The Office of the Superintendent of Financial Institutions is defending its role in the ongoing seizure of the asset-backed commercial paper (ABCP) market.

“It is important to get to the bottom of what happened and OSFI fully supports these efforts and will continue to provide input into this process,” said Superintendent Julie Dickson during a brief with the media in today in Toronto.

During a briefing with the media, Dickson emphasized that OSFI’s role is to help promote a safe and sound banking sector in Canada; and that OSFI’s guideline that sets out capital charges for loans by Canadian banks to ABCP conduits was prudent and necessary in order to ensure capital adequacy at the Canadian banks.

OSFI also explained that it does not oversee the firms that created the non-bank ABCP; and it stressed that OSFI guidelines do not apply to the offshore banks that negotiated the bulk of the liquidity lines to non-bank ABCP conduits, they are subject to the capital rules of their home countries.

“It is clear that capital requirements on Canadian banks did not drive the uniqueness of the non-bank ABCP market in Canada. There are a number of factors that contributed to the current situation and I believe a fulsome discussion and review are critical,” Dickson said. “OSFI looks forward to participating in these discussions.”