OSFI releases final version of the Capital Adequacy Requirements (CAR) Guideline following consultation period

News Release

For Immediate Release

OTTAWA ─ December 9, 2016 ─ Office of the Superintendent of Financial Institutions Canada

The Office of the Superintendent of Financial Institutions (OSFI) today released revisions to its Capital Adequacy Requirements Guideline (CAR).

OSFI's CAR Guideline provides a framework for assessing the capital adequacy of federally regulated deposit-taking institutions and is updated periodically to ensure that capital requirements continue to reflect underlying risks and developments in the financial industry.

Captured in this set of revisions are clarifications on how the CAR Guideline will apply to federal credit unions, particularly with respect to qualifying capital instruments, deductions from capital and transitioning of non-qualifying instruments.

The CAR Guideline also includes revisions to the treatment of insured residential mortgages. These revisions aim to emphasize that credit risk insurance is a risk mitigant (guarantee) that relies on the due diligence of a mortgage originator with respect to the requirements of a mortgage insurance contract.

In addition, this Guideline incorporates final guidance on the implementation of the downturn loss given default (DLGD) floor which applies to banks using an internal rating-based (IRB) approach for loans secured by residential real estate. These updates provide a measured and forward looking response to the changing risks occurring in the Canadian mortgage market.

OSFI is also clarifying how we will exercise national discretion in the implementation of the countercyclical buffer, including the reciprocity of countercyclical buffers put in place in other jurisdictions.

Finally, the revisions include OSFI’s implementation of the equity investment in funds rules issued by the Basel Committee on Banking Supervision.

Quick Facts

  • The implementation date for these changes is set for November 1, 2016 for institutions with an October 31 year end, and January 1, 2017 for institutions with a December 31 year end.
  • The CAR Guideline is based on requirements agreed by the Basel Committee on Banking Supervision. As a member of the Basel Committee, OSFI supports and applies the global risk-based framework to its regulated institutions through a measured and tailored approach that is suited to the Canadian context.


“The issuing of this guideline represents an important proactive response to global capital adequacy standards issued by the Basel Committee in the context of changing risks in Canada,” said Assistant Superintendent Carolyn Rogers. “We thank all those who participated in the consultation process vital to ensuring proper stakeholder input.”

Associated Links

About OSFI

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.


Media Contact:

Annik Faucher
OSFI – Public Affairs