OSFI, ONTARIO FSRA, FINTRAC, Autorité des marchés financiers and BC FINANCIAL SERVICES AUTHORITY adjust regulations and guidance for banks, credit unions, financial intermediaries and other market participants.
Canada's financial regulators have advised that they are reviewing and temporarily revising certain regulatory requirements for financial institutions and stakeholders during this time. The following are the key takeaways from notices published to date by these federal and provincial/territorial regulators.
Office of the Superintendent of Financial Institutions (OSFI)
OSFI has published a notice outlining a number of actions that it is taking in response to challenges posed by COVID-19 and current market conditions, including:
1. Adjusting the Domestic Stability Buffer (DSB) Requirement for Banks to 1.00%
- OSFI lowered the DSB by 1.25% of risk weighted assets, to 1.00%, effective March 13, 2020.
- This measure will support banks' ability to supply credit to the economy during the period of disruption related to COVID-19 and market conditions, providing banks with over $3B of additional lending capacity.
- Any increases to the DSB will not take effect for at least 18 months from March 13, 2020.
- Relatedly, OSFI has indicated that it expects all federally regulated financial institutions to halt any dividend increases and share buybacks for the time being.
2. Suspending all Consultations and Policy Development
- OSFI is suspending all of its consultations and policy development on new or revised guidance until conditions stabilize.
- This includes both: (i) the new proposed B-20 benchmark rate for uninsured mortgages and (ii) the new benchmark rate used to determine the minimum qualifying rate for insured mortgages (that was set to come into force on April 6, 2020).
- This means that the benchmark rates currently published by the Bank of Canada remain in force.
3. Aligning Supervisory and Regulatory Priorities to Current Conditions
- OSFI has pledged to focus on those issues that most require its attention and reprioritize its work as needed. This includes monitoring the response to this notice by federally regulated financial institutions, as well as their capital, liquidity and operational capacity.
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
Like OSFI, FINTRAC published a message to its reporting entities subject to obligations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated regulations, regarding their obligations in light of COVID-19.
1. FINTRAC Expects Reporting Obligations to be Met – or to Document Why They are Not
- FINTRAC has advised that it expects reporting entities will do everything possible to meet all of their obligations, including in relation to reporting.
- However, should a reporting entity be unable to meet some of their obligations, FINTRAC has asked for it to document the reasons why and keep a record of it.
- FINTRAC will take a "reasonable approach" with such compliance activities.
2. Prioritize Suspicious Transaction Reports (STRs)
- FINTRAC has asked that its reporting entities prioritize submitting STRs.
- In situations where critical information related to national security matters cannot be provided to FINTRAC in a timely manner, FINTRAC has asked that the reporting entity in possession of the information send an email to firstname.lastname@example.org, and someone will contact the entity. A written report by the entity should follow as soon as possible.
Financial Services Regulatory Authority of Ontario (FSRAO)
FSRAO published a statement of business continuity for its regulated entities.
1. Business Continuity Plans – Assess Priorities
- FSRAO acknowledged that many of its regulated entities have activated their business continuity plans in response to the outbreak. A best practice is to share such plans with FSRAO, including steps taken to protect your ability to serve customers.
- FSRAO advised that regulated entities should self-assess what core functions must be prioritized during this period of disruption, noting that your FSRAO contact is available to respond to any questions, comments or concerns.
- You should inform your FSRAO contact if you experience, or expect to experience, disruption of any of your critical functionality.
2. Changes to FSRAO'S Engagement with You
- FSRAO is reviewing upcoming licensing, filing and other similar requirements across the regulated sectors as the COVID-19 disruption continues to evolve. It has advised that regulated entities that anticipate being unable to fulfil these requirements on a timely basis should discuss their concerns with their FSRAO contact at their earliest convenience.
- FSRAO's call centre continues to operate, but is experiencing high volumes and reduced functionality. If you have non-essential matters to discuss, FSRAO has asked you to please delay calling about them.
- The on-site component of all examinations that are not currently underway will be postponed until further notice – except in exceptional circumstances. FSRAO is also considering developing supplemental procedures to compensate for the loss of this component.
- Public consultations are all online and will continue, but the timelines associated with them may later be reviewed and revised.
3. Credit Union and Insurer Annual General Meetings (AGMs)
- Any credit union or Ontario incorporated insurer that is required to hold an AGM in the near future should conduct the meeting virtually to respect public health advice.
- FSRAO has also provided a link with information on how to respect public health advice and use telephonic, digital or other electronic forms of meeting.
Autorité des marchés financiers (AMF)
On March 13, 2020, the AMF published a press release reminding financial service intermediaries that they must take measures to ensure the continuity of their activities.
1. Business Continuity Plans (BCPs)
- In order to effectively implement BCPs, they must be communicated to brokers, employees and partners. If firms outsource any of their activities to service providers, they must ensure the service providers can continue those activities.
- BCPs are not a one size fits all; they vary based on the size, nature and complexity of an entity's activities.
- The AMF reinforced warnings and social distancing related to COVID-19 and emphasized that firms must still respect their obligations under the law.
- Finally, the AMF invited financial service firms to contact email@example.com for assistance if they experience difficulty putting their BCP into action or their clients experience service interruptions in the circumstances.
British Columbia Financial Services Authority (BCFSA)
The BCFSA has published a letter regarding annual general meetings (AGMs) in light of COVID-19.
1. Credit Unions Can Extend their AGMs
- The BCFSA has advised that credit unions should assess their risk exposure by holding their AGMs in person.
- The BCFSA has legislative power to make an order extending the deadline for a particular credit union to hold its AGM by a maximum of six months. If a credit union wishes to seek such an order from the BCFSA, the BCFSA has indicated it will consider the COVID-19 situation (as well as other factors) and provide an expedited response to the request.
- In such a case, a set of interim financial statements may be required from the credit union.
If you have any questions as to how these regulatory changes may impact your organization's obligations, please contact your Gowling WLG professional. Our Financial Services Regulatory Team at Gowling WLG will continue to keep you informed as further developments arise.
For other COVID-19 related resources, please visit our resource page with information to help clients manage their business during the pandemic. The page contains critical information to guide you through various complex legal issues, as well as a list of key contacts who can provide advice on these issues.
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