With regulators in Europe and the U.S. delaying certain aspects of the post–financial crisis reforms to global capital rules for banks in their respective markets, the Office of the Superintendent of Financial Institutions (OSFI) is pushing back the planned increase in the capital floor for a year too.
OSFI announced it has decided to delay an increase to the capital floor level — a provision of the Basel capital rules that aims to prevent excessive variance in capital requirements between banks using different methodologies to set those requirements. The capital floor level had been set to rise from its current mark of 67.5% to 70.0% in fiscal 2025, and to 72.5% in fiscal 2026.
Instead, the level will remain unchanged at its current level in 2025, rising to 70.0% in fiscal 2026, and going up to 72.5% for fiscal 2027 and beyond.
The regulator said its decision to delay the increase will give it “time to consider the implementation timeline of the Basel III 2017 reforms in other jurisdictions.”
The move follows a recent decision from European regulators to delay implementation of certain capital reforms in that market, citing delays by U.S. regulators and concerns about putting its banks at a competitive disadvantage by tightening their capital rules ahead of their Wall Street rivals.
In a statement, OSFI superintendent Peter Routledge said, “The Basel III 2017 reforms will strengthen banks’ ability to withstand financial shocks and support economic growth while enabling them to compete and take reasonable risks. Key to these reforms’ success is full, timely, and consistent adoption and implementation across [Basel] jurisdictions so that competitive balance prevails throughout the international banking system.”
In May the group that oversees the global bank regulators reaffirmed its expectation that the Basel reforms will be fully adopted in all markets.
OSFI said it’s committed to that objective and that it’s “optimistic our regulatory peers will continue to work towards a full, timely and consistent adoption and implementation of the Basel III 2017 reforms.”
“We will continue to measure implementation progress of the Basel III 2017 reforms across jurisdictions with a focus on both competitive balance in banking and the soundness of Canada’s capital regime,” Routledge said.