Statement from the Superintendent of Financial Institutions on the Basel III standardized capital floor level

OTTAWA, ON, Feb. 12, 2025 /CNW/ - Today, Peter Routledge, Superintendent of Financial Institutions, released the following statement:

"The Office of the Superintendent of Financial Institutions (OSFI) will defer increases to the Basel III standardized capital floor level ("output floor") until further notice. The output floor requires that risk-weighted assets generated by banks' internal ratings-based capital models cannot fall below a percentage of risk-weighted assets computed under the Standardized approach.

This means that the output floor will remain at 67.5% until further notice. Moreover, we commit to notifying affected banks at least two years prior to resuming an increase in the output floor.

On February 4, 2025, the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision (BCBS), unanimously reaffirmed their expectation to implement the Basel III capital framework in full and consistently. Like its GHOS peers, OSFI remains committed to Basel III principles because we believe our commitment will enhance the resilience of the Canadian banking system.

At present, however, there remains uncertainty about when other jurisdictions will fully implement Basel III. Although OSFI has nearly fulfilled its commitment to implement all aspects of the Basel III framework, we will not extend the implementation lead we share with a small number of fellow jurisdictions.

The Basel III capital framework 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 BCBS jurisdictions so that competitive balance prevails throughout the international banking system.

Taking decisive action, as we have on the Basel III capital floor, reflects OSFI's strong will to act. Since the global financial crisis, OSFI has worked to build resilience in Canada's financial system, which enables financial institutions to adjust to uncertainty and cushion themselves against economic shocks. This work includes adjusting (1) the Domestic Stability Buffer (DSB) for Canada's systemically important banks and (2) the capital buffers for small and medium-sized banks (SMSBs).   

We will monitor closely developments in Canada's financial system, as well as the broader economic environment, and adjust to prevailing conditions. While OSFI sets the DSB in June and December, we stand ready to adjust the DSB, as well as capital expectations for SMSBs, should conditions warrant."

SOURCE Office of the Superintendent of Financial Institutions

Contacts: OSFI - Media Relations, Email: [email protected], Telephone: [phone]