Summary of stakeholder comments and our responses for the Capital Adequacy Requirements Guideline (2027)
| Section | Stakeholder feedback | Our response |
|---|---|---|
| Annex 1, paragraph 10(h) | Stakeholders requested confirmation that the reference to Solo Total Loss Absorbing Capacity (TLAC) ratios should be singular because there is only one Solo TLAC ratio. | We made no change to the final guideline. The guideline appropriately refers to both minimum and target Solo TLAC ratios and therefore the plural form remains appropriate. |
| Annex 1, Paragraph 11 | Stakeholders recommended removing the reference to the Financial Stability Board’s Enhanced Disclosure Task Force (EDTF), noting that the EDTF was disbanded. | We made no change to the final guideline. We will assess this request as part of future updates to the CAR Guideline. |
| Section | Stakeholder feedback | Our response |
|---|---|---|
| 4.1.5 | Stakeholders requested that the lower risk weights for covered bonds issued by SIBs apply to SMSBs as well. | We upheld the changes proposed in the draft guideline on the covered bond risk weights. Covered bonds issued by SMSBs are risk-weighted consistent with the treatment applicable to the issuing bank. |
| 4.1.7 | Stakeholders requested that IRB institutions be able to risk weight unrated short-term corporate exposures using SA 65% investment grade (IG) risk weight (RW) based on their internal IG ratings for purposes of the capital floor, without confirming whether they meet the relevant criteria for the SA RW. | We made no change to the final guideline. IRB institutions should use the Standardized Approach for purposes of the capital floor. |
| 4.1.7 | Stakeholders requested that we lower the risk weight for unrated corporates that institutions categorize as non-IG from 135% to 120%. | We upheld the changes proposed in the draft guideline. The risk weight for non-IG unrated Corporates is 135%, which is broadly consistent with the risk weights for non-investment grade rated corporates (BB+ to below BBB−). |
| 4.1.9 | Stakeholders requested that the maximum exposure threshold for an individual or small business to qualify as a regulatory retail or SBE exposure be increased from $1.5 million to $5 million. | We increased the maximum exposure threshold in paragraph 85 from $1.5 million to $2.5 million to account for inflation. |
| 4.1.10 | Stakeholders noted that applying the income producing commercial real estate (IPCRE) risk weights for substantially completed land ADC exposures did not align with the finished property requirement for IPCRE. | We added a footnote to paragraph 92 to note the exception to the requirement of fully completed property for substantially completed ADC exposures. |
| 4.1.11 | Stakeholders asked for a modification to the requirement to validate the borrower’s ability’ to service mortgages on other properties for identification of IPRRE for borrowers with multiple mortgages, given this information may not be available to institutions for mortgages issued by other lenders. | We removed the reference to income used ‘to validate the borrower’s ability’ to service mortgages on other properties in paragraph 104, replacing it with ‘income used to service other mortgages’. We added a footnote to clarify that other mortgages include those issued by the lender as well as those issued by other lenders. |
| 4.1.11 | Stakeholders asked for clarification of the alternative criterion under which institutions can use their internal property purpose indicators for classification of IPRRE. | We modified wording in paragraph 104 to clarify that the alternative categorization is based on the institutions’ internal property purpose indicators, if they are at least as conservative as the 50% borrower income criterion. |
| 4.1.13 | Stakeholders requested clarification of when construction begins for purposes of the criterion to apply the preferential RW for land ADC exposures based on pre-sales. | We removed the reference to ‘construction beginning’ in footnote 56, paragraph 115, and updated the footnote to clarify that the preferential treatment is allowed upon reaching the required level of pre-sales at any time during construction. |
| 4.1.13 | Stakeholders recommended changing the criterion for the preferential land ADC RW based on pre-sales to reference value of contracts, rather than number of contracts. | We modified the pre-sale threshold definition in footnote 56, paragraph 115, to reference the value of contracts, to better reflect how pre-sales mitigate the financial risks of ADC exposures. |
