OTTAWA,
ON, May 27, 2024 /CNW/ - Today, the Office of
the Superintendent of Financial Institutions (OSFI) launched a
90-day consultation on proposed changes to its Liquidity Adequacy
Requirements (LAR) Guideline.
OSFI is seeking feedback on:
- proposed changes to intraday liquidity monitoring tools
- two new regulatory returns that federally regulated financial
institutions (FRFIs) will need to complete and submit to OSFI on a
monthly basis; and
- updates to the treatment of Bankers' Acceptances in funding
measurements.
The LAR Guideline helps OSFI determine if institutions have
adequate liquidity. The proposed changes further address
intraday liquidity risk - the risk that on a given day a bank will
be unable to meet a payment obligation at the time expected.
Intraday liquidity risk affects not only the bank's own liquidity
but also that of third parties, and could result in additional
borrowing costs, loss of stakeholders' trust, and disruption to
payments, settlements and clearings.
These measures will allow OSFI to determine how well
institutions manage their intraday liquidity risk and the
introduction of the new regulatory returns will help monitor
whether institutions can meet their payment and settlement
obligations, even during challenging times.
These changes are based on lessons learnt from recent liquidity
risk events and are consistent with international peer
practices.
Comments can be submitted to consultations@osfi-bsif.gc.ca by
August 30, 2024. Feedback from this
consultation will inform the final guidance and regulatory returns.
A summary of comments received and OSFI's responses will be
published with the final Guideline in November 2024. The Guideline updates and related
regulatory reporting requirements will take effect on April 1, 2025.
Quote
"Heightened risks in the financial system have highlighted the
importance of monitoring intraday liquidity. Consistent with our
approach to principles-based regulation, we are consulting with
federally regulated financial institutions on proposed changes to
our LAR guideline. We believe the changes will add to the
resilience of Canada's financial
system."
- Peter Routledge,
Superintendent of Financial Institutions
Quick facts
- OSFI's LAR Guideline is a framework for assessing the liquidity
adequacy of banks, bank holding companies, and federally regulated
trust and loan companies.
- Intraday liquidity risk occurs if a bank is unable to meet a
payment obligation at the time expected, thereby affecting its own
liquidity level and that of other third parties.
- A Bankers' Acceptance (BA) is a short-term credit investment,
with a maturity between 30 and 180 days created by a non-financial
firm and guaranteed by a bank to make payment.
- Regulatory returns are documents OSFI uses to collect data from
the institutions it regulates.
- The guidance on intraday liquidity monitoring has been in place
since 2015 and is consistent with the international Basel Committee
on Banking Supervision's (BCBS) Basel III reforms.
Related links
- Liquidity Adequacy Requirements Guideline
- Liquidity Adequacy Requirements cover letter
- OSFI update on Canadian Dollar Offered Rate transition
SOURCE Office of the Superintendent of Financial
Institutions