Pillar 3 Disclosure Requirements Guidelines. OSFI has specified its final policy position with respect to certain disclosure templates. In response to request from stakeholders, OSFI published the updated mocked-up versions of the eight existing disclosure templates reflecting updated rows and columns to ensure clarity on 2023 disclosure requirements.
Annex 1 to the letter contains OSFI final policy positions on certain key topics while Annex 2 provides updated net cumulative cash flow outflow rates. OSFI will complement the information in the annexes to the letter with specific revisions to the guidelines, which are to be released in January 2022). Clarity on final policy positions on the items discussed in the annexes will help institutions to continue their preparations ahead of implementation of the guideline revisions in the second quarter of 2023 (with the exception of market risk and credit valuation adjustment risk, which will be implemented in the first quarter of 2024).
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Keywords: Americas, Canada, Banking, Basel, Implementation Timeline, Regulatory Capital, Leverage Ratio, Liquidity Risk, Credit Risk, Market Risk, Operational Risk, Pillar 3, Disclosures, Reporting, CVA Risk, OSFI
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