| 4.1.13 | Stakeholders proposed allowing self-liquidating ADC loans to qualify for the preferential RW of 90%. | We made no change to the final guideline due to overlap of the self-liquidating concept with the preferential treatment for exposures based on pre-sales. |
| 4.1.13 | Stakeholders requested that the preferential RW for commercial ADC exposures be allowed upon reaching the pre-lease threshold during construction. | We updated the language in footnote 57, paragraph 120, to allow application of the preferential RW for commercial ADC exposures upon reaching the pre-sale or pre-lease thresholds at any time during construction, provided they meet the LTV condition. |
| 4.1.13 | Stakeholders requested that substantially completed ADC exposures be eligible for the IPCRE risk weights even with loan to value (LTV) levels higher than 80%. | We made no change to the final guideline to keep the treatment consistent with that of IPCRE and given that higher LTVs increase the residual risk of ADC exposures. |
| 4.1.13 | Stakeholders requested a definition of pre-leases for purposes of the preferential RW criterion for commercial exposures and a clarification of the threshold calculation. | We updated the wording of paragraph 117 to reflect the definition of pre-leases as legally binding written contracts secured by a substantial cash deposit. We also added footnote 57, paragraph 120, to clarify the calculation of the 50% threshold for preferential treatment is based on the percentage of the total value of contracts. |
| 4.1.13 | Stakeholders asked for clarification of whether the preferential treatment for low-rise residential real estate projects is limited to purpose-built rental projects. | We updated the wording in paragraph 118 to clarify that all low-rise rental projects are eligible for the preferential risk weight, irrespective of the purpose-built status, subject to meeting the equity at risk criteria. |
| 4.1.13 | Stakeholders proposed reducing the preferential RW for commercial ADC exposures from 110% to 100%. | We made no change to the final guideline. We maintained the preferential RW of 110% for commercial ADC exposures, to remain consistent with the treatment of IPCRE exposures, and to reflect the generally higher risk of commercial ADC compared to residential exposures. |
| 4.1.13 | Stakeholders asked for an increase to the maximum LTV threshold for the commercial ADC preferential RW. | We made no change to the final guideline, given the higher risk of commercial ADC exposures, particularly those with higher leverage. |
| 4.1.13 | Stakeholders requested that OSFI clarify whether the preferential 100% RW for land acquisition exposures with LTV lower than 60% applies to commercial land acquisition exposures. | We updated the wording in paragraph 124 to clarify that the 100% RW for exposures with LTV lower than 60% continues to apply exclusively to residential land acquisition exposures. We added footnote 58 to paragraph 124 to clarify that institutions should not reflect land lift in the LTV calculation for land acquisition loans. |
| 4.1.13 | Stakeholders proposed decreasing the equity requirement for preferential risk weight for ADC exposures from 25% to 15%. | We made no change to the final guideline. We will assess this request as part of future updates to the CAR Guideline. |
| 4.2.3 | Stakeholders requested that IRB institutions be permitted to use internal long-term ratings for unrated short-term exposures when calculating the capital floor. | We made no change to the final guideline. IRB institutions should use the Standardized Approach for purposes of the capital floor. |
| 4.3.3 | Stakeholders requested that OSFI consider permitting cash surrender value of life insurance policies to be deemed eligible financial collateral. | We made no change to the final guideline. We will assess this request as part of future updates to the CAR Guideline. |
| 4.3.3 | Stakeholders requested that OSFI consider permitting guaranteed investment certificates to be deemed eligible financial collateral. | We made no change to the final guideline. We will assess this request as part of future updates to the CAR Guideline. |
| Appendix 2, Footnote 104-105 | Stakeholders requested clarification regarding transitional footnotes related to SMSB materiality threshold calculations. | We removed obsolete footnote 104 and amended footnote 105 to only reflect ongoing requirements. |
| Section | Stakeholder feedback | Our response |
|---|---|---|
