OSFI completes Basel III reforms, releases final capital and liquidity rules to protect Canadians

News Release

For Immediate Release

OTTAWA ─ January 31, 2022 ─ Office of the Superintendent of Financial Institutions

Today, the Office of the Superintendent of Financial Institutions (OSFI) announced revised capital, leverage, liquidity and disclosure rules that incorporate the final Basel III banking reforms with additional adjustments to make them suitable for federally regulated deposit-taking institutions (DTIs).

These revised rules will help ensure that Canadian DTIs can effectively manage risks through adequate levels of capital and liquidity, thereby helping to bolster the resilience of these institutions.  OSFI’s implementation of these rules reflects three key principles: introducing rules that are fit for Canada, setting the right incentives, and tailoring capital and liquidity requirements to better reflect the unique nature of small and medium-sized banks.

The internationally agreed-upon Basel III reforms provide a sound foundation for a resilient banking system in Canada. OSFI’s domestic implementation of these reforms will help to promote continued public confidence in the Canadian financial system by reinforcing the overall safety and soundness of Canadian banks.

Most of these revised rules will take effect in the second fiscal quarter of 2023, with those related to market risk and credit valuation adjustment risk taking effect in early 2024.

Quote

“These changes to capital and liquidity rules help ensure a strong financial services industry where federally regulated financial institutions are able to compete effectively. They also ensure these institutions maintain an adequate level of capital and liquidity to help protect depositors and creditors in case of an adverse event.”

Peter Routledge, Superintendent

Quick facts

• The revised rules released today include new Capital Adequacy Requirements (CAR), Leverage Requirements (LR), Liquidity Adequacy Requirements (LAR), Capital and Liquidity Requirements specifically for SMSBs, and separate Pillar 3 Disclosure Requirements for D-SIBs and SMSBs.
• The Basel III reforms provide standards for bank capital, leverage, and liquidity that have evolved over time in response to changing market conditions.
• The final package of Basel III reforms were published by the Basel Committee on Banking Supervision (BCBS) starting in December 2017, and OSFI launched an industry consultation in July 2018 to gather input on how best to implement these reforms in Canada.
• By implementing the Basel III reforms in a way that makes sense for the Canadian context, OSFI is further reinforcing the strong international reputation of Canada’s banks and helping them attract capital and funding, both domestically and from investors around the world.

Associated Links

• January 31, 2022 letter to industry
• Overview of changes to OSFI guidance - infographic
• November 29, 2021 update on Basel III implementation

About

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 supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.

Media Contact

OSFI – Public Affairs
Media-Medias@osfi-bsif.gc.ca
343-550-9373