Office of the Superintendent of Financial Institutions
OSFI supports relevant disclosures regarding key risk information as a way to allow stakeholders to gain a thorough understanding of a deposit-taking institution’s (DTI’s) activities. As part of its Liquidity Adequacy Requirements (LAR) guideline,Footnote 1 OSFI introduced in December 2018 a Net Stable Funding Ratio (NSFR) requirement.
Canadian federally regulated DTIs lack guidance on the public disclosure of their NSFR positions. The absence of robust NSFR disclosure reduces transparency and may inhibit public confidence with respect to their funding risks.
The objective of the guideline is to complement the NSFR requirement with an NSFR disclosure requirement that will provide transparency over DTIs’ funding risk, thereby encouraging comparability and market discipline over this key metric.
OSFI believes that issuing an NSFR disclosure guideline is the best way to achieve consistent and comparable NSFR disclosure. OSFI’s key considerations relate to the scope and implementation date of NSFR disclosure.
Canadian Domestic Systemically Important Banks (D-SIBs)Footnote 2 are internationally active and systemically important in Canada. Given their nature, size and complexity, OSFI believes it is in the public interest that these institutions are transparent regarding their funding risk.
In determining the implementation date for the NSFR disclosure, OSFI considered whether to:
NSFR disclosure complements D-SIBs’ compliance with the NSFR requirements. As such, D-SIBs could provide the NSFR disclosure at the same time as they implement the requirement. This would provide useful market information, and would demonstrate that D-SIBs’ regulatory disclosures are amongst the best of their international peers. However, this option would provide D-SIBs with little lead-time to operationalize the disclosure requirements.
A one-year deferral over the NSFR compliance date of January 1, 2020 would provide D-SIBs sufficient time to operationalize the NSFR disclosure subsequent to implementing the NSFR requirement. This option would allow D-SIBs to provide NSFR information to the public in a reasonably timely manner.
Deferring disclosure implementation to align with that in other jurisdictions potentially allows D-SIBs the most time to operationalize their NSFR disclosure. However, delaying public disclosure for an indeterminate period does not support OSFI’s objective of promoting transparency and market discipline.
In February 2019, OSFI published a draft NSFR Disclosure Guideline. All comments received were considered in finalizing the guideline. The cover letter accompanying the final guideline contains a summary of the material comments received and OSFI’s responses.
OSFI recommends that the NSFR disclosure requirements be mandatory for D-SIBs on a quarterly basis.
The guideline will be effective beginning with the quarterly reporting period ending January 31, 2021. The location of the NSFR and LCR disclosures should be the same.
OSFI, December 2018: http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/nsfr_gias.aspx.
Return to footnote 1
OSFI has designated six institutions as D-SIBs: Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank of Canada.
Return to footnote 2