| 5.2.1 | Stakeholders requested that all land ADC exposures that meet pre-sale/pre-lease criteria for preferential risk weights in Chapter 4 be excluded from the definition of HVCRE. | We made no change to the final guideline. We will assess this request as part of future updates to the CAR Guideline. |
| 5.2.1 | Stakeholders requested clarification that small business exposures exceeding the regulatory retail threshold should be treated as Corporate SME exposures rather than general corporate exposures. | We modified the language in paragraph 81 to clarify that retail exposures include both individuals and small businesses. |
| 5.2.1 | Stakeholders requested that the maximum exposure threshold for an individual or SBE to qualify as a regulatory retail or SBE exposure be increased from $1.5 million to $5 million. | We increased the maximum exposure threshold in paragraph 24 from $1.5 million to $2.5 million in order to account for inflation. |
| 5.2.2 | Stakeholders requested that OSFI clarify the calculation of revenue for purposes of identifying a large corporate exposure, when the parent company of a borrower revenue is not available, . | We included additional guidance in paragraph 39 on what institutions should do when there is insufficient information on the consolidated group as a whole. |
| 5.3.1 | Stakeholder requested that OSFI increase the firm-size adjustment (FSA) for corporate SMEs from 4% to 8%. | We increased the FSA for corporate SMEs in paragraph 68 to 6% to support lending to corporate SMEs while ensuring the FSA remains reflective of historical default correlations for corporate SMEs. |
| 5.8.6 | Stakeholders requested that OSFI clarify how to calculate the LGD for combined loan products (CLPs) for which a mortgage insurer has a senior claim. | We amended paragraph 269 to account for the possibility that products within a CLP have different seniorities (for example, a home equity line of credit subordinated to a mortgage). |
| Section | Stakeholder feedback | Our response |
|---|---|---|
| 6.1 | Stakeholders requested that OSFI consider allowing repurchase agreements used to fund the acquisition of assets to be considered securitization exposures. | We made no change to the final guideline. We will assess this request as part of future updates to the CAR Guideline. |
| 6.1 | Stakeholders asked for clarification that re‑tranching a single securitization exposure should not be considered a re‑securitization, whether all tranches are retained or the mezzanine/sub‑note is sold. | We added footnote 3 to provide certainty that such re-tranched securitizations would not be considered a re-securitization pursuant to exceptions already included in the guideline. |
| 6.5.1 | Stakeholders requested that OSFI consider excluding deducted exposures from the significant risk transfer test or allow the test to be performed in capital terms. | We made no change to the final guideline, since the deduction of a retained junior securitization exposure from CET1 does not in itself constitute a transfer of credit risk to third parties and remains fully retained by the originator. |
| 6.5.1 | Stakeholders requested clarification that specific allowances can be excluded from the deduction when institutions deduct securitization exposures that qualify to be risk-weighted at 1250%. | We added an explicit clarification to paragraph 45 that, consistent with the treatment of 1250% risk-weighted securitization exposures, originating institutions can reduce the deduction of a securitization exposure by the amount of their specific allowances on the underlying assets of that transaction and non‑refundable purchase price discounts on such underlying assets. In addition, we included deductions from CET1 as one of the allowable approaches for securitization exposures when calculating the capital floor as specified in section 1.5 of Chapter 1 of CAR. |
| 6.5.4 | Stakeholders requested that banks be permitted to use Securitization -External Ratings-Based Approach (SEC‑ERBA) (instead of Securitization -Internal Ratings-Based Approach (SEC-IRBA)) for an originator’s retained subordinated notes that are externally rated to recognize the enhancement from excess spread, even when IRB parameters are available. | We made no change to the final guideline and maintained the existing hierarchy of approaches. The SEC-IRBA better reflects prudential risks related to excess spread, including the volatility of excess spread, its sensitivity to performance deterioration, and the potential for delayed or lagged recognition of risk in external ratings. |
