OSFI adjusts temporary exclusions from leverage ratio exposure measures; to take effect at end of 2021

OTTAWA, Aug. 12, 2021 /CNW/ - Today, OSFI confirmed that the exclusion of sovereign-issued securities from the leverage ratio exposure measure for deposit-taking institutions (DTIs), introduced at the outset of the COVID-19 pandemic, will not be extended past December 31, 2021.  Central bank reserves will continue to be excluded from the leverage ratio exposure measure for DTIs.

In April 2020, in response to the uncertainty caused by COVID-19, OSFI allowed the DTIs it regulates to temporarily exclude central bank reserves and sovereign-issued securities from their leverage ratio exposure measures. In November 2020, OSFI extended this temporary measure until December 31, 2021 to continue supporting the economy as it coped with the effects of the pandemic.

The decision to allow the temporary exclusion of sovereign-issued securities to expire is in line with previous OSFI decisions to discontinue other temporary relief measures introduced in response to COVID-19 when they are no longer credible, consistent, necessary and fit-for-purpose in the Canadian context. OSFI will closely monitor conditions and remains ready to take any further action, including the unwinding of other temporary measures, as required.

For specific guidance, please see the letter to industry issued to DTIs.

Quote

"When OSFI introduced this special treatment of leverage ratio exposure measures in the spring of 2020, it was the appropriate response at the time to the uncertainty created by the pandemic. Now that this uncertainty has diminished, conditions warrant unwinding certain elements of this relief measure, which were always intended to be temporary."

Ben Gully, Assistant Superintendent, Regulation Sector, OSFI

Quick facts

• At the start of the COVID-19 pandemic OSFI acted quickly to adjust capital and liquidity measures so that they were suitable for these unprecedented circumstances.
• OSFI's actions provided options for relieving potential pressures facing DTIs at that time, and allowed them to focus on their critical operations.

Associated Links

• November 5, 2020 extension of leverage ratio exclusions
• April 9, 2020 announcement of continued regulatory flexibility measures

About

The 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.

SOURCE Office of the Superintendent of Financial Institutions