Office of the Superintendent of Financial Institutions
OTTAWA ─ April 29, 2016 ─ Office of the Superintendent of Financial Institutions Canada
The Office of the Superintendent of Financial Institutions Canada (OSFI) today released for public consultation proposed updates to the regulatory capital requirements for loans secured by residential real estate. These updates will ensure that capital requirements remain prudent in periods where house prices are high relative to household income and/or house prices are increasing rapidly in nominal terms. The proposed updates apply to those federally regulated deposit-taking institutions (DTIs) approved by OSFI to use the internal ratings-based (IRB) approach to credit risk.
Included in the updates is the introduction of a risk-sensitive floor on IRB capital requirements to take into account periods where the value of properties pledged as collateral becomes less certain. The proposed floor would be included in banks’ estimates of loss given default (LGD).
These updates provide a measured and forward looking response to the changing risks occurring in the Canadian mortgage market.
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.
OSFI – Public Affairs