Superintendent formally designates Canadian D-SIBs and sets minimum loss absorbing capacity requirements
News release - Ottawa -
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As part of the implementation of the statutory Bail-in Regime and OSFI’s Total Loss Absorbing Capacity (TLAC) guideline, the Bank Act was amended on June 21, 2016 to give responsibility for the designation of domestic systemically important banks (D-SIBs) to the Superintendent of Financial Institutions. Today the Superintendent issued orders to Canada’s six largest banks, legally designating them as D-SIBs. This formalizes OSFI’s identification of these banks as D-SIBs in March 2013.
Under the Bank Act amendments, the Superintendent is also responsible for setting D-SIBs’ minimum TLAC. Accordingly, the Superintendent has issued orders to each D-SIB, setting the minimum risk-based TLAC ratio at 21.5% of risk-weighted assets and the minimum TLAC leverage ratio at 6.75%.
The Government of Canada has developed a comprehensive risk management framework for D-SIBs. The recent Bail-in Regime and TLAC requirements were the final components of the framework to be implemented. In the unlikely event of a failure, the framework would allow a bank to be recapitalized and to remain open and operating without requiring public funds or threatening financial stability.
Quick facts
- The six designated D-SIBs are the Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank.
- The recent designation of the Royal Bank of Canada (RBC) as a G-SIB by the Financial Stability Board does not affect the application of the Bail-in Regime to RBC or its designation as a Canadian D-SIB.