OSFI unwinds regulatory adjustments for banks subject to market risk capital adequacy rules

Today, the Office of the Superintendent of Financial Institutions (OSFI) announced the unwinding of regulatory adjustments to the market risk capital requirements for banks, effective May 1, 2021.

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 initial wave of the COVID-19 pandemic.

These measures included a reduction in the Stressed Value at Risk (“SVaR”) multiplier, a component of the market risk capital requirements that ensures that a minimum amount of capital is held against stress periods. At the beginning of the pandemic, the volatility in capital markets increased such that the level of additional conservatism achieved through the SVaR multiplier was temporarily not needed and banks were permitted to reduce the level of the multipliers used.