The Office of the Superintendent of Financial Institutions has issued a couple of updates to capital adequacy requirements.

A new advisory from OSFI addresses changes to the aggregate limit on tier-1 qualifying preferred shares and innovative instruments. Previously, OSFI maintained that a strongly capitalized financial institution should not have innovative instruments and perpetual non-cumulative preferred shares that, in aggregate, exceed 25% of its net tier 1 capital. However, it has decided to raise that limit to 30%.

“After taking into account the fundamental characteristics of tier 1 capital and reviewing guidance in other jurisdictions, OSFI has decided to increase this limit to 30%. The maximum amount of innovative tier 1 instruments that can be included in the aggregate limit calculation continues to be 15% of net tier 1,” it says.

Additionally, OSFI is issuing for comment a revised guideline regarding capital requirements for federally regulated cooperative credit associations that has been updated to reflect the financial instruments accounting standards that came into effect for the 2007 fiscal year. Changes are proposed to the definition of capital, the definition of borrowings and the definition of assets of little or no realizable value. Comments are due by February 8.