The head of OSFI, Canada’s banking regulator says, that Canadian banks will likely have to face tougher regulations, and must be prepared to face them.

Speaking to the Empire Club of Canada in Toronto on Thursday, Julie Dickson, the Superintendent of Financial Institutions, said, “While Canadian banks are better situated than many right now, they should not assume that no changes will be forthcoming.”

Dickson said that developing a new capital regime is a challenge “because we want to get this done quickly to reduce uncertainty about what capital requirements are going to be, but we want to get it right, and the issues involved in setting capital rules are complex.”

While an international agreement on a new set of capital and leverage rules is not a sure thing, she noted that policymakers have always been able to reach an agreement in the past. “Assuming there is agreement, there must then be a concerted effort to ensure they are implemented globally,” she added.

In the meantime, Dickson said that it is premature to draw conclusions about what the final capital and liquidity rules will be. “We need to give the process a chance and a critical part of the process is really just beginning,” she said, noting that April 16 was the due date for comments to the Basel Committee on Banking Supervision on its proposals for enhanced capital and liquidity rules that were released in December.

Global banks have to provide detailed quantitative impact study results to their supervisors in a couple of weeks. Those results “will ultimately give us a global snapshot of the potential impacts of proposed changes to these rules”, she noted. Additionally, an international review of the macroeconomic impacts of the proposals has begun, she said, “With it is an international top down analysis of the incentives that might be created by the rules.”

“Having the facts and figures, and reports on macroeconomic impacts, will enable us to tackle basic questions, such as how much capital is enough? As a bank, do you need enough to cover any possible crisis, or do you need enough to maintain market confidence in such a crisis, allowing you to go to market to raise more?” she said. These decisions are expected in early fall, and the final rules are to be announced by the end of the year for adoption by the end of 2012.

Dickson stressed that Canadian banks must be prepared for rule changes, even though they may think the weathered the crisis rather well under the current regime.

“We should not assume that nothing will change and that internationally everyone will agree to adopt our rules as they currently stand. Indeed, some changes are necessary. Canada is well placed to influence international negotiations, but agreement usually means that no country gets everything they want, and we need to be prepared,” she concluded.