D-12: Public Disclosure Requirements related to Basel III Leverage Ratio

Document Properties

  • Type of Publication: Guideline Impact Analysis Statement
  • Date: September 2014
  • Audiences: Banks / BHC / T&L / Retail Associations

I. Background

On January 12, 2014, the Basel Committee on Banking Supervision (BCBS) issued its final rules on the Basel III leverage ratio framework and disclosure requirementsFootnote 1 (the BCBS LR Framework).  The BCBS LR Framework introduces a simple, transparent, non-risk based leverage ratio to act as a credible supplementary measure to the risk-based capital requirements and includes public disclosure requirements (BCBS LR disclosure requirements) starting in January 1, 2015.

As outlined in OSFI’s Advisory entitled, Domestic Systemic Importance and Capital Targets – DTIsFootnote 2, Canadian Domestic Systemically Important Banks (DSIBs) are expected to adopt future disclosure recommendations in the banking arena that are endorsed by international standard setters. 

II. Problem Identification

OSFI does not have guidance that reflects the aforementioned BCBS LR disclosure requirements.  

III. Objectives

OSFI’s objective is to issue a guideline that describes the minimum implementation requirements of the BCBS LR disclosure requirements for all institutionsFootnote 3

IV. Identification and Assessment of Options

Option 1 – Reflect the BCBS publications in formal OSFI guidance

This option entails the creation of a guideline that would contain specific reference to previous OSFI issued disclosure guidance as well as to the OSFI Leverage Requirements GuidelineFootnote 4 (LR Guideline). This option will allow OSFI the opportunity to detail its expectations related to the frequency and availability of disclosures and to determine the requirements for DSIBs and all other institutions (i.e., non-DSIBs) as well as to reference the LR Guideline and is consistent with OSFI’s past approach to implementing BCBS disclosure requirements. 

While this option entails up-front costs to OSFI to produce the disclosure guideline, it will provide long term benefits to institutions because a guideline would be able to clearly establish a scope of application (i.e., DSIBs versus non-DSIBs) and could provide additional interpretation of the BCBS LR Framework.  A guideline would also complement OSFI’s related leverage ratio guidance.

Option 2 – Make no changes – rely only on BCBS publications to communicate requirements

The advantage of this option is that OSFI would not have to devote resources to producing its own guidance.  However, institutions would be left without comprehensive leverage disclosure guidance and would not be able to easily refer to related OSFI leverage requirements and disclosure requirements.  This is inefficient for institutions and raises the potential for guidance to be misunderstood or, more problematic, missed. 

V. Recommendation

OSFI is of the view that a comprehensive domestic leverage ratio disclosure guideline (Option 1) is the most appropriate option for ensuring that institutions are aware of the BCBS LR disclosure requirements and apply the guidance correctly.  It is recommended that the D-12: Public Disclosure Requirements related to Basel III Leverage Ratio guideline be created to incorporate the BCBS LR disclosure requirements. 

VI. Consultations

In June 2014, the guideline was published in draft form on the OSFI web site for a four-week consultation period. Comments were received and were taken into consideration in the final version of the guideline.

VII. Implementation

D-SIBs are required to implement the BCBS LR disclosure requirements beginning with the Q1 2015 reporting period.  All other institutions are required to implement the BCBS LR disclosure requirements by year end 2015.

Footnotes

Footnote 1

BCBS January 12, 2014: Basel III leverage ratio framework and disclosure requirements  http://www.bis.org/publ/bcbs270.pdf

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Footnote 2

OSFI, March 2013: http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/adv-prv/Pages/DSIB_adv.aspx#ToCVIIInformationDisclosurePractices

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Footnote 3

Banks and bank holding companies, to which the Bank Act applies; federally regulated trust or loan companies, to which the Trust and Loan Companies Act applies; and cooperative retail associations, to which the Cooperative Credit Associations Act applies; are collectively referred to as “institutions”.

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Footnote 4

OSFI’s Leverage Requirements Guideline: http://www.osfi-bsif.gc.ca/Eng/Docs/LR.pdf

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