| 6.6.2 | Stakeholders requested that OSFI recalibrate risk weights under SEC-ERBA, arguing that current levels—particularly for below‑AAA securitizations and non‑senior tranches—are overly punitive and increase too steeply with maturity. | We made no change to the final guideline. The SEC-ERBA risk weights appropriately reflect the higher structural risks of securitization exposures and are consistent with corresponding SEC‑IRBA risk weights. |
| 6.6.2.3 | Stakeholders requested that OSFI clarify whether a bank's involvement in selecting a rating agency for a junior sub-note tranche, in a transaction where the institution holds the unrated senior position treated under the Securitization-Internal Assessment Approach (SEC-IAA), constitutes cherry-picking | We modified paragraph 116 (e) to clarify that selecting a rating agency for a junior sub-note tranche, when the unrated senior tranche is retained, is not considered cherry-picking as long as the institution meets the operational requirements for external credit assessments in section 6.6.2.3 |
| Appendix 6-1.D1 and Appendix 6-2.D1 | Stakeholders requested that OSFI restrict the scope of the standardized risk weight ceiling of 75% to regulatory retail assets under the STC securitization framework, rather than all retail assets, to allow the inclusion of non-regulatory retail exposures in STC securitizations. | We revised paragraph 53 of Appendix 6-1.D.D1 and paragraph 90 of Appendix 6-2.D.D1 to allow non-regulatory retail exposures to be included in STC securitizations. |
| Appendix 6-4 | Stakeholders requested that OSFI clarify the information required to be submitted within 30 days of synthetic securitization issuances. | We modified paragraph 5 to clarify the provision of OSFI feedback and confirm that the information requirements only apply to originating institutions. We also modified Appendix 6-4 to clarify stress testing expectations, reporting frequency, and information requests regarding lending arrangements. |
| Appendix 6-4 | Stakeholders requested that OSFI clarify whether reversal of capital treatment, when OSFI determines that a securitization exposure does not qualify for treatment under the securitization framework, will be on a go-forward basis. | We made no change to the final guideline. We will determine whether the reversal of capital treatment will be on a go-forward or retroactive basis, or according to any other means of adjustment, on a case-by-case basis |
| Section | Stakeholder feedback | Our response |
|---|---|---|
| 7.1.7 | Stakeholders requested that the supervisory parameter for credit derivative referencing unrated counterparties be assigned the same supervisory factor as credit derivatives referencing BB rated counterparties. They noted that this is the treatment assigned to unrated obligors for the Default Risk Charge in Chapter 9. | We revised the table of Supervisory Factors in paragraph 162. |
| Section | Stakeholder feedback | Our response |
|---|---|---|
| 9.2.2 | Stakeholders indicated that listed investments arising from merger and acquisition activities may not meet the criteria for trading book classification and suggested that we permit institutions to exclude such instruments from the presumptive trading book list. | We updated paragraph 66 such that for listed equities resulting from an institution’s own merger and acquisition activities, that are not held for any of the purposes in paragraph 62, institutions can exempt these instruments from the list of presumptive trading book instruments. |
| 9.2.5 | Stakeholders expressed the view that permitting transfers of U.S. Treasuries between the trading book and banking book without restriction would support the functioning of sovereign debt markets and reduce competitive disadvantages for Canadian institutions operating as primary dealers. | We modified paragraph 74 to permit movement between the trading book and banking book for US Treasury positions originated from US primary dealer underwriting activity at the settlement date. |
| 9.2.6 | Stakeholders proposed expanding the current definition of “exactly matching” for internal risk transfers by amending the current measurement methodology, such that, in addition fair value changes, exact matches can be recognized if the weighted sum of the sensitivities are within a range of 90% to 110%. | We made no change to the final guideline on the measurement methodology for exact matches for internal risk transfers, as we consider the existing criteria to be sufficient. |
| 9.5.2.4 | Stakeholders proposed scoping in other credit exposures beyond bonds when capping credit spread risk (CSR) shocks applied on short credit positions under the sensitivities-based method. | We revised paragraph 121(g) such that, when applying the risk weights for CSR on short credit positions, institutions may cap the risk weight at the lower of the prescribed risk weight and the market spread on the credit instrument. |
