OSFI unwinds temporary increase to covered bond limit

News Release

For Immediate Release

OTTAWA ─ April 6, 2021 ─ Office of the Superintendent of Financial Institutions

Today, the Office of the Superintendent of Financial Institutions (OSFI) announced the unwinding of the temporary increase to the covered bond limit, effective immediately.

One year ago, OSFI introduced extraordinary regulatory adjustments to support the financial and operational resilience of federally regulated financial institutions (FRFIs) in response to the COVID-19 pandemic.

These measures included a temporary increase to the covered bond limit to facilitate greater access to Bank of Canada facilities. Covered bonds are debt securities issued by a financial institution that are collateralized against a pool of assets designed to cover claims should an issuer fail. OSFI normally limits a bank's issuance of covered bonds to 5.5% of the bank's total assets. The temporary increase in the limit targeted covered bonds pledged directly to the Bank of Canada, with the limit relating to market instruments (covered bonds sold into the market) still set at 5.5%. When OSFI announced the temporary increase to the covered bond limit on March 27, 2020, it was noted that the increase would be provided for at least one year, but could be extended beyond this if needed.

Throughout the past year, OSFI has continued to monitor banks' liquidity and access to term funding, which have stabilized considerably since measures were initially put in place. Further, on October 15, 2020 the Bank of Canada removed own-name covered bonds from their list of eligible securities for regular term repo operations. As such, the temporary increase to the covered bond limit by OSFI is no longer necessary.

OSFI's regulatory and supervisory adjustments will continue to be credible, consistent, necessary and fit-for-purpose in the Canadian context. OSFI will closely monitor conditions and remains ready to take any further action, including unwinding temporary measures, as required.

For specific guidance, please see the letter issued to federally regulated deposit-taking institutions issuing covered bonds.


"The uncertainty caused by the first wave of the COVID-19 pandemic made it necessary to adjust certain regulatory requirements including the covered bond limit. With market conditions stabilizing, it's fitting that the covered bond limit should return to its pre-pandemic level too."

- Ben Gully, Assistant Superintendent, Regulation Sector

Quick Facts

  • The measures introduced by OSFI at the end of March 2020 provided relief to banks' capital, liquidity and reporting requirements. In addition, such measures delayed the implementation deadlines for a number of planned regulatory changes.
  • OSFI's covered bond limit caps the collateral available for issuance of covered bonds to 5.5% of a bank's total assets. This is to ensure that the financial stability benefits of covered bonds are not dissipated by excessive issuance.
  • In March 2020 the covered bond limit was increased to 10%, specifically to accommodate newly structured covered bonds temporarily eligible for the Bank of Canada's term repo program. These securities (own-name covered bonds) were removed from the Bank of Canada's list of eligible collateral types in October 2020.
  • The temporary increase by OSFI to the covered bond limit is now being unwound.

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About OSFI

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.

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OSFI – Public Affairs