Office of the Superintendent of Financial Institutions
For Immediate Release
OTTAWA ─ January 27, 2021 ─ Office of the Superintendent of Financial Institutions
Today the Office of the Superintendent of Financial Institutions (OSFI) issued
direction to federally regulated deposit-taking institutions (DTIs) on how to treat new loans to businesses through the Government of Canada's
recently announced Highly Affected Sectors Credit Availability Program (HASCAP).
The Government mandated the Business Development Bank of Canada (BDC) to set up the HASCAP loan guarantee program and work with eligible lenders to provide additional liquidity for Canadian businesses highly affected by the COVID-19 pandemic.
As the prudential regulatory authority of federally regulated lenders, OSFI is providing timely direction for institutions, financial markets and borrowers on the capital treatment of this loan program.
OSFI expects federally regulated lenders to treat HASCAP loans as a sovereign exposure based on the BDC guarantee and to apply the relevant risk weight under OSFI's Capital Adequacy Requirements guideline. In addition, the entire amount of the loan would be included in the lender's leverage ratio calculation. These treatments are similar to the expectations outlined for Export Development Canada's loan guarantee for small and medium enterprises and communicated to banks in
OSFI's March 30 letter.
These and other responsive regulatory adjustments, as well as ongoing supervisory vigilance, ensure that OSFI's guidance is appropriate for these extraordinary circumstances while remaining risk-focused and forward‑looking.
OSFI will continue to look for ways to ensure its capital and liquidity requirements are fit for purpose during the pandemic.
The loans and guarantees offered through these temporary measures fall within OSFI's existing capital framework. Participating lenders remain responsible for their underwriting practices.
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.
OSFI – Public Affairs