OTTAWA,
ON, July 5, 2024 /CNW/ - Today, the Office of
the Superintendent of Financial Institutions (OSFI) announced a
one-year delay to the increase of the capital floor level (or
"output floor"). Canada concluded
its implementation of Basel III 2017 reforms in early 2024 and
established a three-year phase-in of the capital floor consistent
with the timetable set by the Basel Committee on Banking
Supervision (BCBS).
The purpose of the capital floor is to reduce excessive
variability and to enhance comparability of risk-based capital
ratios. The capital floor requires that risk-weighted-assets
generated by internal model-based approaches cannot, in aggregate,
fall below a percentage of the risk-weighted assets computed by the
standardized approach.
OSFI's implementation of the Basel III 2017 reforms, including
the capital floor, reflects our conviction that these reforms
provide a sound, prudential foundation for Canada's banking system. Global implementation
of the capital floor has been a lengthy process. The one-year delay
will give OSFI time to consider the implementation timeline of the
Basel III 2017 reforms in other jurisdictions.
On May 13, 2024, Group of Central
Bank Governors and Heads of Supervision (GHOS), the oversight body
of the Basel Committee on Banking Supervision (BCBS), unanimously
reaffirmed their expectation of implementing all aspects of the
Basel III framework in full, consistently and as soon as
possible.
Like its GHOS peers, OSFI remains committed to Basel III
implementation and the sound prudential principles underlying these
reforms. We are optimistic our regulatory peers will continue to
work towards a full, timely and consistent adoption and
implementation of the Basel III 2017 reforms.
Quotes
"The Basel III 2017 reforms will strengthen banks' ability to
withstand financial shocks and support economic growth while
enabling them to compete and take reasonable risks. Key to these
reforms' success is full, timely, and consistent adoption and
implementation across BCBS jurisdictions so that competitive
balance prevails throughout the international banking system.
We will continue to measure implementation progress of the Basel
III 2017 reforms across jurisdictions with a focus on both
competitive balance in banking and the soundness of Canada's capital regime."
- Peter Routledge,
Superintendent of Financial Institutions
Quick facts
- Basel III is a set of measures developed by the Basel Committee
on Banking Supervision in response to the 2007-2008 global
financial crisis and were internationally accepted in 2017.
- Basel III 2017 reforms help ensure Canadian banks effectively
manage risks through adequate levels of capital and liquidity to
help bolster resiliency.
- Canada's progress against
other participating jurisdictions is available at the BCBS website:
RCAP on timeliness: Basel III implementation dashboard
(bis.org)
- OSFI's implementation of Basel III reflects three key
principles: introducing rules that are fit for Canada, setting the right incentives, and
tailoring capital and liquidity requirements to better reflect the
unique nature of Canadian banks.
- The capital floor subjects banks using internal models to a
floor on their required capital relative to the standardized
approaches.
- OSFI's decision is the product of an in-depth consultation with
the affected institutions and with global regulatory peers.
- With the one-year delay, the transition of the capital floor
will be:
Floor adjustment
factor
|
Fiscal Year
|
2024
|
2025
|
2026
|
2027+
|
Current
|
67.5 %
|
70.0 %
|
72.5 %
|
72.5 %
|
Revised
|
67.5 %
|
67.5 %
|
70.0 %
|
72.5 %
|
Related links
- Regulatory Notice - Modification to the Capital Output) Floor
Transition Schedule
- Basel III: international regulatory framework for banks
(bis.org)
- Frequently asked questions – Basel III reforms - Office of the
Superintendent of Financial Institutions (osfi-bsif.gc.ca)
- Backgrounder: Breaking down Basel III - Office of the
Superintendent of Financial Institutions (osfi-bsif.gc.ca)
- Capital Adequacy Requirements (CAR) - Guideline (2024) - Office
of the Superintendent of Financial Institutions
(osfi-bsif.gc.ca)
SOURCE Office of the Superintendent of Financial
Institutions