For Immediate Release
OTTAWA - April 11, 2019 ─ Office of the Superintendent of Financial Institutions
Today, the Office of the Superintendent of Financial Institutions (OSFI) released final revisions to its Liquidity Adequacy Requirements (LAR) guideline. The revised guideline will help financial institutions enhance their resiliency to short-term liquidity stresses, and will ensure that they maintain stable funding profile over the longer-term.
The environment in which Canadian financial institutions operate has evolved considerably since the Liquidity Coverage Ratio (LCR) and the Net Cumulative Cash Flow (NCCF) metrics were issued in 2014. Some institutions increasingly rely on deposit funding that may experience higher risk of withdrawals in periods of stress. Such funding models can amplify risks for both individual institutions and for the financial system at large.
To help mitigate this risk, OSFI has introduced targeted changes to the LAR’s LCR and NCCF metrics that better reflect the increased risks posed by different types of retail deposits that may be subject to sudden withdrawals.
In addition to building resilience to short-term liquidity stresses, institutions should also maintain a stable funding profile over a longer-term horizon to reduce future funding stress. To address this, the Basel Committee for Banking Supervision (BCBS) published the Net Stable Funding Ratio (NSFR) liquidity requirement to promote longer-term funding resiliency. Chapter 3 of the revised LAR guideline implements the NSFR in Canada for Domestic Systemically Important Banks (D-SIBs).
OSFI is also releasing today the final version of its guideline on Net Stable Funding Ratio Disclosure Requirements. The guideline will ensure D-SIBs provide clear and consistent disclosures regarding their funding risks.
“The revisions ensure that OSFI’s liquidity risk framework remains current with the environment in which Canadian financial institutions operate”, said Assistant Superintendent Carolyn Rogers. “The revised LAR guideline promotes resilience to short-term liquidity stress and fosters a more stable long-term funding profile for Canada’s financial institutions.”
- All deposit-taking institutions are expected to comply with Chapters 2 (LCR), 4 (NCCF) and 5 (Liquidity Monitoring Tools) of the revised Guideline by January 1, 2020.
- Designated domestic systemically important banks are expected to comply with Chapter 3 (NSFR) of the Guideline by January 1, 2020.
The Office of the Superintendent of Financial Institutions Canada (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.
OSFI – Public Affairs