The Reporter provides a monthly summary of Canadian federal
legislative and regulatory developments of relevance to federally
regulated financial institutions. It does not address Canadian
provincial financial services legislative and regulatory
developments, although this information is tracked by BLG and can
be provided on request. In addition, purely technical and
administrative changes (such as changes to reporting forms) are not
Title and Brief Summary
[Applicable to Banks, Bank Holding Companies, Federally
Regulated Trust and Loan Companies, Cooperative Retail
The Office of the Superintendent of Financial Institutions
Canada (OSFI) released for public consultation proposed updates to
the regulatory capital requirements for loans secured by
residential real estate. These updates will ensure that capital
requirements remain prudent in periods where house prices are high
relative to household income and/or house prices are increasing
rapidly in nominal terms. The proposed updates apply to those
federally regulated deposit-taking institutions (DTIs) approved by
OSFI to use the internal ratings-based (IRB) approach to credit
Comments should be provided no later than June 10, 2016
The standards revise the Committee's 2004 Principles for the
management and supervision of interest rate risk, which set out
supervisory expectations for banks' identification,
measurement, monitoring and control of IRRBB as well as its
supervision. The standards reflect changes in market and
supervisory practices since the Principles were first published in
2004, which is particularly pertinent in light of the current
exceptionally low interest rates in many jurisdictions.
Division 3 of Part 4 amends the sunset provisions of certain
Acts governing federal financial institutions to extend by two
years, namely, from March 29, 2017 to March 29, 2019, the period
during which those institutions may carry on business.
Division 4 of Part 4 amends the Bank Act to facilitate
the continuance of local cooperative credit societies as federal
credit unions by granting the Minister of Finance the authority to
provide transitional procedural exemptions, as well as a loan
Division 5 of Part 4 amends the Canada Deposit Insurance
Corporation Act to, among other things, broaden the
Corporation's powers to temporarily control or own a domestic
systemically important bank and to convert certain shares and
liabilities of such a bank into common shares.
It also amends the Bank Act to allow the designation
of domestic systemically important banks by the Superintendent of
Financial Institutions and to require such banks to maintain a
minimum capacity to absorb losses.
Lastly, it makes consequential amendments to the Financial
Administration Act, the Winding-up and Restructuring
Act and the Payment Clearing and Settlement Act.
Division 6 of Part 4 amends the Office of the
Superintendent of Financial Institutions Act to change the
membership of the committee established under that Act so that the
Chairperson of the Canada Deposit Insurance Corporation is replaced
by that Corporation's Chief Executive Officer.
The definitions proposed by the Basel Committee aim to promote
harmonisation in the measurement and application of two important
measures of asset quality and thereby foster consistency in
supervisory reporting and disclosures by banks.
The proposed definitions complement the existing accounting and
regulatory framework in relation to asset categorisation. They are
intended to be used, for example, in the supervisory monitoring of
a bank's asset quality as well as by banks in their credit risk
management and as part of their internal credit categorisation
Comments should be provided no later than July 15, 2016
This report is the second by the Basel Committee to analyse
variation in risk-weighted assets (RWA) in banks using internal
ratings-based models to calculate credit risk capital requirements.
The study evaluates two types of risk estimates. First, it
considers those risk estimates used for exposures to retail
customers and small and medium-sized enterprises. Second, it
explores the way banks evaluate the likely exposure at default
across all asset classes.
This report is part of the Committee's wider Regulatory
Consistency Assessment Programme (RCAP), which is intended to
ensure consistent implementation of the Basel III framework. Its
analysis of regulatory outcomes complements other reports by the
Committee on variation in RWA for market risk and counterparty
credit risk, as well as an earlier report on RWA variation for
credit risk published in July 2013.
This Reporter is prepared as a service for our clients. It is
not intended to be a complete statement of the law or an opinion on
any subject. Although we endeavour to ensure its accuracy, no one
should act upon it without a thorough examination of the law after
the facts of a specific situation are considered.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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