Canada’s big six banks have been designated as domestically systemically important, and will face an added 1% capital charge and enhanced oversight, federal bank regulators said Tuesday.
The Office of the Superintendent of Financial Institutions (OSFI) announced that the big six — Bank of Montreal (TSX:BMO) , Bank of Nova Scotia (TSX:BNS), CIBC (TSX:CM), National Bank of Canada (TSX:NA), Royal Bank of Canada (TSX:RY), and Toronto-Dominion Bank (TSX:TD) — have been designated of domestic systemic importance, and will be subject to continued supervisory intensity, enhanced disclosure, and a 1% risk-weighted capital surcharge by Jan. 1, 2016.
“The measures we are announcing today are designed to limit the likelihood that a major bank would encounter distress or failure that could negatively impact the Canadian economy or taxpayers,” said Julie Dickson, Superintendent of Financial Institutions.
OSFI reports that it came up with the list in consultation with the Financial Institutions Supervisory Committee (FISC), which is chaired by the superintendent, and includes representatives from the federal department of Finance, the Bank of Canada, the Canada Deposit Insurance Corporation, and the Financial Consumer Agency of Canada.
The criteria used to determine systemic importance include size, interconnectedness, substitutability and complexity, OSFI says, noting that the Basel Committee on Banking Supervision released a framework in October 2012 that set out a principles-based approach requiring national authorities to assess and designate domestic systemically important banks and determine a capital surcharge.