Frequently asked questions – Basel Capital Adequacy Reporting (BCAR) 2023

Introduction

The questions below represent recurring enquiries received by OSFI from numerous financial institutions. The responses provided by OSFI are intended to act as general information in response to commonly asked questions about the completion of BCAR 2023. These should not be considered to be a definitive response or ruling in respect of a particular set of circumstances at an individual financial institution. OSFI will update this page as other questions on BCAR 2023 are submitted.

This information is not a substitute for guidance, and institutions should contact the Capital & Liquidity Standards Division through their assigned Relationship Manager for specific guidance on a particular situation.

Questions

1. Based on OSFI’s new guidance for credit risk mitigation (CRM) techniques, should exposures be reflected on the schedule of the guarantor?

Yes, as per the guidance in the Summary of OSFI's proposed changes, exposures affected by CRM can move from original obligor schedules to schedules for CRM providers. This applies to reporting entities that file under the IRB approach.

2. In schedule 50.010, there are two memo items associated with the schedule for Public Service Entities (50.020). Can you explain this discrepancy and what you want reported in these memos?

As per the BCAR Instructions, we expect financial institutions to report the memo items related to insured mortgages associated with PSEs on 50.010 until further notice. Work is underway to move those memo items to the correct schedule and will be completed after 2023. In the meantime, FIs are still expected to fill in the memo items.

3. Under the Standardized approach, the real estate schedules (e.g., 40.190-40.240) have notes to leave the PMI backstop portions blank. How should exposures be reported on these schedules?

The individual PMI Backstop risk weights should be left blank, and only reflected in the Total (700) rows for the Drawn (501) exposure type. The other risk weights should be reported as they would be reported on any other schedule or exposure type. Similarly, on schedule 10.080 (Summary of All Insured Canadian Mortgages and HELOCs) DPAs 11025-11034 should be left blank with the totals (DPA 10843 and 10850) reflecting any values associated with those risk weights. Please note any validation rules triggered by this temporary workaround will be turned off in 2023.

4. In schedule 10.020, the footnotes denoted by double asterisks (**) are associated with exposures that are unaffected by currency mismatch. How should these exposures adjust for a non-applicable currency mismatch?

This is a template error and those footnotes should only be associated with the real estate exposures found on schedule 10.090. Exposure classes such as transactors, revolvers, indirect auto, and regulatory retail do not have to be adjusted for currency mismatch.

5. In schedule 10.090 (Summary of All Standardized Approach Exposures Subject to Currency Mismatch Multiplier), there are certain rows in which RWA subject to currency mismatch exceeds the maximum 1.5 multiplier expressed in CAR 4.1.16. How should we report on those rows in which the 1.5 multiplier will be exceeded (e.g., 105% risk weight)?

This only impacts the 105% risk weight rows, so those should be multiplied by 45% instead of the given 52.5%. Any validation rules that would be tripped around those specific 105% risk weights will be turned off.

6. In the new advisory on cryptoassets, Group 1 cryptoasset exposures receive a capital treatment that is comparable with traditional assets, while Group 2 cryptoassets are to be reported as a deduction from CET1. Where should this be reported in BCAR 2023?

The guidance on Group 1 cryptoasset exposures is clear in that the capital treatment mirrors comparable traditional assets. For Group 2 cryptoasset exposures, the deduction will be reflected in DPA 1532 (20.010) and an accompanying reconciliation to balance sheet assets in 8936 (10.070). An update has been made to the BCAR instructions for Group 2 crypto assets.