Office of the Superintendent of Financial Institutions
OSFI is releasing today, for public consultation, revisions to the following guidance:
In July 2018, OSFI issued a
discussion paper which set forth its proposed policy direction for the implementation of the final Basel III reforms in Canada. Within the paper, OSFI noted its support for the changes proposed by the Basel Committee on Banking Supervision (BCBS), while outlining its intent to make adjustments to the package to reflect the Canadian market. Consistent with its current approach to developing domestic guidance, OSFI noted that its implementation of the Basel III reforms would be guided by the following key principles:
Accordingly, the proposed revisions to the CAR and LR Guidelines reflect OSFI’s domestic implementation of the final Basel III reforms as set out in the consolidated Basel Framework published by the BCBS.Footnote 1 In addition, proposed revisions to these guidelines, as well as those proposed to the LAR Guideline, include changes to reflect specific capital and liquidity requirements applicable to small and medium sized deposit-taking institutions (SMSBs). These changes align to the draft new
SMSB Capital and Liquidity Requirements Guideline (the SMSB Capital and Liquidity Guideline) that is also being released today for public consultation.
Concurrent with this consultation, OSFI is consulting on proposed changes to the
Pillar 3 Disclosure Guideline applicable to Domestic Systemically Important Banks (D-SIBs). These enhanced disclosure requirements incorporate revisions to the Guidelines to support transparency and promote market discipline. For SMSBs, OSFI has included consultative questions for SMSB stakeholders in the Annex to this letter. Feedback received from stakeholders will be used to develop OSFI’s future Pillar 3 Disclosure Guideline for SMSBs.
To assess potential impacts of certain aspects of the proposed changes to the Guidelines on DTIs’ regulatory ratios, OSFI will be undertaking a domestic quantitative impact study (D-QIS). The D-QIS template and instructions will be issued to all DTIs shortly.
OSFI will undertake public consultations on corresponding changes to the related regulatory returns separately in 2021 and 2022.
The primary changes that have been incorporated in the consultative version of the CAR Guideline include:
The primary changes that have been incorporated in the consultative version of the LR Guideline include:
The primary changes that have been incorporated in the consultative version of the LAR Guideline include:
In July 2019, OSFI released a Discussion Paper:
Advancing Proportionality: Tailoring Capital and Liquidity Requirements for Small and Medium-Sized Deposit-Taking Institutions which described its initiative to develop more tailored requirements that take into account the unique nature of these institutions. In January 2020, OSFI released a
Consultative Document that provided an update regarding the development of these Pillar 1 SMSB capital and liquidity requirements.
OSFI took into consideration stakeholder feedback related to the July 2019 Discussion Paper and January 2020 Consultative Document in developing the SMSB Capital and Liquidity Guideline. The new guideline is a reference tool for stakeholders to help them understand which parts of the CAR, LR and LAR Guidelines are applicable to SMSBs. As such, the SMSB Capital and Liquidity Guideline should be read in conjunction with the relevant portions of the CAR, LR and LAR Guidelines.
Key features of the SMSB Capital and Liquidity Guideline include:
The SMSB Capital and Liquidity Guideline along with the CAR, LR and LAR Guidelines also reflect changes to the capital and liquidity requirements for SMSBs that build upon the proposals included in the July 2019 Discussion Paper and January 2020 Consultative Document. Key changes include:
Except as noted below, the revised Guidelines as well as the SMSB Capital and Liquidity Guideline will be implemented from the beginning of fiscal Q1-2023Footnote 4. The revised CAR Guideline chapters relating to CVA risk and market risk (i.e. Chapter 8 and Chapter 9) will come into effect in fiscal Q1-2024Footnote 5.
OSFI also plans to revise and update its implementation note on
Data Maintenance at TSA and AMA institutions in light of the updated operational risk framework included in the CAR Guideline. We plan to engage in further consultations later this year with respect to any changes in our data maintenance expectations for institutions using the Standardized Approach for operational risk.
Specific feedback is requested in respect of the questions outlined in the Annex. Notwithstanding this, OSFI welcomes questions and comments on all aspects of the changes to the Guidelines as well as the draft SMSB Capital and Liquidity Guideline. Questions and comments on these guidelines should be sent to OSFI by email at
Consultations@osfi-bsif.gc.ca by no later than June 4, 2021. Questions and comments related to the Pillar 3 Disclosure Guideline applicable to D-SIBs should be sent to OSFI by email at
Consultations@osfi-bsif.gc.ca by no later than July 2, 2021. A non-attributed summary of industry comments along with OSFI’s responses will be posted on OSFI’s website upon publication of final guidance.
Ben Gully Assistant Superintendent Regulation Sector
In conjunction with the public consultations, OSFI is seeking specific feedback on the following questions for each guideline.
In its January 2020
Consultative DocumentSMSB Capital and Liquidity Requirements, OSFI noted that its review of the capital and liquidity frameworks aimed to strike an appropriate balance in relation to the following principles which are guiding OSFI's review of the capital and liquidity frameworks for SMSBs.
Basel Framework Disclosure Requirements provide a number of tables and templates for internationally active banks (D-SIBs in Canada) to disclose. Taking into consideration the guiding principles set out in
OSFI’s Draft Pillar 3 Guideline for D-SIBs, OSFI aims to require SMSBs to disclose only those tables and templates that are fit for purpose given the applicable capital measures per OSFI’s
Draft SMSB Capital and Liquidity Requirements Guideline.
OSFI is seeking feedback from stakeholders on a proportional set of Pillar 3 disclosure requirements for SMSBs. The responses to the questions below will inform OSFI’s future Draft Pillar 3 Disclosure Guideline for SMSBs.
Questions for all stakeholders:
Please provide your rationale.
Questions for SMSBs:
All references to the Basel framework text throughout the Guidelines have been updated to reflect the December 2019 publication (see
https://www.bis.org/basel_framework/index.htm). Note that, at this time, OSFI has not incorporated proposed revisions to the CAR Guideline to reflect the final credit valuation adjustment (CVA) risk framework published by the BCBS in July 2020. OSFI plans to conduct a separate public consultation on this area in mid-2021.
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Please note that the sequence of certain chapters of the CAR Guideline has been revised.
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Transitioning arrangements remain in effect for non-qualifying instruments issued by federal credit unions prior to their continuance under the
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November 1, 2022 for institutions with an October 31st year end and January 1, 2023 for institutions with a December 31st year end.
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November 1, 2023 for institutions with an October 31st year end and January 1, 2024 for institutions with a December 31st year end.
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