Leverage Requirements Guideline (2019) - osfi-bsif.gc.ca

OSFI's Leverage Requirements (LR) guideline sets out the framework for the leverage ratio, which provides an overall measure of the adequacy ... Skiptomaincontent Skiptosecondarymenu LeverageRequirementsGuideline(2019) PageContent AlternativeFormats PDF,193KB AccompanyingDocuments Guideline Letter DocumentProperties TypeofPublication:GuidelineImpactAnalysisStatement Date:October2018 Audiences:Banks/BHC/T&L/CRA I.Background OSFI'sLeverageRequirements(LR)guidelinesetsouttheframeworkfortheleverageratio,whichprovidesanoverallmeasureoftheadequacyofaninstitution'scapitalandservesasasupplementarymeasuretotherisk-basedcapitalrequirementsspecifiedintheCapitalAdequacyRequirements(CAR)guideline. II.ProblemIdentification OSFIisissuingarevisedversionoftheCARguidelinethatincludeschangesrelatedtoderivativesexposuresandcertainsecuritizationexposures.Withoutappropriatechanges,theLRguidelinewouldnotalignwiththeCARguideline. III.Objectives OSFI'sobjectiveistoensurethattheLRguidelineremainsup-to-dateandreflectsrecentchangestotheCARguideline,whichcomeintoeffectinQ12019.Specifically,theproposedrevisionstotheLRguidelineinclude: ReplacingtheCurrentExposureMethod(CEM)withtheStandardizedApproachtoCounterpartyCreditRisk(SA-CCR)asthemethodforcomputingcounterpartycreditriskexposureamountsforderivatives.ThischangealignswiththeplannedimplementationofSA-CCRunderChapter4(SettlementandCounterpartyRisk)oftheCARguideline. Amendingthetreatmentofsecuritizedassetsthatmeettheoperationalrequirementsforrecognitionofsignificantrisktransfer(SRT)toalignwiththeproposedrevisionstoChapter7(Securitization)oftheCARguideline. Aligningcreditconversionfactorsforoff-balancesheetsecuritizationexposureswiththoseundertheproposedrevisionstoChapter7(Securitization)oftheCARguideline. Allowinginstitutionstoconsideropen-maturitysecuritiesfinancingtransactions(SFTs)asovernighttradesforthepurposesofmeasuringcashpayablesandcashreceivablesinSFTswiththesamecounterpartyonanetbasis,providedtheinstitutionisabletodemonstratetoOSFIthat:i)itcancontractuallyandoperationallycollapseanopenmaturitytradeonthenextbusinessdaywithoutincurringlegalorreputationalrisk;andii)thetradesarepricedsimilarlytoovernighttrades. IV.Consultations OSFIissuedtherevisedLRguidelineforpublicconsultationinAugust2018.AsummaryofmaterialcommentsalongwithOSFI'sresponseshasbeenpostedwiththefinalversionoftheguideline. V.Recommendation OSFIrecommendsthatLRguidelinetreatmentofderivativesandsecuritizationexposuresbemodifiedtoalignwithamendmentsintheCARguideline. VI.Implementation ThefinalversionoftheguidelinewillbeeffectiveNovember1,2018/January 1, 2019Footnote1. Footnotes Footnote1 ForinstitutionswithafiscalyearendingOctober31orDecember31,respectively. Returntofootnote1 ModifiedDate: 2018-10-30 Secondarymenu RegulationandGuidance ActsandRegulations Guidance TableofGuidelines TableofAdvisories ApprovalsandPrecedents ApplicationandApprovalGuides RegulatoryandLegislativeAdvisories LegislativeRulings CapitalRulings NameRequest RiskAssessmentandIntervention SupervisoryPractices GuidetoIntervention TrustAgreements RegulatoryData FilingCorporateReturns FilingFinancialReturns ViewingFinancialData Anti-moneyLaunderingandCompliance Anti-moneyLaundering Anti-terrorismFinancing Sanctions Messages IndustryNotices WebTools WhoWeRegulate