Federal banking regulators have delayed the deadline for adoption of reformsregarding the way banks allocate capital for market risk.
The Office of the Superintendent of Financial Institutions (OSFI) announced on Thursday that Canadian banks will have to implement planned changes to the capital requirements for market risk by the fiscal first quarter of 2021. That represents a delay of at least one year.
In a letter to the banks, OSFI says that since the Basel Committee on Banking Supervision finalized its rules in this area, “it has become evident that there are a series of implementation complexities associated both with the rules text language [and] with IT system changes required by institutions to comply with these rules.”
In addition, OSFI notes that it’s not clear that the requirements will be implemented by regulators in most major foreign markets by the planned Basel implementation date. The Basel Committee requires national regulators to finalize their domestic rules by January 2019, and to start adhering to them by the end of 2019 (which represents fiscal Q1 2020 for the Canadian banks).
While delaying the requirement for Canadian banks until fiscal 2021, OSFI says, it expects the banks to develop strategic plans in the meantime for implementing the new rules. It also plans to provide an update on the Canadian implementation timeline by mid-2018.
OSFI says it remains committed to the rules, which, it says, “are an important improvement in the overall design and coherence of the capital standard for market risk, and ensure the delivery of credible capital outcomes.”
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