| 9.5.2.4 | Stakeholders expressed the view that the requirement to demonstrate annual model validation results for alternative delta sensitivities may be operationally burdensome and may not be necessary where alternative approaches are subject to existing governance and validation frameworks. | We made no change to the final guideline. We upheld the expectation that institutions submit annual model validation reports to demonstrate that their alternative delta sensitivities are yielding results sufficiently close to the prescribed sensitivities, as these reports support supervisory oversight of the use of alternative methodologies. |
| 9.5.2.5 | Stakeholders commented that the current calibration of carbon trading risk weights and tenor correlations may not reflect observed market characteristics, and suggested adjustments to better align capital requirements with empirical evidence. | We made no change to the final guideline on the risk weights or correlation parameters for carbon trading, as available evidence for North American Emissions Trading Systems does not support a revision currently. As these markets mature, we may revisit this issue. |
| 9.5.3.3 | Stakeholders indicated that central bank and public sector entity (PSE) exposures could be treated consistently with sovereign exposures, provided these exposures are funded in local currency, held in a local subsidiary or branch, and assigned 0% default risk weight by their own national authority. | We modified the scope of paragraph 220 to allow institutions to assign a 0.5% default risk weight to eligible central bank and PSE exposures. |
| 9.5.3.3 | Stakeholders suggested that all sovereign exposures be assigned a 0.5% default risk weight, provided these exposures are funded in local currency, held in a local subsidiary or branch, and assigned 0% default risk weight by their own national authority. | We modified the scope of paragraph 220 to allow eligible non-Investment Grade sovereign exposures to be assigned a 0.5% default risk weight. |
| 9.5.3.4 | Stakeholders noted that the draft guideline requirement to assign unmatched equity positions to a 12‑month maturity, and to apply a single methodology consistently across all portfolios, may not reflect the underlying risk profile of certain activities and could reduce flexibility. | We upheld the changes proposed in the draft guideline on the treatment of maturity assignments for cash equities hedging derivatives in the final guideline. This treatment provides institutions flexibility while safeguarding against inconsistent application. |
| 9.5.3.4 | Stakeholders observed that the current treatment of convertible bonds and associated equity hedges may not appropriately reflect offsetting default risk where the underlying exposure is the same and proposed aligning maturities in such cases. | We made no change to the final guideline concerning the maturity assignments for convertible bonds and associated equity hedges, as these hedging strategies introduce additional risk factors beyond those considered when hedging derivative exposures. |
| 9.5.3.4 | Stakeholders identified potential inconsistencies in the application of maturity mismatch caps for investment grade bonds and suggested revisions to improve alignment across hedging scenarios. Specifically, they requested we expand eligibility for the 40-day mismatch cap, for instruments hedged by bond forwards, from Level 1 High Quality Liquid Assets (HQLA) to all investment grade bonds. | We made no change to the final guideline on the application of maturity mismatch caps for investment grade bonds. The existing treatment for Level 1 HQLA hedged by bond forwards remains appropriate and we did not receive evidence showing the materiality or importance of expanding treatment to other investment grade bonds. We also observed that as the credit quality of instruments hedging bond forwards lessens, so does the appropriateness of the mismatch cap. |
| 9.5.4 | Stakeholders noted that the residual risk add‑on (RRAO) framework is not risk‑sensitive and certain instruments should be exempt or subject to a recalibrated add-on. | We made no change to the final guideline on the application of the RRAO framework. The current framework is designed to conservatively capture the risks of such instruments not reflected in the sensitivity based method within the standardized approach. |