The Canadian banking industry is fully compliant with new liquidity rules that are being adopted as part of the new Basel III capital adequacy regime, according to a report published on Wednesday by the Basel Committee on Banking Supervision (BCBS).
The BCBS published a series of reports assessing the implementation of the new liquidity coverage ratio (LCR) requirements in several countries, including Canada, Australia, Brazil, and Switzerland.
All of the jurisdictions it reviewed were rated as ‘compliant’ with the new global standards, which is the highest of the four possible grades they could have received from the reviews.
The LCR requirements and LCR disclosure requirements were implemented by Canadian banking regulators in 2015.
The standards adopted in Canada are compliant with the Basel rules overall, the BCBS report says, and the four components — the definition of high-quality liquid assets (HQLA), liquidity outflows, liquidity inflows and disclosure requirements — are also considered compliant with the new global standards.
The report notes one area where Canadian regulators could benefit from further guidance from the BCBS, the treatment of certain mortgage-backed securities.
With this latest set of reviews, the BCBS has now completed its review of the implementation of the LCR for all jurisdictions, and most countries have been assessed as compliant, or largely compliant, with the new standards.
“The completion of these assessments and the high level of international consistency achieved in implementing the LCR is testament to the ongoing commitment of Basel Committee members to implement the Basel III regulatory reforms. It is essential we maintain this momentum in implementing the rest of the Committee’s post-crisis reforms,” says Stefan Ingves, chairman, BCBS, and governor of Sveriges Riksbank, in a statement.
With its reviews of the LCR requirements complete, the BCBS will now turn its attention to assessing the consistency of implementation of the net stable funding ratio (NSFR) and the large exposures framework, it says.
The NSFR requirements are due to start implementation in January 2018, and the large exposures framework will be adopted starting in January 2019.