OSFI Designates D-SIBs and Sets Minimum TLAC Requirements for D-SIBs
OSFI issued orders to the six largest banks in Canada to legally designate them as domestic systemically important banks (D-SIBs). The six banks are Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank. Orders were also issued to each D-SIB to set the minimum risk-based total loss-absorbing capacity (TLAC) ratio at 21.5% of risk-weighted assets and the minimum TLAC leverage ratio at 6.75%.
The Royal Bank of Canada (RBC) was recently designated as a G-SIB by FSB. This G-SIB designation does not affect the application of Bail-in Regime to RBC or its designation as a Canadian D-SIB. As part of the implementation of the statutory Bail-in Regime and OSFI’s TLAC guideline, the Bank Act was amended on June 21, 2016 to give responsibility for the designation of D-SIBs to OSFI. Under the Bank Act amendments, OSFI is also responsible for setting the minimum TLAC for D-SIBs. The Government of Canada has developed a comprehensive risk management framework for D-SIBs. The recent Bail-in Regime and TLAC requirements were the final components of the framework to be implemented. In the unlikely event of a failure, the framework would allow a bank to be recapitalized and to remain open and operating, without requiring public funds or threatening the financial stability in Canada.
Related Link: News Release
Keywords: Americas, Canada, Banking, D-SIBs, TLAC, Bail-in Regime, OSFI
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