Federal banking regulators have issued a letter setting out interim disclosure requirements for federally-regulated financial firms in anticipation of new rules that are to take effect next year.
The Office of the Superintendent of Financial Institutions (OSFI) Wednesday published the final version of a letter that aims to clarify the implementation of new disclosure rules under the new capital adequacy regime, known as Basel III, for the first and second quarters of 2013. The regulator expects all institutions to fully implement the new disclosure rules starting in Q3 2013.
Earlier this year, the Basel Committee on Banking Supervision issued its final rules on the information banks must publicly disclose when detailing the composition of their capital, and sets out a framework to ensure that this is disclosed in standardized formats.
OSFI notes that the new public capital disclosure requirements are intended to improve both the transparency and comparability of institutions’ capital positions, in the wake of the financial crisis, which revealed that market players and regulators both had a tough time assessing banks’ capital positions, which stoked uncertainty during the crisis.
The letter indicates that the new disclosure requirements are to apply to all institutions; which, in Canada, includes all banks, bank holding companies, federally regulated trust and loan companies, and cooperative retail associations.
“For greater certainty, these public disclosures are required, regardless of the size of the institution and whether the institution is publicly listed,” it says, noting that disclosure is required for wholly-owned institutions, foreign bank subsidiaries and all other institutions that might not be publicly listed.
The letter sets out a template for these transitional disclosures, and says that it expects institutions to continue to comply with the original Basel disclosure requirements. In the interim period, OSFI will require firms to make modified composition of capital disclosures, although they can disclose additional information at their discretion, it says.
Additionally, it says that, while the Basel rules mandate that certain disclosures should be publicly available on institutions’ websites, OSFI encourages firms to make all of their required disclosures available on their public websites in a central location “to enhance transparency and comparability”.