Apr 3, 2020
Bank regulator teases more capital relief after unlocking $300B
By Greg Bonnell
OSFI 'prepared to release some or all of what remains' of the buffers imposed on the major Canadian banks
Canada’s financial regulator said he’s ready to free up more lending capacity at the country's big banks to help deal with the fallout of the COVID-19 pandemic.
“We stand ready to take further steps,” Jeremy Rudin, superintendent of the Office of the Superintendent of Financial Institutions, told BNN Bloomberg’s Amanda Lang in an interview.
“We released about half of the stability buffer that we’ve imposed on the major banks and we’re monitoring that. We’re prepared to release all or some of what remains, if need be.”
Last month, OSFI lowered the domestic stability buffer requirement for Canada’s biggest banks to one per cent of risk-weighted assets. That move was intended to support more than $300 billion of additional lending capacity.
On Friday, Rudin made it clear on BNN Bloomberg that OSFI is willing to go even further.
Buffers “are built up in good times precisely, so that we can release them when the economy goes through a difficult period,” said Rudin.
“We’ll look at the amount of capital buffer we have kept in reserve and we stand ready to release that if we think that will be necessary.”
When OSFI lowered the buffer on March 13, it explicitly stated the banks should “use the additional lending capacity to support Canadian businesses and households” and not “use this measure to increase distributions to shareholders or employees or to undertake share buybacks.”
The stability buffer is one of four capital requirements for the country's systemically important banks. The others include a minimum Common Equity Tier 1 capital level, a capital conservation buffer and a surcharge for Canada’s six biggest banks.