OTTAWA, ON, May 27, 2024 /CNW/ - Today, the Office of the Superintendent of Financial Institutions (OSFI) launched a 90-day consultation on proposed changes to its Liquidity Adequacy Requirements (LAR) Guideline.
OSFI is seeking feedback on:
- proposed changes to intraday liquidity monitoring tools
- two new regulatory returns that federally regulated financial institutions (FRFIs) will need to complete and submit to OSFI on a monthly basis; and
- updates to the treatment of Bankers' Acceptances in funding measurements.
The LAR Guideline helps OSFI determine if institutions have adequate liquidity. The proposed changes further address intraday liquidity risk - the risk that on a given day a bank will be unable to meet a payment obligation at the time expected. Intraday liquidity risk affects not only the bank's own liquidity but also that of third parties, and could result in additional borrowing costs, loss of stakeholders' trust, and disruption to payments, settlements and clearings.
These measures will allow OSFI to determine how well institutions manage their intraday liquidity risk and the introduction of the new regulatory returns will help monitor whether institutions can meet their payment and settlement obligations, even during challenging times.
These changes are based on lessons learnt from recent liquidity risk events and are consistent with international peer practices.
Comments can be submitted to [email protected] by August 30, 2024. Feedback from this consultation will inform the final guidance and regulatory returns. A summary of comments received and OSFI's responses will be published with the final Guideline in November 2024. The Guideline updates and related regulatory reporting requirements will take effect on April 1, 2025.
"Heightened risks in the financial system have highlighted the importance of monitoring intraday liquidity. Consistent with our approach to principles-based regulation, we are consulting with federally regulated financial institutions on proposed changes to our LAR guideline. We believe the changes will add to the resilience of Canada's financial system."
- Peter Routledge, Superintendent of Financial Institutions
- OSFI's LAR Guideline is a framework for assessing the liquidity adequacy of banks, bank holding companies, and federally regulated trust and loan companies.
- Intraday liquidity risk occurs if a bank is unable to meet a payment obligation at the time expected, thereby affecting its own liquidity level and that of other third parties.
- A Bankers' Acceptance (BA) is a short-term credit investment, with a maturity between 30 and 180 days created by a non-financial firm and guaranteed by a bank to make payment.
- Regulatory returns are documents OSFI uses to collect data from the institutions it regulates.
- The guidance on intraday liquidity monitoring has been in place since 2015 and is consistent with the international Basel Committee on Banking Supervision's (BCBS) Basel III reforms.
- Liquidity Adequacy Requirements Guideline
- Liquidity Adequacy Requirements cover letter
- OSFI update on Canadian Dollar Offered Rate transition
SOURCE Office of the Superintendent of Financial Institutions
OSFI - Media Relations, Email: [email protected], Telephone: 343-550-9373
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