Total Loss Absorbing Capacity and Capital Adequacy Requirements

OSFI is issuing for comment the draft Total Loss Absorbing Capacity (TLAC) guideline, which sets out the framework within which the Superintendent will assess whether a Domestic Systemically Important Bank (D-SIB) maintains its minimum capacity to absorb losses pursuant to subsection 485(1.1) of the Bank Act, upon its coming into force. Comments on the guideline may be provided to OSFI no later than July 17, 2017.

OSFI is also issuing for comment amendments to the Capital Adequacy Requirements (CAR) guideline (principally to chapter 2). The changes implement the amendments to Basel III finalized by the Basel Committee on Banking Supervision (BCBS) in October 2016 in respect of holdings of instruments issued by Global Systemically Important Banks (G-SIBs) that qualify towards their Total Loss Absorbing Capacity (TLAC) requirements and instruments ranking pari passu with those instruments. Given the potential for this initiative to reduce a significant source of contagion in the banking system, OSFI will be applying this standard to all deposit-taking institutions and will extend the Basel III treatment to holdings of TLAC issued by Canadian Domestic Systemically Important Banks (D-SIBs). Comments on the amendments may be provided to OSFI no later than July 17, 2017.